Massucci's Take: Facebook is getting too popular for its own good

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Recently at the Apple Store, I was told that there are too many photos on the hard drive of my MacBook Air. There were three options: delete stuff, buy an external drive and store things there, or buy a beefier computer and load the sucker up.

Facebook has the same problem as it grows in popularity.

Bursting with 200 million users, Facebook doubled its membership since last August, according to a story in The New York Times. In the last three months, Facebook added 75 million users and became the world's largest photo-sharing site, according to a BusinessWeekstory.

In a move that signals the company may sell a stake to the public to raise money, yesterday Facebook said it is replacing its Chief Financial Officer Gideon Yu and wants to find a successor with experience running a public company.

Facebook doesn't publicly disclose earnings and is privately held. Press and analysts estimate 2008 revenues from $250 million to $400 million, according to the Times. That likely isn't enough to cover rising expenses. To quote the underrated Tom Hanks flick, "Joe vs. the Volcano," Facebook has a "luggage problem."

As folks figuratively unload shoe boxes of photos onto Facebook, storage at the Palo Alto, California-based company has become, well, overwhelmed. So cluttered that some of their servers can't handle the load.

On March 8, the company noted on its blog that some photos weren't appearing on members' Facebook pages. That affected 10 to 15 percent of uploaded photos on the site, Facebook said.

"A few of the hard drives where we store photos apparently failed all at once," the Facebook blog notes. After promising to fix the problem within a week, a note was sent that photos were restored the next day. Yet, members are still logging complaints about disappearing photos.

The company, founded by 24-year-old Mark Zuckerberg, is adding a million customers a day. In recent months, Facebook has accelerated its growth by adding foreign language versions of the site.The company is selling some ads, but not enough to support the increased costs of customers multiplying like Octomom children.

What to do? Short of having a car wash, here are the best options for Facebook:

  • Buy or lease more servers. Both are expensive options for a company not creating a lot of income at the moment.
  • Sell equity to raise cash. Not as easily done in this economic environment. Also, it's a bad time to sell equity, which might fetch depressed prices for a chunk of the Web giant.
  • Sell larger ads. Customers will balk at ads appearing on their personal Facebook pages. Many would surely cancel their accounts.
  • Charge users. In a word: no. You want to see 200 million served drop to 50 million in record time? Put a fee, any fee, on Facebook's service.

The company, it seems, agrees with me. Posted on Facebook's Facebook page (did you follow that?) was this note from March 26: "We've seen a few groups crop up on Facebook suggesting that we might require people to pay to use the service. We're not sure where these rumors came from, but Facebook is a free service and we intend to keep it that way."

Zuckerberg says Facebook's mission is for everyone in the world to share information, and the company says in its "proposed principles" that, "people should be able to use Facebook for free."

At what cost? Adding servers may be the quick answer for Facebook on its way to fulfilling its mission. The company needs to figure out how to make more money while contending with competition from the likes of faster-growing social network site Twitter. (See Massucci's Take on Twitter.) At the same time, if Facebook doesn't expand its capacity or raise money soon, it may find itself becoming less popular or relevant, like MySpace.

At the moment, I've been deleting photos, music and videos to create room on my less-than-a-year-old MacBook Air. That's how fast my storage needs are growing. The last year of growth for Facebook has pushed its storage limits to a similar capacity brink. So far, it looks like they're looking to solve this by buying more external hard-drives, so to speak.

The problem is, as expenses increase for Facebook, what the company really needs is an external wallet. For the moment, not many are reaching into their pockets and those who are, don't have fat enough wallets.

Anthony Massucci is a senior writer for Daily Finance. He previously covered technology companies for Bloomberg News.

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