In a May 18th, 2012 interview that appeared in The Atlantic, reporter Derek Thompson asked Stanford professor and entrepreneur Steve Blank about the Facebook IPO and its implications for the future of Silicon Valley.
This interview, while prompted by the enormous interest in Facebook because of its record IPO, is about more than this one company's success. What Prof. Blank sees is a fundamental shift in venture capital - away from certain types of investments and toward social media, where explosive growth and quick returns are (among other things) reshaping how entertainment is experienced, marketed and supported.
Filmmakers have historically adopted new technologies to improve their filmmaking and its distribution. Indie filmmakers all over the world are currently experimenting with the new set of tools for production and distribution of their films. Many of the new tools (like crowdfunding, online distribution, user recommendations, etc.) are being built on - or made possible by - social media platforms. This interview, with Steve Blank about the future of investment in social media, is therefore essential reading for any filmmaker interested in how filmmaking will evolve in concert with social media.
For example, 21st century filmmakers are experimenting with Facebook as a platform for marketing - and perhaps even distributing - their films. This experimentation begs the question: Will Facebook last - or will it be another MySpace or Friendster that disappears?
When asked if the current valuation of Facebook (around $100 billion) was similar to the unrealistic valuations of the dot.com bubble, Steve Blank made a clear distinction:
"In the last bubble there were no customers. Facebook makes $4 per user. The users are customers. They produce real revenue. Nobody's debating whether Facebook can make money. They're debating how much more valuable Facebook's hundreds of millions of users can be, and how fast can they can grow that value. That's an execution problem.... It's like what Willie Sutton said: Social media is just 'where the money is'... Facebook's success has the unintended consequence of leading to the demise of Silicon Valley as a place where investors take big risks on advanced science and tech that helps the world. The golden age of Silicon valley is over and we're dancing on its grave."
I agree with Prof. Blank: The Facebook IPO is part of the undeniable rise of social media. Considering the timeline for developing medical and most other high-tech innovations (as compared to the rapid growth of YouTube and other social media platforms and apps) the interest in Facebook is not a fluke. As long as social media fortunes can be made in months instead of years, social media will overshadow the other forms of investment and innovation in Silicon Valley.
And unlike the dotcom bubble of a dozen years ago (where growth was accepted as a substitute for profit), the interest in Facebook is supported by profitability (CNBC reports "roughly $1.5 Billion in operating profits" for 2011). Even if you see storm clouds ahead and suspect overvaluation today - it's tough to make the case that the Facebook IPO represents a broader speculative bubble.
Facebook may be trading at levels that are unsupported by the company's current revenue - but this isn't a case where a precipitous drop in the value of Facebook would force its competitors into insolvency, bankruptcy or foreclosure. The current exuberance for Facebook does not threaten a larger financial crisis.
Yes, the true value of Facebook may end up being lower (Henry Blodget, former head of the global Internet research team at Merrill Lynch, suggests $16-24 per share) than what we know from yesterday's stock price. But the importance of social media to 21st century commerce (especially for what we used to call "indie" filmmakers) should not be underestimated.
The social network - and how users are sharing content online - is an unprecedented disruption in human communication. Access has been democratized and marketing has become the domain of recommendations and sharing.
And the way that content - like movies, music, books, and conversations - will be monetized in this new world will evolve - must evolve - as part of the evolution of social media.
Is there any doubt that billions of dollars will be made by the companies that develop the best tools for navigating the flood of news, information, entertainment and conversations available online?
Google is already hugely profitable. And the revenue models on Facebook (which is only 8 years old) are just starting to generate serious money ($4 per user begins to mount up when you've got close to a billion users).
And, just like the early days of motion pictures (when nickels were collected for short films that played in storefronts called nickelodeons) or TV (when single sponsors using the old revenue model of radio and backed short live programs), the potential for revenue growth online via social media (where Old World display ads currently appear in separate columns alongside text and TV-style ads currently roll before crude short videos) is huge.
As content producers learn how to use the power of social media to reach their customers - art and commerce online will evolve. And Facebook, YouTube and the other social media leaders are uniquely positioned to be the platforms for funding, sharing and presenting that new content - and capitalizing on it all.
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