In his book ‘The Living Company’, the author Arie de Geus points out that the average life span for a multi-national company (Fortune 500 or its equivalent) is between 40 and 50 years. For companies in general, it’s a massive 12.5 years. In comparison, the average for human beings is 75 years, suggesting we do a better job of living our lives than we do running companies… Not really a fair comparison given that, currently, it is not legal to acquire, merge or break up human beings.
Can Web 2.0 start-ups become living companies?
When MySpace was acquired in July 2005 for nearly $600 million I remember wondering what exactly was NewsCorp buying – a company or a fad, more akin to buying the rights to a movie that will be hot property (and high revenue, hopefully) for a limited period of time. Now, a New York Times blog has articulated the lifespan of a social networking site:
¨They inevitably self destruct because sooner or later using it will stop being fun and start being embarrassing.¨
It’s an interesting statement and makes you wonder if Facebook, having turned down a $1 billion offer from Yahoo in 2006, risks ending up with the 1p box (comparing acquisitions to the UK show ‘Deal or No Deal‘). The New York Times references a great article by Cory Doctorow on Information Week that nicely sums up the challenge of longevity for social networking sites:
¨It’s socially awkward to refuse to add someone to your friends list — but removing someone from your friend-list is practically a declaration of war. The least-awkward way to get back to a friends list with nothing but friends on it is to reboot: create a new identity on a new system … Once that happens, poof, away you go — and Facebook joins SixDegrees, Friendster and their pals on the scrapheap of net.history¨
I love that quote because it goes against the assumption being made by techies that we don’t want to keep creating new profiles on different social networking sites and therefore need a ‘standard’ to integrate them all (see: OpenSocial). Most strategy and management books will tell you it easier (and more successful) to kill something and create from new than it is to change an established business/process/product/whatever, despite the hassle involved in starting from scratch all over again. People experience the same when moving house – do you seamlessly migrate all of your belongings or do you have a bit of a clean-out in the process?
So what will Facebook be worth in 4 years time? (The duration of the advertising deal that was part of Microsoft’s $240 million investment for a 1.6% stake.) I think it is a mistake to assume the value will be higher then that it is today. Some things just aren’t built to last…
- How Your Creepy Ex-Coworkers Will Kill Facebook – Information Week (Cory Doctorow)
- Has Facebook Worn Out Its Welcome? – New York Times blog
- The Living Company, by Arie de Geus, published 1997