this is the same crap we used to hear about myspace and friendster.
Techcrunch needs to lay off the crack...facebook might be a billion dollar company...it might even be a 2 billion dollar company...but there is no way it'd beat Google.
They compare it to Google revenues...but Google's ad product is a lot more effective. On Google the user is searching for widget, and Google tells them "hey widgets are 90% off at this site". With Facebook you are reading your friend's profile, and Facebook tells you "hey, I know you are busy, but this might possibly be of interest to you"
The rate of return is a lot worse with Facebook, because you can only target by demographics...not intent
The funny and scary point this post made was that maybe (just maybe) Facebook is bringing back the inefficient TV ads that Madison Avenue loves in the form of Facebook banner ads.
Facebook ads might make more money than Google ads precisely because their effectiveness cannot be measured (just like TV and billboard ads). Sure, engineers will cite poor CTRs but "brand managers" will be eager to dismiss that as oh-so-2001. They are not buying clicks, they are creating "brand awareness on the largest website on the internet".
Madison Avenue is about demand generation not demand harvesting. You can't market to people that don't realize they have a problem or a need.
You could invent the wheel and there will be no demand to harvest because everyone has always dragged their dinner back to the cave. A caveman will never do a Google search for a wheel.
FYI, it is impossible for any single company to generate demand, they can only create products that meet existing demand. Demand rises organically over time through the combination of all market forces, cultural trends, etc.
Trying to educate a market that they need your product is a losing proposition. Trust me.
Neither? Judging from the downvotes my comment has been misunderstood. My job is marketing, so I know better than to say it's bunk. For those who still don't understand, here's what Eugene Schwartz, one of the greatest marketers of all time says:
"What are you doing when you market something? You are not creating demand for a product. If you think that you are creating demand for your product, you’ve doomed yourself to a lifetime of hard work and failure. You can’t create
demand for anything because demand is too large for you to create. The demand has to be out there. The demand has to exist before you even walk into the picture...You cannot create demand. You can only channel demand. Demand is
there. Demand is enormous. The bigger the demand, the better your ad is. You are getting in a boat and letting the stream carry you. Just don’t think that you can paddle up against the stream."
Madison Avenue loves these "inefficient" ads because they get to play the part of "cop" in the classic prisoner's dilemma.
Let's say you release "Brand New Purple Foobars!" and hire my ad firm to advertise them. Sales are up, so what's your conclusion? Well, maybe my ads really helped push your product. OR maybe your product was just so awesome on its own that it didn't need any advertising. The question is, if you don't know for certain which it was, do you take the risk of not hiring my ad firm next time? What if you don't, but your competitor that just came out with "Brand New Yellow Doohickeys!" does?
The problem with Google's ads is that it removes the mystery. If I know how many people saw the ad, and how many people followed through and clicked the link, then I can evaluate how effective my ad campaign is directly. It's like giving the prisoners cell phones so they can text each other… "Hey, they said you confessed…that true?" "Nah man, you?" "Nope!" "Cool…so drinks later?"
I, and many others, get measurably better click through and conversion rates from Facebook because I can target people who are interested in certain topics and likely to buy. A person's search term is not the whole story.
Do you really think marketers want to blow all their money without returns? Why do you think Google Adwords is so popular in the first place?
And a final note, from someone who worked at a large agency that focused on media buying: display ads often reinforce a keyword/CPM/CPC campaign and lead to better overall results, despite how ridiculous that sounds.
I believe this is a failure of imagination. Facebook Credits will be their Gmail, the second act which shows that they are something special. Blippy, Groupon, and others are all in the general area of "social purchasing" but FB will simply dominate this when they enter the game. In a down economy, if you can get a discount by simply sharing or liking, you will. And advertisers can micro target not just demographics, but influencers within those demographics, people who are disproportionately effective in passing on memes -- and buy messages -- to
their friends.
(Parenthetically, this also means people will visit Facebook for product search, buoying the overall commercial intent of the site. And an endorsement by a friend of something carries even more weight than a good Amazon reviews.)
Sounds cool, but I think these innovations would transform my idea of what Facebook is into something like how I think of Craigslist or Groupon.
Right now Facebook is where I go to see what my friends are up to. I think adding movie reviews, product recommendations, etc. might dilute its brand and its addictiveness factor -- in fact, I think they already have. Some commercial-type messages have already started diluting my news feed a little bit.
Google, despite having relevant ads in its sidebar, is still just a search engine.
Facebook has penetrated much further than myspace or friendster. My Facebook friends span several generations. I was skeptical of Facebook, I didn't think they'd pull it off. I still don't think they will be quite as ubiquitous as Google, but also I don't think that is going to matter.
