A response to Corey Wong’s “Playing to Win on the Digital Frontier”

Social media sites are a telemarketers dream come true. Every day, Facebook and Twitter must collect more information on any individual that one could collect in a year by calling. So then why haven’t investors dumped every penny they have into social media? Isn’t social media so powerful that we should be taking out mortgages on our homes to buy Facebook?

Although Corey’s analysis of why social media investment isn’t highly sought after is logical and well argued, I cannot say I fully agree. I believe the real reason for the lack of investment is that companies such as Facebook and Twitter are limited in their growth and cannot generate new ideas to make long term investment feasible. For example, the acquisition of Instagram by Facebook was valued $730 million. Is this a justifiable price for software that simply crops, and adds color effects to images? When a company is considering re-investing $730 million into their company, they generally look at the benefits that come with that investment. All I see is millions in expenses for software that turns up the exposure on my pictures, and that’s exactly what investors see as well.

This ultimately becomes the heart of the problem, what is it actually that I am buying when I put my money into Facebook? Ads? Why would I put my money into Facebook when Google also sells ad space, and is expanding into the mobile phone market? It all ends up being about growth because in Silicon Valley, if you’re not growing, you’re dying.