
After Facebook fails - angusgr
http://blogs.law.harvard.edu/doc/2012/05/23/after-facebook-fails/
======
polemic
I have no idea if Facebook is valued correctly or not, however I think this
misses a vital point. Facebook is not nearly the same as other web ventures.
It's ability to target ads seems secondary to this:

From [http://www.kenburbary.com/2011/03/facebook-demographics-
revi...](http://www.kenburbary.com/2011/03/facebook-demographics-
revisited-2011-statistics-2/), slightly out of date, but still useful:

    
    
      - Average user visits the site 40 times per month
      - Average user spends an 23 minutes (23:20 to be precise) on each visit
      - Global users 629,982,480 (I believe this has passed 800 million now)
    

So, _on average_ hundreds of millions of people are spending about 1/2 an hour
looking at Facebook.com _every day_.

As much as their ability to target ads is hyped (or derided), does it really
matter? Isn't targeting just a way to charge a premium, or drive click-thru on
_massive_ volume?

Facebook isn't competing with other websites for online advertising. It's
competing with the entire entertainment sector for all advertising,
everywhere. That isn't going to change soon.

~~~
hammock
How many of those users use adblockers? What if the most popular browser
started shipping with adblocking enabled out of the box?

~~~
sanswork
Given the proliferation of random toolbars on the computers of my family and
friends and I would say almost no one in the grand scheme of things.

~~~
paulgb
The people who use adblockers are probably the people who are least likely to
click on ads anyway.

------
hkmurakami
Every time I read about how online targeted ads have poor returns for
advertisers, I think to myself:

"These advertisers know that the ads have low ROI because things are
_measureable_ online. How (in)effective would traditional advertisements prove
to be, if they were as measurable as their online counterparts? How
(in)effective would traditional advertisements prove to be, if they didn't
interject themselves into the medium in such grotesque, user-experience
destroying ways?"

~~~
guelo
But advertisers aren't stupid. There must be a rational reason why they keep
paying higher prices for traditional ads.

~~~
silverlake
I'm just guessing here... If ad agencies earn a % of ad spend, it's in their
interest to spend more. It's easier to spend more on TV, plus it's difficult
to prove it's ineffective. Targeted ads on the 'net may someday be really
good, but it would cost less and undermine ad agencies' fat fees.

~~~
alexqgb
Agencies, in effect, earn a percentage of the spend. But this amount is
determined up front. Clients go to market saying "We have $x for client y and
we want to know which shops will give us the most bang for the buck."

Shops that over-promise then fail to maintain reasonable profit margins don't
survive. At the same time, there's pressure on clients to work with
established players, since a campaign gone bad is even harder to defend when
it turns out the the marketing budget was blown on inexpedienced and / or
desperate people who were willing to seriously undercut competitors just to
land the account.

------
Smerity
He points out some of the terribly targeted ads that Facebook pushes on users.
I think this is a huge issue that's not discussed enough.

Facebook has all the data but no real targeting. This stems from two core
issues: 1) they don't seem to use their immense datasets as effectively as
Google does and most importantly 2) they rely on the advertisers to target
their ads. Advertisers, even when handed the best demographic tools in the
world, seem to get it horrifically wrong. This means people are exposed to bad
advertising and learn to ignore it. This also means that advertisers will
complain that Facebook doesn't give them the bang for the buck that they're
after. Facebook don't mind however -- they still get their revenue.

In the long run Facebook need to work out how to target ads. The longer they
leave these horrible ads in place the more desensitized their userbase will
become. They're poisoning their revenue stream by allowing any and all ads
through, regardless of quality or accuracy in the target market.

~~~
alanfang
Based off the ads the author cites in the article the issue is the lack of
data, not poor targeting by advertisers. For example the author wouldn't see
the "Boyfriend Wanted" ad if he listed himself as married in his Facebook
profile (Facebook aggressively forbids dating ads targeted towards people who
list themselves as married or in a relationship).

All online advertising platforms rely on advertisers to target their ads. If
this really is the issue, which I doubt, it applies to the entire advertising
industry not just Facebook.

~~~
microtherion
I have always listed myself as married (even as public information), yet I see
a dating ad on my sidebar. The two top ads were for high heel shoes.