And whether they "beat" google or not is rather beside the point. Facebook doesn't compete with them on search, except for people search.
To play devil's advocate here do you have any evidence that Google's model generates higher return, click thru or revenue?
To me it seems like Facebook is the best long term business model. Slowly, as you and your friends update every bit of your life, where you are, what you are doing, who you are with, etc. they can have a massive amount of data to target you with. Google basically made Gmail just so they could mine more data from your email to better target adverts. Facebook may have found the golden needle in the haystack if they evolve the business correctly which it looks like they will. Look where they are taking things with places, etc. Google can target you and the people who email you but there isn't a permanent link between you and the recipient(s) whereas with FB it is a chunky sold gold chain linking you together in every way they can think of from things you "like", wall posts, comments replying to you, comments you make, invites you get, invites you accept, places you go, who you go with, when you go, how much you spend, monitor you behaviour via status updates. They will know you go out every friday night with the same three friends to one of two bars or clubs, you then go and add photos to FB when you are there and label everyone in the pictures, the location either specifically or via geotag, etc.
Google may have a lot of your data but FB is the holy grail and every business needs to think about how they can get in on the action. Google tried with the piece of crap Buzz was and the crappy Orkut that they bought but let it die when FB exploded. Soon FB will be as well known as Coca Cola and used by everyone. FB is the first service my mum, dad, grandma, aunt, uncle, etc. use. It isn't just a "under 30s" thing, literally everyone can and seem to be using it. Facebook is going to only get bigger and they have such a high userbase now it is hard to see how anyone else will replace them. They saw what happened to MySpace, they are smart and have learnt from others mistakes.
We tried FB ads at a company I've worked for. The return was so bad we canceled the whole campaign. Compare that to Google SEM, which is the largest channel by far.
FB may have a ton of data about you, but no amount of demo data can beat a person who searches for "i want to buy x" when you're selling x.
Interestingly, Google has had the same difficult time monetizing gmail (compared to search), even though they are targeting based on the content of your inbox.
I think the big problem with this idea is that Facebook is far more vulnerable to changes in fads and so forth than Google is. For the forseeable future we will need something like Google and Google will probably continue to stay on top (if they don't keep putting out Google Instants) but Facebook could much more easily be hit hard by a new social networking paradigm or some kind of fad change. Also, interestingly, it seems like probably the vast majority of Facebook's users use Google but converse is probably not true.
Google will probably continue to stay on top (if they don't keep putting out Google Instants)
Google Instant only gains Google dominance. You may not like it, but some people do. That adds to Google's stickiness; those people are now much less likely to switch search engines. If the $.12/query rate is to be believed, that stickiness is extremely valuable in the long run. As for those that do no prefer Instant, I suspect they didn't have any trouble disabling it.
As a nice little bonus, Google gained notoriety for their Instant search. This means anyone else who implements it in the future will be riding in Google's coattails, and will be much less likely to realize the positive effects that Google did.
If it were up to me, I'd have Google churning out more of these features. I believe it's already the case that "search" is a commodity, and it's now the bells and whistles that are the point of competition. Google already has a huge head start, and they now need to maintain it.
The rate of return is a lot worse with Facebook, because you can only target by demographics...not intent
Facebook will harvest much more intent than they do today. There will be many cases where "Ask your friends/experts" is much better than "Ask PageRank". We are seeing this with knowledge exchange sites like Quora and we will eventually see this with Facebook Questions. And this will seep into all of Facebook's Apps.
Google is having a hell of a time trying to monetize YouTube. They just aren't as good with display advertising. YouTube would be a massive revenue generation engine if Facebook owned it. Look for a Facebook Video that becomes huge.
Facebook will also turn into a massive lead generation engine based on Connect and Pages. Run the numbers for social distribution. You can do customer cluster acquisition through social distribution. With SEM you can only acquire a user at a time.
When you acquire a customer through a social network, they are more likely to lead to referrals than a user acquired through search engine marketing.
Comparing MySpace to Facebook does not follow. MySpace has massive leadership and execution issues. Facebook is probably the best executing pre-IPO company out there.
spoken like someone who is a "social media expert"
look this whole Facebook is the future of search is just plain nuts. People want instant results, they don't feel like asking "what colors does the Honda Civic come in?". The answer to that will be "use the search"
spoken like someone who is a "social media expert"
I resent the ad hominem attack. I happen to have a computing science degree from when they used to actually teach Lisp in university.
look this whole Facebook is the future of search is just plain nuts.
