I often get asked to listen to pitches for new web companies, mostly with the idea of offering advice, suggestions or helping someone take a project to the next level. I am always eager to participate in these sessions, because it gives me a good idea of how people perceive the opportunities that the web presents, and it also often highlights the many misconceptions that people have of marketing in this space (If only 1% of all online people pay us $5, we’ll be very successful, and will offer ourselves to Google ….., you get the idea).

So I was THRILLED to be given the opportunity to hear the concept of a new local start up that has HUGE global potential. I cannot say anything about the company itself (yet), but I can already see that if the cards are played right here, we have the next “obvious” application, that will appear on web pages all over the world, coming right out of our shores. That is great news. But it is not often that local companies can easily go global, which is why when the founders of this particular start up launch, I wish them the best of luck.

Which got me thinking – how exactly do you go global? In South Africa, which really does have a small online community, if you only slightly network, you are no more than two degrees of separation from those who can propel you forward if they believe in your product. It is more difficult to launch big, quickly and cheaply if the whole world is your intended audience.

I suppose you can attend the many overseas trade shows and seminars to spread the word, but that is hardly cheap or quick. You can open yourself to outside funding, but that might be a bit premature and a bad early move. Your best bet is to depend on the very community that you can attract (local) to be networked enough globally to spread the word. And that can happen. Or you resign yourself that your launch will need to sacrifice at least one of the three “big, cheap and quick” requirements, and you come up with a very, very good hook – which, by the way, this particular company seems to have done.

The good news is that the company is soft launching in South Africa, and soon, so keep your eyes peeled. Or subscribe to this blog, where I will of course keep you updated!

Business Week feature an excellent chart that neatly sums up the state of the web wrt to the US audience.

They divide the web audience into six categories:

• Creators publish web pages, write blogs, upload videos
• Critics comment on blogs and post ratings and reviews
• Collectors use RSS to gather information
• Joiners use social networking sites
• Spectators read blogs, watch videos, listen podcasts
• Inactives are online but don’t participate in any social media

The audience is also divided into 7 age groups:

• 12 – 17 yrs
• 18 – 21
• 22 -26
• 27 -40
• 41-50
• 51-61
• 62 +

The chart then shows you what percentage of users fall into each category and each age group. For example:

34% of 12-17 yr olds in the US, who are online, are creators. 51% of them are Joiners and 34% are Inactives (obviously, these categories are not mutually exclusive, so you can belong to more than one)

On the other hand,

only 5% of the 62 yr+ age group are Creatives, and 70% of them are Inactives.

Gives you a good understanding of who is where doing what.

Yahoo has tried to buy Facebook for an initial price of $750 million, and supposedly took the offer all the way up to $1.6 billion before the end of the talks. According to Executive Summary, which uses a leaked slide of Yahoo’s evaluation techniques and projects them for current figures, Facebook is now worth about $3.5 billion.

Numbers, numbers, numbers. Anyone with a calculator can plug them in and come up with arguments as to why FB is worth $10m, $50m, $1 billion or whatever.

The truth is, number analyses don’t work. Here’s an example of why:

Number of FB users at time of Yahoo offering: 7 million
Amount Yahoo was willing to pay: $750 million - $1.6 billion
Cost per FB user: $100 - $235

At the time, FB was a college community tool. And, as anyone who was once a poor student knows, students respond to money. So if the value of FB can be found in numbers, build a better tool (ain’t rocket science) and offer each student $150 to join. Hell, I’ll join too! And you ! And you!

But, of course, there is more to it than that. What you are really buying, if you are buying FB, is a mind set. There are, today, 30 million people who like FaceBook. And it isn’t even perfect. But our mind is set on logging in everyday, because our friends are logging in too.
And we love our friends.
More than we love Google.

But where is the money?
Facebook is a great start for a money making making tool, but it is not the tool itself. What Facebook has done, is it has created an audience. Not, mind you, an ad-receptive audience. Just an audience, made up of millions of people, who like to communicate with each other in an environment that they can very much control. But don’t try to send them a message to buy anything. Right now, there is no advantage to the audience to receiving that message.

Unless, of course, the audience is also making money out of it.

This is pretty much how Google’s Adsense works. Google haven’t bought Joe Doe’s website, but they have convinced him that if he puts ads on it, he can make money. Joe gives a licence of sorts to Google, to display ads on his site. Slyly, but logically, Google explain to Joe that it is still his effort that is necessary to make the money - by maintaining the website, posting good content, and pushing it out to the community.

But wait! The community in Facebook is already built in. So all we need now is for someone to convince Joe Doe that he should put ads on his Facebook page by incentivising him with cash. Of course, it is a bit awkward to sell things to friends, so it will have to be a very subtle process. Maybe Joe will recommend a book to Jane, and make money if Jane buys it. Or he’ll suggest we all go to a concert together, and make a commission on the tickets. Or we’ll all subscribe to a service that adds benefits to our online experience. Maybe if Joe sends a Facebook message to Jane that they should see a movie this Friday, a one line note can be appended that suggests which movie is going to be the hot ticket this weekend.

The options of monitization are endless, but they would have to be dealt with a lot of sensitivity. This, after all, was our community first, and it was founded on some self-evident rights. The main of these is that nobody is making money off us, without our permission.

So how much is Facebook worth?
Spreadsheets won’t tell you, because Facebook is worth what anyone will pay for it. Or what Mark wants for it.

Perhaps an alternative method to valuing Facebook is to work out how much time is spent Facebooking relative to time spent being exposed to other online marketing methods, and how fixed that ratio is. And trust me, as soon as Facebook is sold, there will be plenty of “Where’s the next Facebook ?” questions posted out there - immediately.

By licensing out Facebook, the buyer and seller get a win-win situation. The “seller” continues to develop a product that gets as much online attention span as is possible form the audience. The “buyer” takes advantage of this attention span in a sensitive, incentivised, and brilliant way. Either one messes up, and it’s back to the market.

But if they both succeed, they will perfect the ideal marketing model of the most powerful marketing machine in the world- the online community.

And we know who “they” are. Don’t we?