Either FB has me pegged as a two timing trannie, or their targeting is really
poor.

~~~
greedo
This doesn't have to be a case of poor targeting by FB; it could be broadcast
targeting by the advertiser who isn't as selective as we would expect.

And for brand awareness advertising, I could see that it might be worth it,
depending upon the cost. I have no intention of using eHarmony (happily
married here), but I'm aware of them due to both online and offline
advertising. If a coworker asks me about online dating, I'm sure I'll remember
eHarmony. That brand awareness has obvious value to advertisers, and if the
cost is in line with their budget, it explains the "mis-targeted" ads.

------
aresant
This essay reads like an advanced lifeform encountering, and misunderstanding,
the average human consumer.

Two quotes stick out:

(1) That he goes "on Facebook. . . as infrequently as I possibly can."

This statement disqualifies his entire experience.

Hundreds of millions of average-consumers use Facebook DAILY.

These users update their content, they integrate more of their life. They
click the like buttons. They share.

This in turn creates more specific opportunities for advertisers to target
more relevant ads vs. the junk broad market ads he uses as examples of their
failure (credit cards, dating, classmates known to be JUNK-CPM offers that
work everywhere).

(2) That his perfect model is inclusive of "Vendor Relationship Management"
that lets people manage their vendors, vs the vendors managing the people.

I might use VRM along with my HN brethren but average consumers won't adopt
VRM because it requires them to choose.

Advertising works because people prefer to be told what to do.

This article fits nicely into the "FB is destined to fail" cannon, but I find
the author to be grossly misinformed by his own experiences.

~~~
PakG1
Grossly misinformed is perhaps a bit much. I don't think a guy like Doc Searls
is so out of touch to not know what the general populace is doing. He
contributed to _The Cluetrain Manifesto_ , he's a well-respected writer.
<http://en.wikipedia.org/wiki/Doc_Searls>

I think making statements like what you quote in (1), he's making a bet: I
understand what people are really truly like, and this stuff will prove to be
just a fad; eventually, people will realize I'm right. He predicts online
social networks as we know them to decline in 2013.

If he's right, then it doesn't matter what Facebook users are doing today,
even if they are using it daily. There was a time when MySpace and Friendster
were the top social networks on the Internet too. Facebook just out-executed
them. The interesting question is if Facebook had not been around, would
MySpace or Friendster still have been around in 10 years anyway? Or would it
have been proven to be too faddish after the activity level reached a certain
boiling point?

------
InclinedPlane
Unlike some I'm not convinced that facebook will fail. However, I think the
risk that they will lose a lot of their userbase and/or they will fail to
massively increase per user monetization over the next, say, 10 years is
pretty high (maybe 50/50 as a SWAG).

The advertising revenue risk is a big one, but there are bigger ones I think.

First, we may be nearing the end of an era where monolithic social sites make
sense. Social Graph as a Service and federated social networking just plain
makes sense. I think the biggest risk to facebook isn't necessarily the one
big competitor (like google) but a thousand tiny competitors who offer the
same full suite of services as facebook but are more targeted toward a
particular social niche.

Second, as technology advances the ease with which someone can bootstrap a
company that has 10 million, 100 million, or even a billion regular users
drops dramatically. Right now supporting a billion users takes over a thousand
employees and data centers around the world. How will that change in 5, 10,
15, and 20 years? In 2022 it might be possible for a site with the same usage
load as facebook to be supported by a company with less than a hundred
employees and other expenditures on the same scale as payroll. When, not if,
that happens it'll open up facebook to a much greater degree of competition.
It also fundamentally changes the game, because then you will have situations
where "fad" sites rise up and then evaporate away in a matter of only a few
years, months, or days and yet still have gigauser popularity at their peaks.

Third, related to the other 2 points, social is just plain going to change, a
lot, over the next several years. Anyone who thinks that the way social on the
web works today should be set in stone and never changed is either clueless or
evil. There is a lot that's missing and a lot that's broken today. Facebook
has so much work to do just to be able to increase its monetization to a level
that justifies their stock price, but they will also have a tremendous amount
of work to do to fix and change social networking. If they do one and not the
other they are doomed, but their competitors can get away with doing only one
and they'll eat facebook's lunch.

