You think Facebook plays fast and loose with your privacy? You ain't seen nothing yet. As Facebook's stock price continues to plunge and its July earnings release draws closer, the Boy Billionaire Mark Zuckerberg and his executive team will grow desperate. When they do, they're going to take a hard look at the biggest gap in the company's arsenal: a coherent strategy to make money from mobile applications.
Facebook has more users than any company on the planet -- with the exception of Google -- and you have to give lots of credit to Zuckerberg, even though I frequently make fun of him. But has Facebook fundamentally changed during its phenomenal rise, or is it doing the same thing it always did, but on a much larger scale? "The twins were the real visionaries, not Zuckerberg," says Global Equities analyst Trip Chowdhry, referring to the Winklevoss brothers, who co-founded Facebook and have since made suing Zuckerberg their life's work. "Where's the innovation?" he asks.
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Sarcasm aside, Chowdhry's point is insightful: At bottom, Facebook is tied to the same fading desktop-centric computing model that's pulling Microsoft down. That's not because Zuckerberg and COO Sheryl Sandberg don't believe in mobile, and it's not because users don't access it from mobile devices (hundreds of millions do) -- Facebook just hasn't figured out a way to make money from it. For a company that's valued at $60 billion (down from about $100 billion just last week), that's stunning. "They should have had a mobile road map and already executed 40 percent of it," Chowdhry says.
Mobile payments: Be afraid, very afraid
Since Facebook hasn't developed that winning mobile strategy, I expect the company to announce more wasteful acquisitions like the $1 billion Instagram buy -- Opera appears to be a target -- and maybe make a desperate play like the rumored Facebook phone. Both would be failures, though that's a problem for the shareholders, not the rest of us. But what worries me is the likelihood that Facebook will desperately seek even more ways to mine user data and use it as incentive to land advertisers.
Mobile payments, says Chowdhry, is a multi-billion-dollar (maybe trillion-dollar) market that's barely been penetrated, and Facebook could purchase a good mobile-payments technology partner for couch money -- say, $100 million. Do you really think that the payments you make using a Facebook payment app will stay private or that no one will know the name of that adult bookstore you found through a Facebook mapping app? Oh sure, there will be some arcane way to opt out after the press gets wind of an egregious violation and Zuckerberg apologizes yet again, then repeats it for good (PR) measure.
That's exactly what happened back in 2010 when Facebook got caught allowing third-party apps to harvest user IDs. Now that Facebook is public, the financial stakes are much higher: The company has to convince Wall Street that it has a way to pull in revenue commensurate with its huge valuation. Put your privacy on one side of the scale and the angst of investors on the other, and guess which one will weigh the heaviest.