Ronnie05's Blog

Profiling Facebook: The Google of Social Networking (Part III)

Posted in Revenues and Monetization, Social context, media and advertising by Manas Ganguly on March 17, 2009

This is the last of the Profiling facebook series. The earlier posts have been listed above. The first post dealt with the rise of Facebook and its business model, the second part dealt with Mark Zuckerberg’s vision for Facebook. This post is a critique of the Facebook’s success in terms of efforts @ monetization of Social Networking Freetardonomics.
Fortune featured Facebook in an article “How Facebook is taking over our lives” in February 2009. Read the story. The focus was on the growth in Facebook users and race to mass market (Graphic below), stickiness, user demographics, Zuckerberg’s vision and applications that make Facebook a very happening place! 


Here is Paul Monica, (editor in chief of CNN money) critique of Facebook published as “Why i hate Facebook“.

Reason 1: It is not always about Networking. There are times when people like to be un-networked.

Reason 2: With 175 million users and growing at 6 million per month, the top line sounds great. But How do you generate meaningful revenue and profits out of such a venture/user base. Popularity @ Freetardonomics is fine, but profits are cooler!

Reason 3: The first 150 million users accrued to the following in the stated number of years.
Telephone: 89 years
Television: 38 years
Cellphone: 14 years
iPod: 7 years
Facebook: 5 years
This rationale has a strong fallacy: Apple sold a product to 150 million consumers, a pretty pricey one at that where as all Facebook has done is to get people signed up for a service: a free one at that. A comment worth a mention in here is “Bill Gates did not become one of the wealthiest men on the planet by giving away operating systems for free!”

Reason 4: Social networking is about easily connecting and communicating with friends. Ads and promos wouldnot mean much to the user who is “blind” to all that the web site offers since he is single mindedly networking. Thus the inherently loose one here is that Social Websites can never be major generators of Ad revenue.

Reason 5: Efforts to tap information about users implicitely can invite legal backlash as it did with the Beacon@Facebook. This furthermore narrows the field for targetting users with relevant marketing stuff.

Reason 6: 2009 and 2010 would possibly be the toughest years in US and marketers will cut costs. Online advertising will slow down from 17,5% in 2008 to 8.9%. Facebook’s attempts at Traditional online advertising has failed miserably and revenue from banner ads are small enough to ignore them as incidentals.

There are the examples of AOL and Yahoo who after a brilliant start fizzled out in trying to monetize their offerings on the web. Facebook and its team must now deliver on a telling agenda of monetizing their growth on a difficult wicket of the economic meltdown.

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