Either way, it'll be exciting to watch what happens.

~~~
fredwilson
you nailed it inclined plane

------
cletus
Here's my take on Facebook (disclaimer: I work for Google, these opinions are
purely my own and not representative of the company, yadda yadda yadda).

Display advertising works best when you have sufficient, quality inventory
(publishers whose sites serve ads) such that you attract advertisers in
sufficient quantity and quality. Targeting in display ads works because from
the publishers, the intermediary has information to figure out what your
interests are and so on. A common misconception from fearmongers is that your
data is being sold. It is not. Advertisers are paying to have their creative
put in front of a particular audience.

The most important strategic move Facebook made in the last few years (IMHO)
is the Like button. Whether or not you "Like" things is irrelevant. The main
purpose of that "Like" button is (IMHO) as a tracking cookie. Visit any Like-
enabled site and you see a small piece of content from Facebook that tells
Facebook all the sites you visit. It's a tracking cookie like any other and
personally I have no problem with that. Just make no mistake why the Like
button exists.

Facebook also has a wealth of information in terms of who your friends are,
what your interests are, your relationship status and so on. It's this alleged
treasure trove that people point to as the real value of Facebook (combined
with the network effect).

I disagree. I think that information is largely useless for a number of
reasons:

1\. Because of social games and the like who your friends are on Facebook
loses a lot of meaning. In the very least Facebook has to filter that
information and determine who your real friends are (which it probably does
anyway for News Feed filtering and so on);

2\. Where people go and what people do is far more accurate than what people
will tell you about themselves. As House says--or used to say--"people lie".
When you ask someone their interests or opinions it will pass through various
filters of what that person thinks you want to hear, what they want the world
to believe, what they themselves wish they were and so on. It's a distortion.

It's a bit like dating or job hunting. You look at any online profile or CV
and you'll see lies, distortions, omissions and so on. As Chris Rock said, for
the first 6 months you're not dating them, you're dating their representative.

Facebook has no search engine. Whatever you say about the size of display ads,
search advertising is still far bigger. With search you have intent. People
want to find things by their actions. On Facebook ads are an annoyance.

It's the difference between wandering the streets shouting "does anybody want
ice cream?" versus putting an ad in front of a bunch of people who have
already told you that they're looking for ice cream.

Their mobile presence is at the behest of Apple, Google and (arguably)
Microsoft. Mobile (IMHO) poses an existential risk to Facebook, which in part
explains the exorbitant price tag paid for Instagram (it has nothing to do
with any alleged "bubble"). Much of the engagement on Facebook is because of
games. Those games are increasingly going mobile. This is bad for Facebook.

At $100B IPO valuation that put Facebook being worth half of Google with 5-8%
of the revenue and significant strategic risks. Of course it was overvalued.
It's still valuable but it will take some time to figure out exactly how much
it's worth.

~~~
mike-cardwell
"Visit any Like-enabled site and you see a small piece of content from
Facebook that tells Facebook all the sites you visit. It's a tracking cookie
like any other and personally I have no problem with that"

I understand that you work for Google and that not holding this opinion would
mean that you have to conclude that your employer is also very much in the
wrong. But how do you justify it?

It's clearly not information that people have chosen to give to Facebook.
Facebook is basically taking advantage of a technical trick in order to obtain
information about their users which their users neither gave them permission
to collect, nor know they are collecting. It just seems highly unethical to
me. But you "have no problem" with it... How is that possible?

The thing that annoys me about it is that the browser vendors could prevent
this hidden tracking quite easily. By either disabling third party cookies, or
by tying them to the domain in the address bar. Hell, Safari blocks third
party cookies by default, and Apple is all about usability, so it can't cause
_that_ many problems... On the other hand, why would Google and Microsoft
modify their browsers in such a way as to increase our privacy at the expense
of their profit.

~~~
gvb
It is _MUCH_ more than a tracking cookie. The more useful XFBML version is a
snippet of JavaScript. JavaScript can do a lot more than a cookie.

[http://developers.facebook.com/docs/reference/plugins/like/?...](http://developers.facebook.com/docs/reference/plugins/like/?_fb_noscript=1)

    
    
       <div id="fb-root"></div>
       <script>(function(d, s, id) {
         var js, fjs = d.getElementsByTagName(s)[0];
         if (d.getElementById(id)) return;
         js = d.createElement(s); js.id = id;
         js.src = "//connect.facebook.net/en_US/all.js#xfbml=1";
         fjs.parentNode.insertBefore(js, fjs);
       }(document, 'script', 'facebook-jssdk'));</script>
    

Go to <http://connect.facebook.net/en_US/all.js#xfbml=1> and be horrified.

