Facebook: All We Know Is Advertising

Facebook On The Way Up 

Although MySpace got 76% of US social network traffic, Facebook grew 51% last year and is about to surpass MySpace in foreign traffic. It’s interesting to note that although MySpace still dominates the total pageviews traffic, growth is stagnate; meanwhile, Facebook continues to make impressive gains.

Zuckerberg Makes 60 Minutes Appearance

You can watch the full broadcast on Kara Swisher’s blog (she made an appearance on the segment) Boomtown; there is additional content and a transcript available on the 60 Minutes website as well.

Zuckerburg basically quotes PR material verbatim, which is an assumption on my part, but if you watch the video I feel it will be immediately apparent. One of the highlights of the segment is when Leslie Stahl ask Zuckerburg, “You seem to be replacing Larry and Sergey as the people out here who everyone’s talking about.” He just stares at her. And stares. So she says, “You’re just staring at me,” to which he replies, “Is that a question?” Golden.

“There Have to be Ads”

The rest of the segment is pretty fair, neither a complete puff piece for Facebook or a total humiliation either. One part the stuck out for me, however, is when responding to issues of advertising, privacy and the following PR disaster, Zuckerberg states, “I mean there have to be ads either way because we have to make money.”

Hold up one second.

Dear readers, please look at that again: “I mean there have to be ads either way because we have to make money.” [emphasis mine] It’s disappointing that so many websites these days cannot think beyond the advertising revenue model; yes Google did it and is now multi-billion dollar company, but the context of a sponsored link in a search results page is much different from text ads in a Facebook profile; same goes for many other social networking sites.

Where is the creativity?! Where is the diversified bottom line? I’m guessing all of you want glorious IPO’s that a) line your pockets with cash and b) vindicate the various investments that value your product in the billion-dollar range… are you really going to get there through simply advertising? Please, be honest here.

Here’s some ideas: Badoo, a social networking site, lets a user’s profile and content be featured for $1 in a program called Rise Up. Or, you can look at a recent in the blog A VC for a great rundown of revenue ideas, some of which are from Chris Anderson’s earlier post. 

Identity, Privacy, And Web 2.0

I’ve broached the subject of privacy in a previous post, but I’ve run into a few more articles concerning the issue since then.

The Kinda Creepy YouTube Video

While looking for other material on this topic, I ran into a video from the government of Canada that attempted to shed light on how social networking sites can exchange and leverage a user’s personal information for marketing purposes.

Don’t get me wrong: privacy is very important, but the issue I take with this particular video is a) the “big brother is out to get you” tone, as well as b) they make the marketing angle sound all bad, i.e., the video says you will only get more junk mail on your doorstep, more email adverts in your inbox. This completely ignores the aim of marketing: in the fracturing media landscape, reach is not the only goal. As a marketer, I want to spend my client’s money in the most responsible way. Thus, I want to reach the people who are the most likely to be interested in buying what my client is selling, so hitting the target is more important than reaching the most amount of people; this is what responsible advertising and marketing agencies should be trying to accomplish.

Projecting Yourself Online

Did you notice the header above says “projecting” rather than “protecting”? We are putting ourselves, and our identities online. Now, we may not be the most honest, but we are the ones making the conscious decision. The New York Times published a fascinating article on how we put our best foot forward when it comes to our online persona, and quite some time ago New York Magazine had an incredible story exploring the shifting values of privacy in a new, digital generation. I highly recommend reading both (lengthy) articles.

My personal attitude about privacy online is pretty cavalier: “Marketers have already known a lot about us before the Internet came into full swing. Therefore, so what if Facebook is using Beacon?!” I’m sure that pisses off a lot of people who treasure their privacy, but honestly, I think the way things are headed your information will inevitably be viewed by someone else; the point is we need to educate ourselves on the measures we can take to protect that information: clear your cookies; actually visit the privacy settings on Facebook; and above all, delete that damn MySpace account already! It’s such a waste!

Don’t Misunderstand Me, Though

Privacy and the identity game does matter. Although many teenagers report utilizing privacy measures, MySpace has recently agreed to devote some of their resources to leading the fight against online sexual predators. There are those who are too young to be adept at protecting themselves online and require more help. I think the most heart-wrenching intersection of the privacy and identity game comes in the story of Megan Meier, a teenager who, subject to a hoax perpetrated through MySpace that turned ugly, committed suicide. I really want to say that in a case such as this, all the sentimental “this is a cautionary tale” is bullshit and is not addressing what happened on the level the incident merits. Being on the younger side, I remember seventh grade vividly; it was one of the worst years of my life. Teenagers can be merciless, and with tools such as MySpace and Facebook, they can be even more underhanded in their quest for doling out pain. It is within this tragedy that the problem of identity and privacy become even more conflated: people want to protect what information others know about them, but then can those measures be deployed to create even sneakier, meaner attacks? It also sheds light on the fact that, no matter how old some people think they are, they need assistance to safely wade through the waters of digital society.

