Never underestimate the value of your database

Never underestimate the value of your database

Unless you’ve been hiding under a rock, chances are you heard about the Facebook IPO this week, when it closed its first day of public trading valued at $105.19 billion. I know its share prices have gone down somewhat since first listing (just as Koshie predicted), but its still incredible to consider that its listing figure makes it worth more than brand giants such as Macdonalds, Amazon and Pepsi.

Check out this great article from mashable about how it sits in the ranks of uber companies if you don’t believe me.

My opinion (for what its worth) on why Facebook is now worth so much (and which I predict will continue to be), is the huge amount of data it has on its 901 million (some say getting closer to the 1 billion) users.

And also the fact that an increasing number of people are searching on Facebook for products, services, people, groups, events and more; rather than the traditional search engines, not to mention the billions of dollars they are making from their paid advertising model (yes, billions).

Just today I had a telephone chat with a publishing company, whom all seem to be calling me lately as they navigate the unchartered waters of completing revising their business models to ensure they actually survive the storm that is the digital age.

Like many businesses I speak to, I started the conversation with some easy questions:

  • How long has the business been going for?
  • What was your motivation for starting the business?
  • What is it that you are selling?

And then became more probing:

  • How many staff do you have?
  • What is your turnover?

Then I got to the kicker:

  • What’s the end goal for this business?

His answer? ‘Now that’s a good question!’

Start with the end in mind

Most businesses don’t start with the end in mind. But if they want to be successful, they should give it some thought quick smart, then keep their eye on the end prize.

This particular person I spoke to said that he would ultimately like to sell the business – a common exit strategy. And he wanted to do this in the next 3 to 5 years. And he has already had an offer.

Most businesses think that the value of their business will be determined by their lovely turnover. Or their lovely branding. Or the lovely goodwill they have with their clients and in this case, readers.

But I set this guy straight. A big part of the value of your business is the size of your database. So you better get collecting one, and fast!

A contact of mine worked alongside a Sydney Mum who started a business called Seven years later they sold it to Fairfax for $4 million in January 2007. Why did they sell it for so much? Sure it had 120,000 unique visitors per month, a very healthy 10 million page views but it was its membership of more than 100,000 that commanded the high price.

And this to me is the very reason Facebook is worth more than $100 billion too. Because they don’t only have a very large database. They have a large amount of information about the people on that database.

Bring them back to a property you own

Facebook is an incredible tool. I love using it, and myself and my team teach people how to use Facebook for great business results on a regular basis. However an important point we make in regards to Facebook is that the ‘database’ you build up in terms of your Facebook community is owned by Facebook, not you.

For this reason, we recommend Facebook and other social networks be used for what they’re good for – helping people to find you, get to know you, and what you know a lot about. And hopefully at some point choose to do business with you.

But a good portion of your social media activities we believe should be dedicated to bringing people back to your website and into your sales funnel. Basically onto property you do own and control, namely your database.

By doing this, you can continue marketing to them forever and a day. And so, too can anyone who buys your business in the future, hopefully making you one very happy (and rich) retiree in the process!

What is your exit strategy? What do you have to do between now and then to get it ready for sale? Are you confident in your sales funnel? Did you buy shares in Facebook? Share your comments below…