~~~
crusso
That's a decent chunk of minified js. Seems like quite a bit of code just to
be able to tell FB whether or not you "like" something.

My biggest problem with it is that consumers have no clue whatsoever that
they're being tracked that way. Even typical web site owners don't really
realize that the little piece of code they copy/pasted to get the FB Like
button exposes their visitors to so much intrusive js.

I don't have a problem with people being tracked if they feel that they're
getting reasonable value out of the relationship, but the current situation is
just very sneaky.

------
prof_hobart
Whilst I agree with pretty much everything he says about Facebook and targeted
ads, I'm surprised that the article makes no reference to Amazon - which is
the one place that, at least for me, targeted advertising works brilliantly.

There's a few reasons why it works for me

\- I'm going there to buy or at least thinkg about buying something, and when
it comes to things like books, I like to browse for something interesting so
being prompted to look at books that I might be interested in seems entirely
appropriate

\- they are entirely open about why a particular product has been recommended
to you, and you are able to pretty easily fine-tune those recommendations.

\- when I buy something from them, or even browse on their site, I'm not
particularly shocked when they remember that next time I visit. They don't
seem to be secretly collecting stuff behind the scenes, sniffing around what I
did on a random 3rd party site etc.

Facebook, and Google mostly (although they are at least slightly better off on
the first point than FB) fail on all three of these. They are giving me
messages about things that I'm not currently planning on doing, based partly
on some secret info they've gathered from god knows where.

------
fleitz
If internet advertising is a bubble that's going to pop they might as well
retitle this article:

After Google, Yahoo and most web properties fail.

I guess all we're going to be left with is craigslist and basecamp, also there
won't be any newspapers because they're dead because of the internet, and all
their replacements are dead too because internet advertising doesn't work.
(according to the OP)

~~~
nextparadigms
I think there's a Facebook Advertising bubble, not an Internet advertising
one. I don't think Facebook ads have ever really worked, but most thought they
did, which is why it's a bubble.

------
yaix
>> Robert Scoble likes Orchard Supply Hardware

That is not an ad for a hardware store, its an ad for Scoble. Just "like" as
much stuff as you can, and people will constantly see your name and are
reminded of you for free.

------
tferris
Yes, they massed up the IPO, Facebook doesn't have a true value as Google or
Apple, ads do not work and user growth is finished. I have doubts too that
Facebook will match expectations but I am a sick of reading every other day
why FB fails or what happens after they fail.

I don't like Facebook either and stopped using it actively but I know for sure
that Zuckerberg is a very smart and talented guy just looking at how he build
this company, kept power the entire time and with 16B$ he'll find sooner or
later a way how to get money from all those Facebook addicts.

------
jriediger
I think a lot of the analyses of Facebook's advertising model miss one
important point. Sure, their CTRs are not even closely comparable to Google's
numbers. However, when people search on Google, they're often actively looking
for certain products that lead to high CTRs on these targeted ads. In
Facebook's case, people want to socialize and generally don't want to be
disturbed by ads.

Basically, Facebook currently uses an advertisement model that is not very
natural to its product (and not very well targeted for a number of reasons).
But Facebook just doesn't care at this point, because they still generate
sufficient revenue through the sheer number of users.

So the real question is whether Facebook can come up with an advertising model
that is truly natural to its product (e.g. actual product recommendations by
friends in conversations etc.). To conclude that Facebook is doomed to fail
because their advertising model is suboptimal seems to be a little premature.

------
clarky07
If he put that he was married on the site, he wouldn't get the dating ads. I
just checked my facebook (for the first time in awhile) and 3 of 4 ads where
things that made sense and were interesting to me.

I personally don't think Facebook is worth nearly as much as their current
valuation, but as long as they have 900 million users who average a 1/2 hour a
day on the site they are worth quite a bit. As for the targeted ads, I'd much
rather have ads for things that are interesting to me than for things that
aren't.

------
raintrees
Interesting... I was just going through the phase of unsubscribing from all of
the legitimate info/news sources I had subscribed to over the years to try to
reduce my daily Inbox levels, and it got me to thinking about reversing the
tables so I could announce when I _wanted_ to partake and for what reason, and
THEN get appropriate emails, links, ads, etc.

~~~
redwood
Right on, is there a platform for this yet?

Perhaps fbook can pivot to this... since it'd be tough without a big user base
first.

