The Potential In Facebook's Recent Return To Roots

| About: Facebook (FB)

Facebook (NASDAQ:FB) recently launched Groups for Schools, a new community feature that lets people create groups exclusively for other people in their university. This is a return to the time when Facebook used to be exclusively for students at universities, though now it's just a small feature of an 800-million person network. However, it has a lot of potential. It is often difficult for college students to find other people in their major or get information about certain classes. This will become much easier, assuming enough students sign up for the relevant groups.

These groups will also be able to be used like a classifieds site. Students often are looking to find rides, jobs, roommates or housing, and it helps to have one site to post their ads to. While there are already a few college classifieds sites, few of them have the critical mass necessary for it to be worthwhile for students to use them. Facebook however is already so dominant that people already post what they are looking for there, even though they don't end up getting full exposure (and might, for example, end up missing the ride they wanted to the airport). With this new groups feature, it will become much easier to reach the relevant people in one's university. This will help expand Facebook's role beyond entertainment to be a more general-purpose website. This will encourage students who have refrained from signing up for Facebook or do not spend much time on it to use the site regularly.

Another major area for students is textbooks. Students often look to buy or sell textbooks from each other, but most universities do not offer any way to facilitate this. The new university groups can be used for this, and Facebook automatically creates a "Textbook Exchange" group for each university. Currently, they don't seem to offer any search option, so it seems it will be difficult to use. However, Facebook might add this feature in the future. Once there is a search, it would make sense to display results from other universities, and perhaps from other online sources as well. They will then be able to earn revenue from affiliate payments from the book-seller sites they include.

Facebook may choose to expand their partnership with Oodle, their current operator of Facebook classifieds, to integrate with their new college groups. This will allow them to take over the college classifieds market. Besides being a potential source of revenue itself, this may allow Facebook/Oodle to gain users who will continue using their site after college. This may allow them to become the main classifieds site on the internet, and finally chip away at the 1990's-era Craigslist.

While Facebook may not follow the exact path mentioned above, the ability for it to do so shows the great potential value Facebook has as a company. It would be hard to justify a $100 billion evaluation for Facebook just as a site for sharing messages, links and photos. However, it becomes a much more reasonable possibility when one considers the potential for building commercial features into Facebook's social network. This will allow Facebook to offer advertising to people when they are actually involved in making purchases, a high-revenue area currently dominated by Google (NASDAQ:GOOG).

Disclosure: I am long GOOG.

Additional disclosure: Previously created NYtextbooks, a small classifieds site for college students.