Facebook ‘Social Ads’

Facebook announced a new advertising program, which you can read about in the New York Times story  Facebook Is Marketing Your Brand Preferences (With Your Permission). Also, there is a quick question-and-answer style article from the Associated Press, and another story posted by Businessweek that gives more details about the announcement. On a side note, the latter article confirms something I wrote about earlier, namely the horrible click-through rates of the larger social networking sites. Overall, this brings up two interesting points:

First, I am glad to see a somewhat creative go at advertising. Because many Web 2.0 sites are holding out for the ad-generated revenue savior, but are realizing marketers are unhappy with campaign performance, this is a chance to test something relatively new out, a chance to test whether or not thinking outside the box can garner attention and interaction.

Additionally, one of the larger arguments present throughout these stories is a concern about the lack of privacy the new ad campaign seems to offer. However, as part of the Internet crowd, I take little issue with this; a New York Magazine article, Say Everything, did an incredible job expressing my feelings towards the shifting concept of ‘privacy’ among younger Americans, particularly those active online. On the more personal side, I have my own private blog, but as (I believe) a fairly-educated Internet user, I take many measures to separate out my ‘online identities’ so as to prevent any privacy issues. Also (just in case), I stalk back: I posted html code on my private blog to log all page-views and geographic areas through a great (free) service I researched. Thus, I think that as long as the Internet user who posts private things online or participates in social networking sites are aware of how their information will be used, it should not be an issue.

Now, let’s cross our fingers and see where Facebook’s ‘Social Ads’ take us…

Why It’s So Difficult To Monetize Web 2.0

So maybe it’s time to take my training in post-colonial literature studies and apply it, in an ever-so-esoteric manner, to Web 2.0 and the problem of monetization.

The Problem

As the New York Times once again trumpets the possibility of a dot-com bust (see today’s article Silicon Valley Start-Ups Awash In Dollars, Again), I am beginning to believe the issues presented by web pessimists are somewhat pertinent: once again money is being thrown at sites that can only guarantee eyeballs… and in most cases not even a lot of eyeballs (sans MySpace, Facebook, YouTube, etc). It appears many are forgetting that guaranteeing eyeballs is not a sound revenue model. Even with successful advertising campaigns running on these sites, that still does not make up for other costs. YouTube is a prime example of delivering a significant audience, but with the bills they must pay for bandwidth alone I can’t foresee them making acceptable margins.

So why is it so hard to create business models around this new venture in media? I think it’s because we are trying to do something completely new; honestly, I cannot think of another instance in history where it has been done before.

The Real Question

I’m not an economist, but from what I understand a free market economy runs by taking natural resources, land, and labor and turning those materials into a commodity that is then sold at a profit. This commodity is bought at the expense of a ‘thing’ that has an arbitrary exchange value attached to it (money, for instance). But what are we trying to do with Web 2.0? Let’s use Facebook as an example: we are trying to monetize relationships. So rather than using materials to create a product that is sold, we are using materials to facilitate relationships. Cell phones facilitate relationships, but people are willing to pay for tools like an iPhone and for an outrageous monthly bill, keeping shareholders for Apple and AT&T happy. But ask anyone from the generation that is utilizing Facebook if they would pay for it (and keep in mind, this is the same generation doling out oodles of money for that iPhone and monthly bill). What do you think their answer would be?

I thought so…

Three effective business models are typically subscription fees, commission fees and advertising. The latter is being utilized heavily in Web 2.0, but I feel this will not make the majority of sites profitable. How do you monetize interactions between people? Dating sites such as eHarmony do exactly that, but finding a significant other is a critical priority for many people… commenting on a friend’s new highlights or hair cut not so much. So maybe we are asking the wrong question; maybe we should ask why isn’t Facebook such a great service that people would pay for it? But even then, Generation Y and on are used to free services; we’ve spoiled them (free MP3’s, free email accounts, free Facebook, etc).

All this said, maybe one channel for revenue is a great program that aggregates these services and allows users to access all the sites they use through one portal. Online services such as Netvibes are doing this, but I have yet to experience a robust application that is also easy to use. For access to their sites and API maybe Facebook and MySpace could charge the developers of these programs. Anyways, this is just one thought, but it still does not address the more direct question of how to monetize personal interactions and relationships; I’m really at a lost for that…