This only works for non demand-creating advertising of course.

~~~
redwood
(edit "raintree" would be a great name for such a service!!! --- hint hint, go
for it!)

------
foxylad
Marketing used to be about information, letting potential customers know your
product exists. Then it morphed into manipulation, but I think that has run
it's course - even young children now know when they are being manipulated,
and are resistant to it.

Because of this, my company concentrates entirely on providing remarkable
services for remarkable prices, so our customers do our marketing for us by
telling other potential customers. In our experience, this strategy works
magnificently - we're doubling our revenue every year without spending a cent
on marketing.

Back to Facebook - I see Google ads as informational marketing, and Facebook's
as manipulative marketing. And currently Facebook is horribly bad at it - I
think I've "liked" two products ever, because I think most of my "friends"
would think I was really lame for endorsing anything that isn't truly
exceptional. Having said that, our services have thousands of likes...

------
revorad
I'm amused when intelligent people like Doc don't even show enough curiosity
to hack Facebook ads to their own advantage. I hate ads with a vengeance, but
I like using Facebook. And just like Doc, I kept seeing stupid irrelevant ads.

So I decided to fix it. I started liking Facebook pages of things I _really_
like - Arduino, Raspberry Pi, Ubuntu, Sphero, Android. And lo and behold, I've
started seeing ads which I actually like and even click on.

Facebook critics offer a strange bipolar argument - on the one hand, they say
Facebook ads are so badly targeted even with the wealth of personal info they
have. On the other hand, they question the valuation. Where's so much growth
going to come from? Better ad targeting is definitely part of the answer, but
more importantly, I think Facebook will come out with some killer new products
in mobile and ecommerce.

------
damian2000
For some reason the Facebook IPO reminds me of when Steve Case sold AOL to
TimeWarner in 2000.

From the AOL wikipedia page :- "AOL is best known for its online software
suite, also called AOL, that allowed customers to access the world's largest
"walled garden" online community and eventually reach out to the Internet as a
whole."

At the time it was held in high regard for getting such a massive online user
base (around 34 million) - which is a bit paltry by today's standards.

~~~
gerrit
AOL wasnt sold to Time Warner, it was the other way around (see
<http://en.wikipedia.org/wiki/Time_Warner#2000>)

------
dr_
First of all, it's not clear that social media advertising is going to fail,
just because the author is not happy with results he gets. It was announced
today that Oracle purchased Vitrue <http://techcrunch.com/2012/05/23/more/> a
company with close to 100 million a year in revenues. Presumably, for many
people, it works.

Secondly, the title of the article is After Facebook fails - which implies it
will fail and will do so because it's advertising model will fail - but who
says facebook primary business model has to be advertising? If they continue
to grow to over a billion users - who says that the "like" button on sites all
over the web now shouldn't be charged for? who says users shouldn't be charged
for premium services? more photo filters on instagram - just pay!

the possibilities are endless, and advertising, for now, is just one of them.
my gut says it will become less and less important as a revenue generator over
time. and personally I will welcome that change, cause with all the ads
adjacent to the chat bar, the site is looking pretty messy.

------
ilaksh
I don't know if Facebook is necessarily going to completely fail anytime soon,
but he does have a lot of good points, like how bad the targeted ads are, and
that the whole concept of targeted ads is not great.

I think that Google is parsing gmail a lot more closely than we might be
comfortable with, and I would not be surprised if an even more intelligent
system eventually was applied to Facebook conversations and used to create
targeted ads, with or without our consent.

The idea of "intentcasting" what you want to buy at the advertisers and then
having control over their responses is a great idea and something I would like
to experiment with at some point if I have time.

Within two or three decades, I think there are going to be major, major
changes, not just with social networking, but with computing and even the
overall nature of computing and even human society.

Yes, we do want, should and shortly will have more control over our personal
conversations and data etc., but it goes beyond that. I think that non-
commercial distributed but at the same time more private content oriented
networking will become a big thing within the next decade or so, and that
network will be even more difficult for commercial interests to take advantage
of. And it won't be hosted on a giant commercial centralized system.

Beyond the private distributed social/content networks etc., you will see
artificial general intelligence that blows Google's gmail parsing and
everything else out of the water. I believe that personal data and
conversations will generally be stored more privately and that people will
voluntarily take advantage of these AIs (AGIs) to act as agents and
assistants.

I also think that these powerful artificial general intelligences are going to
put the nail in the coffin for the current infinite growth consumer driven
"economic" model, which will be replaced by a more sophisticated and humane
descendant.

