Well, perhaps a tad premature but I truly believe that we are witnessing the beginning of the end for Facebook ... the emperor has no clothes are people are starting to stare and point. We have already seen Myspace die, of course the site exists and they'll try something else but it is no longer cool to have a Myspace account and it has all but disappeared from view. Facebook will itself die, I'm sure of it.

So what's the problem? A near complete lack of value! I've mentioned before what I get of Facebook ... it is a great way to recall people's birthdays; that is about the sum total of the value I see in Facebook, I struggle to think of anything else it is useful for unless you are looking to waste time...there is a lot of ability to waste time! Of course, there is the "status" messages that many people clearly enjoy ... though 90% of them are just repeated "tweets", they alone certainly cannot sustain the monster that is Facebook.

While the actual expense of running Facebook is a company secret, there is some information available about how expensive this toy is:

2007 Revenues: $150 million

2008 Revenues: $300 to $350 million (projected)

2007 Headcount: 450

2008 Headcount: 1,000 (projected)

2008 Capital Expenditures: $200 million (i.e., servers)

2008 EBITDA: $50 million

2008 Cash Flow (EBITDA – CapEx): negative 150 million.

• In 2009, Facebook's revenue is growing 70% from where it was last year. (We believe last year's revenue was about $365 million, so assuming some slowdown through the year, this would put 2009 revenue at $500 million-ish)
• The company has generated positive EBITDA (earnings before interest, taxes, depreciation, and amortization) since August of 2007.
• The company expects to start generating cash from operations ("Operationally cash-flow positive including cap-ex") at some point during 2010.

It is impossible to get accurate information about Facebook, it remains a private company and it behooves such a company to paint a rosy picture; without any requirement to let the public know the truth, every tidbit of information is suspect. Still, for my point, these numbers are close enough. Facebook's only revenue stream is from advertising but what advertisers are not quite understanding just yet is that the vast majority of the active users are unemployed and as such not prime targets to be advertising to. The reasons for their unemployment are varied and unimportant, the only important bit is that unemployed people do not usually have a lot of spare cash but they do have a lot of spare time!

From a marketers point of view, Facebook is a dream! Their knowledge of their users is unparalleled; it is direct marketing on steroids and it is very attractive. The draw is huge, who can ignore 300 million people! I'm still not convinced that anybody has figured out how to make real money but clearly the success of silly games like Farmville and Mafia Wars (actually, to call them games gives them more credit than they deserve .. we need a new word for "time waster") are allowing some companies to reach for success. But it seems pretty tentative to me, Farmville could just as easily and just as fast see itself disappear from users' thoughts; as it provides zero value it won't take much for something to supplant it.

The makers of Farmville are not likely making any money right now either, Facebook doesn't run their servers and their success must be met with infrastructure ... not to the tune of hundreds of millions of dollars but "million" will be in there. The company's valuation is huge because many folks will believe that there is value in all those Farmvillians ... and there may be because I suspect most don't realize that they have allowed the owners of Farmville to collect stupid amounts of information about those users ... information they can use and sell whenever and wherever they like. Clause 2 of the Farmville Terms and Conditions is:

b) Zynga Reserves the right to change these Terms in any way and at any time. However, no amendment to these Terms shall apply to a dispute of which Zynga had actual notice on the date of amendment.

So, unless you have an official, pending dispute with Zynga they have the legal right to do whatever they want ... the rest of there T&C is just noise because next week (or next year or an hour from now) they can just change the language to say whatever they want. But what is there right now is already pretty bad!

c) You grant to Zynga the unrestricted, unconditional, unlimited, worldwide, irrevocable, perpetual fully-paid and royalty-free right and license to host, use, copy, distribute, reproduce, disclose, sell, resell, sublicense, display, perform, transmit, publish, broadcast, modify, make derivative works from, retitle, reformat, translate, archive, store, cache or otherwise exploit in any manner whatsoever, all or any portion of your User Content to which you have contributed, for any purpose whatsoever, in any and all formats; on or through any and all media, software, formula or medium now known or hereafter known; and with any technology or devices now known or hereafter developed and to advertise, market and promote same.

That's pretty clear, they own everything you say and do while on their service no matter how they obtain that information and once you've given them that right you cannot revoke it. That's HUGE but I'll give you $10 if you can show more than 1% of the Farmville users have any real idea that they have agreed to this as they will not even have opened up the T&C let alone read through to section 4c, they just click through. Now I'm not saying that the information they have collected so far isn't valuable, what I am saying is that the business model is suspect and tenuous. If people stop finding Farmville interesting (and that seems inevitable to me) the company has to find another time-waster or they are stuck with millions in expenses and very little in revenue. When that doesn't happen they will be forced to play their trump card, change the T&C and use the information they have in ways that few people would have agreed to.

Until and unless Facebook can attract value, this is the fate of the entire service. As Myspace has proven, Facebook itself could go out of favour as fast as it came in...imagine $300million in expenses that don't go away but a user base that decides it will go away. How long will Facebook survive then?

The writing is on the wall, smart people read the T&Cs of these "games" and those people, like myself and many people I know, won't give Zynga my data (even if there was something about running a virtual farm that sounded like fun, having worked a real farm however this holds zero interest to me). I think the kiss of death of Facebook is when the corrupted mass media decides it needs to be involved with their own Facebook group/app/page or whatever. Big Business is unable to understand how things work...they believe that they can create a fan base via Facebook but that is exactly the opposite of how it works. Facebook arguably gives a voice to those fans if they want it, but it won't attract fans. While there are a lot of patsies out there promoting their favourite commercial corporation, not any of that promotion will lead to new or increased sales. And more importantly, the more such promotion exists, the more at risk Facebook is of becoming un-hip and seeing it's user base dry up.

I predict the backlash is coming, perhaps this year or next, but the Facebook's entire business model is speculation and we all know what happens when speculators are involved ... the bubble will burst, count on it. The only good news behind that is that very few people will really be affected because there will beno value lost ... it'll just be a disappointment to some.