

Facebook and Twitter Don’t Know What You Want - diego
http://diegobasch.com/facebook-and-twitter-dont-know-what-you-want

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revorad
Reposting the comment I posted on the blog post here:

It seems to me that consumer tech startups have a default belief that selling
the promise of sales is easier and more lucrative than selling something
directly. It’s like a slightly fancier version of the “how to make money
online” courses.

They also seem to look down on selling their products directly to users (“we
don’t want to nickel and dime our users”). They have a strange attraction to
portraying this benevolent change-the-world-for-free image (see
<http://help.kik.com/customer/portal/articles/654821>).

I suspect there are big unexplored opportunities for selling software services
directly to consumers – things which improve people’s lives noticeably,
without them having to first do a ton of donkey work (checking in, writing
reviews, etc). But, the approach to building such products would be to go deep
on a specific problem in a small market and expand only when you’ve nailed
that business. Unlike typical consumer startups, the focus should be on high
quality not scale.

Anyway, I am working on some ideas along these lines. I shared my perspective
to clear my thinking and also hear what you think about it.

Oh and thanks for introducing me to the delightful word Veeblefetzer!

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AznHisoka
Most consumers are not used to buying online services that don't have a
physical component. We're used to free. And when there's a free alternative,
not a lot of people will be paying for a slightly better paid version.

If you want to sell stuff to consumers, it's important to have a physical
component. And it has to solve a very very crucial problem like losing weight.

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lopatin
This article is spot on in pointing out that search advertising is more
valuable and more effective than display advertising, and that Facebook will
most likely never be a major player in search. However the rest of the things
this article is getting at is bogus, much like most of the talk I hear
regarding Facebook's monetization.

While speculating about the crapiness of Facebook's ads system and bringing up
numbers like phenomenally low click thru rates compared to search, people seem
to forget that display, interruption based online ads work. Facebook can also
do it better than almost anyone because of the 'interest' and 'likes' data
they have. And I don't believe they are even using retargeting yet but that's
another conversation for whether or not it's even possible for them.

Basically what I'm trying to say is you can't compare search ads (Google) to
display ads (Banner ads, Facebook, basically everything else) by just stating
the difference between the two. Such a comparison must be done scientifically
through case studies or experiments. Don't bring up Facebook's average click
thru rate in such a debate without mentioning that the billion dollar display
ads industry (which has no end in sight) has the same low click through rates.
Would it be nice for Facebook to know what you want? Yes it would be amazing,
but that's not possible, and that's _not_ a problem. They already know what
you like, and it makes for a great (self-serve) display advertising
experience. I'm not saying what they should do to make more money because I
don't know, I'm just saying that their current ads system is not the problem.

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diego
Nobody says that display ads don't work, of course they do. The point is that
they don't justify Facebook's hype or valuation. It's a matter of numbers, and
it's perfectly fair to compare both. There's a reason Google is by far the
most valuable company in the online advertising industry.

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AznHisoka
I think if FB and Twitter fail (compared to their expectations), that would be
a good thing for the startup world. Right now we see a lot of consumer
startups whose sole business model is online advertising - it doesn't matter
if it's Adsense, display ads, sponsored tweets, what have you - it's the same
thing. Online advertising. And even if you're optimistic, if you do the math,
you realize one thing: it's not sustainable.

If there's 1 thing I like about App.net, it's that we're starting to see a
shift from relying on ads as revenue to building a product users will PAY for,
whether it's B2C or B2B. In a sense, relying on online ads is a semi-copyout.
It's like you're throwing your hands up on the air, and saying "I got NO clue
how to provide a service people will pay for here, I'll let YOU advertisers do
that instead for a fee!".

Most people are just naive and see FB making billions on ads and think they
can build a startup around advertising as well. The harsh reality is that only
a few hundred companies can rely on advertising, and even most of them are
having troubles these days, with the incredible high cost of creating high
quality content, diminishing advertising rates, and avoiding Google penalties
that happen every other week. The ROI is just not there.

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bhangi
Besides relevancy, another problem for Facebook and Twitter ads is that to be
successful, the ads should not degrade the user experience. Speaking just for
myself, promoted stories or tweets definitely feel like a degradation of user
experience even if I understand why they do it.

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diego
I agree. That's one thing Google figured out early on. It's much easier to not
degrade the experience when you can match an ad to a query, because you can
make sure that it appears relevant.

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rimantas
Exactly. I cannot think of any other use cases for ads where they would not
cripple user experience but search. When I am looking for something you are
most welcome to show me your suggestions. When I am chatting with my friends,
o reading updates from Curiosity Rover—stay away.

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sgrove
Ads do seem to be the "default" business model on the web, which is
understandable but a bit sad. App.net has an amazing potential around this if
they build out their API and developers can use it as infrastructure for
inter-app communication. It'd be like an internet-wide "open" enterprise
message bus. I'd very much like to see that, and would have liked to have seen
Twitter go that route. They have outright rejected that though.

Facebook on the other hand is in a more difficult position short-term,
conceptually they're not well positioned for things like payments, etc. But
it's hugely encouraging that Zuckerberg is so young and has such a long-term
view on Facebook. I'm fairly sure they _will_ figure it out and continue to
grow Facebook into something even more amazing than it is now, if the bottom
doesn't fall out from beneath them (read: their engineers leave in frustration
or boredom).

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paulsutter
I think what he's trying to say is that Facebook lacks intent data (which is
the richest at a search engine like google).

Open Graph actually does give Facebook a great deal of behavioral data that
includes intent. But AFAIK it's just an arbitrary policy decision that
Facebook is not using off-Facebook data within Facebook, and also not using
Facebook data outside of Facebook. I didn't mean to write a tongue-twister,
sorry there.

If they change their mind on the arbitrary policy decision they'll have a lot
more data to work with.

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thinkingisfun
I know one thing I don't want, and that is clicking ads. So I don't.