------
sparknlaunch12
People saw value in Facebook, otherwise they wouldn't have purchases shares
last week. Yes, well overvalued but investors are willing to pay a premium for
the associated and perceived value.

1) The main value is the sunk cost people have in Facebook. The vast majority
of your family and friends are on the platform. You unwittingly have built up
a scrap book of your past few years - photos, messages, relationships...

2) The other value is the time people spend on Facebook plus the large user
base. You just need one or two mechanisms to extract revenue from this
position and you are winning.

There are plenty of risks, some may be:

1) The Government cracks down on privacy or advertising standards.

2) An alternative arrives that makes it easy to transfer your profile. You can
always download your Facebook profile.

3) Suffers the MySpace factor. Facebook is left behind due to better and more
exciting offerings.

For now, Zuckerberg has shown his ability to compete. Until people stop
spending hours on Facebook, they are very far from failure.

~~~
loceng
Anyone buying Facebook at the IPO value are sheep and gamblers.

------
SagelyGuru
Absolutely right.

There is yet deeper issue that applies to all advertising, in the form of a
simple natural law:

 _There is a limit on the amount of BS a person can take before taking steps
to actively avoid it or at least 'tuning it out'._

Current business 'thinking' assumes that increasing advertising is always
good. It does not acknowledge this saturation effect at the 'receiving end'.
It essentially ignores the fact that everyone else will also advertise more
and more, for diminishing returns.

The trouble with advertising is that it is like a shouting match: occasionally
someone with a strong voice will obtain a temporary advantage but in the long
run nobody can be heard properly, least of all modest people with something
useful to say.

On a more prozaic level, dividing the FB valuation by its number of active
users gives about $170. I doubt very much that an average active FB user is
buying enough value from FB ads to justify this kind of advertising budget.

------
mcantelon
I didn't get through the whole post as it's kind of disjointed and meandering,
but its initial assertions seem shaky.

Personalized ads do have business value. After looking at some videos about
Native Instruments audio gear on YouTube, I started getting a lot of Native
Instruments ads pretty quickly. Unlike television, I am being shown ads for
something I might actually buy rather than ads for things I will never buy. If
traditional advertising is effective, then I don't see how this more targeted
advertising can't be more effective.

As for "uncanny valley", what's "icky" now won't be icky in 10 years. You can
get used to anything and kids growing up with the "uncanny" will quickly see
it as normal, whether this is a good thing or not.

~~~
tatsuke95
> _"After looking at some videos about Native Instruments audio gear on
> YouTube, I started getting a lot of Native Instruments ads pretty quickly."_

So, you sought out the product first, then received ads? I think that's the
point. What does this accomplish from a brand awareness point of view? You
have already made it clear you're interested.

~~~
mcantelon
>So, you sought out the product first, then received ads? I think that's the
point. What does this accomplish from a brand awareness point of view? You
have already made it clear you're interested.

A traditional sales technique is to retain a list of potential leads and call
them every once and awhile to see if the lead is interested in converting into
a sale. This technique exists because it works and the purpose of the targeted
advertising is similar. Keep me reminded of the product and at some point I
might be inclined to buy.

------
adamio
Facebook will figure out the ad problem - and that's the problem.

They're seemingly profitable now on ads (not 100B worth), and through
innovation, testing, & learning revenue will grow or at least not disappear.
Advertisers will understand how to use Facebook effectively as an advertising
media.

The major problem is lock-in. Facebook's users attract other users, which all
attract advertisers. Once Facebook and advertisers uncover a breakthrough in
effective social advertising, competition for users becomes critical. What
will Facebook rely on to keep others from eating their lunch?

Simplistic, but, Google has search and apps. Facebook has....reluctance to
change? Which might just be enough, until its not.

------
gallerytungsten
Is Facebook going to be the next AOL, left in the dust by a new innovator?

The chances of that happening are excellent, in my opinion.

However, consider the following revenue streams Facebook could generate using
a paid membership model:

Facebook Personal - $10/year (no ads)

Facebook Pro - $100/year (small business)

Facebook Private $200/year (full privacy controls)

Facebook Enterprise $500,000/year (enterprise social network built on top of
Facebook)

All of these ideas are plausible, and there are plenty more the readers of
this site can surely come up with. All of them together could generate a
billion dollars per year, or more. Of course, they depend on a shift in
Facebook's culture, from privacy invasion and destruction; to actual privacy
enhancement.

~~~
ma2rten
I don't think this is a good idea:

\- Facebook Personal: If there would be a market for this why didn't they
introduce this already?

\- Facebook Pro: What would they be getting for this money? Facebook is
already selling branded pages to corporate partners for much more money.

\- Facebook Private: This would be openly admitting that people don't have
full control over their privacy on Facebook already. Doesn't seem like a smart
move to me.

\- Facebook Enterprise: This is a totally different market with different
needs. There are already different strong competitors out there. Also, I don't
know if Facebook is the best brand for this. It's more associated with
distraction then productivity.

------
dageshi
It occurs to me that instead of being an advertising platform facebook would
be better off as a marketplace platform for real goods. e.g. stop competing
with google because you don't have intent and start competing with amazon and
ebay because listing real products that people can instantly buy would be much
more compelling. People don't like ads no matter what their content, everyone
_does_ like a bargain/deal on something they're interested in. Facebook knows
what we're interested in, it can offer us deals on that stuff directly and it
can immediately show off our purchases to all our friends and the deal that we
got...

------
jayzee
Isn't this the same Michael Wolf that Loeb, the activist hedge fund manager,
picked for Yahoo's board? If this is how he feels about businesses driven by
online ads I wonder what he thinks of Yahoo's odds.

------
nns1212
Facebook has a clear monetization model. If Facebook releases a product like
AdSense - which shows content relevant ads as well as targeted ads will be a
great blow to Google.

Also, as far as mobile is concerned there are apps like Karma
(<http://getkarma.com>) and TagTile that Facebook recently acquired - and they
showed a great way to monetize using Facebook data.

There are some many apps that have crossed millions of users just because of
Facebook integration.

Haters gonna hate but Facebook is here to stay for a long, long time.

------
praptak
A bit off on tangent - I believe the real potential for "the game changer" in
advertising is in the following quote from the article: _"If, for instance,
frequent-flyer programs and travel destinations actually knew when you were
thinking about planning a trip."_

Hey, if you create a medium where I can proactively request offers of
particular kind, then I'm all yours. Provided I have control over what I
request - I can set a time limit on a query, revoke it, etc.

------
waterlesscloud
There's actually some interesting stats regarding how much FB gets per user in
the US vs other regions. It's much higher in the US, which does indicate
growth potential in other areas.

[http://techcrunch.com/2012/05/03/stats-facebook-
made-9-51-in...](http://techcrunch.com/2012/05/03/stats-facebook-made-9-51-in-
ad-revenue-per-user-last-year-in-the-u-s-and-canada/)

------
soup10
I have a crazy idea, why doesn't Facebook charge for premium accounts?

They would really only need to get what? Maybe 10% of their users to sign up
to some kind of premium subscription service to justify their valuation. It's
funny how this option is rarely ever mentioned, as if selling a service to
consumers is some kind of taboo for internet companies.

~~~
pyoung
It's been mentioned plenty of times (at least in discussion forums). Also
Facebook has been experimenting with sponsored posts in NZ, where people pay
to have their status posts featured more prominently in peoples news feeds,
which is essentially a 'pay for premium' service. From what I understand, it's
not going too well.

~~~
rbn
This is a good idea in my opinion. Lets say I'm having a party, launching a an
app, selling something..ect. I think people would pay $1-$5 to use that
feature.

------
billybob
I think Facebook will decline for a much simpler reason: whim.

Facebook was cool when I was in college and it was only for college students.
Now my dentist wants me to "like" him on Facebook and get entered in some kind
of drawing.

Lame.

"I wonder if there's a social network that's only for cool people like me,"
thinks the user.

------
alanh
Wow, that header really reminds me of the circa-2006 Facebook design, with
“the facebook guy” in the top left. Screenshot here:
<http://joshvandervies.com/is-the-old-facebook-better-2/>

------
melvinmt
One thing I've noticed while reading the article is that my banner blindness
is so strong, that I even had to force myself to look at the image full of ads
being discussed in the article. I guess the author has a point.

------
eggywat
Why do posters in Hacker News constantly confuse a disclaimer with disclosure.

------
adventureful
He leads with an extraordinarily false claim:

"The daily and stubborn reality for everybody building businesses on the
strength of Web advertising is that the value of digital ads decreases every
quarter"

The value of Google's ad network, including the average cost per click,
increased for 14 years in a row, roughly speaking. Google certainly isn't
suffering from any supposed value decrease per quarter, and if that effect
were actually in place, their business would be nearly worthless by now.

~~~
JabavuAdams
Read the linked MIT article. There's a clear difference between Facebook-style
display advertising, and Google-style search advertising. Google ads are much
more profitable because people already have the intent to buy.

------
a3d6g2f7
FB has bought itself some more time with this IPO. How much time does $15BB
buy? Even if advertising executives and industry analysts give up on FB, FB
stil has the cash to sit and wait for their muse to appear (like Google's
discovery of ad feeds in search). Given that FB no matter what they do, no
matter how much they fail to perform, is now subsidized with $15BB, will they
drive the ad market down?

------
BiWinning
And what about when all TV is served over the internet? Or when all billboards
are controlled over the internet? Or all magazines are displayed on epaper via
the internet? 95% of advertising _will_ be done over the internet, and if the
author is too short-sighted to see that well then that speaks poorly on him.
Of course if he had any insight maybe he'd be building something and not
whining about it. He just sounds bitter because he's getting left in the dust.

~~~
pyoung
Did you make it to the end of the post? He is working on a VRM system that
supposedly puts the power in the hands of the customer, rather than the
vendor.

------
a3d6g2f7
Original source: <http://www.technologyreview.com/web/40437/>

------
ktizo
I could see facebook being replaced by nothing more fancy than a web design
app with a social webring gizmo.

~~~
psc
Facebook's advantage over any competitor is that everyone is already on
Facebook. I could see early adopters moving to what you're describing, but it
would take ages to move the other 90% of the users over. So at least for the
next few years, it's unlikely that people will transition en masse to a
completely new service.

~~~
dredmorbius
"Everybody" is already in a lot of places.

They're on FB. They're also on Google. A hell of a lot of them are still on
Yahoo mail. They're using Craigslist. And eBay. And Amazon. And The New York
Times and/or Fox. Hulu. Whatever Apple's calling its offerings these days.
Even Microsoft. To say nothing of a bunch of B2B service sites that have large
user lists (ADT, Delta Dental, Beico, etc.).

There are a bunch of sites that have a very large userbase. Large enough at
least to get past the network effects problem sufficiently to start
boostrapping social onto things if they want to do so.

Which is one of the reasons that network effects, in and of themselves, offer
such transient advantages. You may be able to corner _the_ network effect in
one area for a time, but you're not going to conrner _all_ network effects in
_all_ areas, leaving you vulnerable to intrusion and erosion.

Several of the players listed above have a vastly better advertising or direct
revenue capacity (Google, Apple/iTunes, eBay, Craigslist, and most of all in
my mind, Amazon).

Craigslist is a wonderful example of a site that leave huge amounts of
potential revenue behind (charging for only a small fraction of jobs and
housing listings) to create a hugely compelling advantage in the classified
advertising market, and supporting some "social" features (there is a pretty
active, if not grossly overwhelming, forums section). Amazon also has
discussion. Google has entered directly into the frey. The direct problem of
social networking is one of coupling a modicum of engineering talent to a
financing capacity and and existing network.

I've said it before and I'll say it again: social is _mostly_ a way of tying
notices and feeds to specific users, and there's absolutely no inherent reason
why it needs to be based on a centralized application model. Diaspora is
already a community-based project, and may be heading toward a decentralized
hosting model. Once that happens, IMO, the jig is up. Not because Diaspora
will instantly subvert Facebook, but because _all_ the 2nd-tier social
networks will have the option of joining FB (or whomever leads the siloed SN
space at the time), ceding significant power and control to them, _or_ of
playing in the open space.

It's the same strategy that's lead Linux to subvert all other operating
systems on the server, embedded, and handheld/mobile markets (less
successfully still in desktop/laptop). Sun, IBM, HP, LG, Samsung, HTC,
Motorola, Google, Amazon, B&N, etc., couldn't take on Microsoft directly with
their own OS offerings, but they _could_ join forces by agreeing on an open
standard which offered none of them a proprietary advantage of itself, but
allowed them to exercise _other_ business strengths to benefit (and yes,
Apple's been doing quite well with an alternative strategy, though also based
on an open UNIX base).

So yes, I'm bearish on Facebook.

------
malachismith
It's sad when old people get bitter about change