I said no such thing. It's more like we will see the rise of sort because Facebook and other services (Hunch, Quora, etc) have access to much more structured information.
I resent the ad hominem attack. I happen to have a computing science degree from when they used to actually teach Lisp in university.
many universities still do teach Lisp (in AI courses, for example). this seems like an attempt to appeal to authority, which is another logical fallacy...
So how does his "vested interest" affect the veracity of his claims?
I have an observation to share with you: If we ignore everyone who has some sort of "vested interest" in a subject, the only people we can consult for advice or suggestions will be people who are completely ignorant of the necessary facts and who have no experience in the subject matter.
Expertise in a subject is gained through working in the field. Working in the field means acquiring some sort of personal interest in the outcome.
I find that bias is useful to consider when given unfounded claims. For example, if someone says "I think Facebook is a complete waste of time," you might ask whether they have a vested interest in making us believe this is the case. However, if someone says, "Before Facebook there was MySpace and ICQ and Compuserve and Orkut and all of these foundered and died, Facebook is just the latest fad, it will die as well," we can analyze the claim directly and ask whether Facebook is a fad and if not, how it differs from the examples cited.
That's not likely to happen because Playboy's ads will presumably be targeted at (a subset of) men. Anyway, FB doesn't need you to be happy. What are you going to do, move to MySpace?
Stopping using the "like" button so as not to give them usable data would be the first step...
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Facebook's bigger problem is that their "platform" strategy makes it pretty easy to monitor these metrics and target fans without paying Facebook a penny. Essentially they traded potential revenue streams for ubiquity. Getting a "x and y like this" published in friends of fans' streams is a free action, as is collecting demographic information on the "likers" and sending them all coupons they have to "like" to activate. Established brands can generate better ROI from well-run fan page promotions they don't pay Facebook for than paid display ads with low CTR.
But I don't use Facebook. I work in a department of seven, and they all are extremely reluctant to even check their Facebook accounts. Google? We use it all day. Google is like Linux, you can't even count how much you use it until you actually talk to an engineer.
Facebook just reminds me of ICQ. It was all hot shit, everyone thought it was going to take over the world, but it was just left to little old ladys who LOL'd at everything you had to say. Which, according to schedule and my wife's age, is probably going to be about another 10 years. Facebook gets another 10 years before it's ICQ.
Usage data, smoochage data. The point of bringing up ICQ was that at one time, for what seemed like a long time, it was king.
People seem to have given up and consider Facebook the winner of this era of the Internet. My point is that stuff comes along too often, and changes so much, that it won't matter eventually.
Besides all that are we really talking about two competitive products? People still haven't even decided what Facebook really is, nor have they really defined it either. Why? Because no one can figure it out.
Facebook may become bigger than google, but they'll never be more important than google.
If facebook would suffer a 1 month outage it would be a 'meh' event, nothing you couldn't live without. If google would be down for as much as 24 hours it would seriously impact a very large number of people and businesses.
In fact, both have been out while I have been a user. When Google went down, I literally refreshed once, it failed again, and I went to Yahoo (today I would go to Bing). When Facebook was down, I did something else, since there was no substitute for Facebook.
I think you're overestimating the chances that in the future Google will play as important a role as it does today.
Google was the first to solve the "search problem". They won't be the last, and finding information is only one aspect of one thing people do on the internet. Google has not been very good at making money in any other way. Competitors in the search engine business are emerging. I can totally foresee a scenario where Google's core business shrinks quite a lot over time, and I have a sneaking suspicion they do too. They're scared, whether they admit it or not, their acquisition spree is evidence.
Key quote:
"This is not about the revenue streams Facebook has; it’s about the revenue streams they’re about to have."
Everyone who's been defending Facebook's $33B valuation is projecting the success of some yet-to-be-developed or nascent product at Facebook. Projecting growth based on past earnings and current growth rate is one thing. But imagining hypothetical revenue streams of yet-to-be validated products is batshit crazy. It doesn't matter how obvious or inevitable people think it may be or what the trends are. There's no track record with any of these if-they-wanted-to-they-could-do-this-tomorrow-and-make-billions products.
"Facebook Credits are poised to be this generation’s American Express"
Am I the only one that thinks Facebook isn't as omnipotent and in total control of its user-base as people like to think? Everyone is making these projections about users just falling inline with Facebook's potential revenue models, but they forget the shitstorm that was Beacon. Clearly, Beacon was a direct grab at a sustainable business model and it violated many of their user's trust. Facebook may act like its a benevolent dictatorship, but there's always been an element of democratic decision-making at the behest of angry users. And those concessions always occur at the boundary between potential profitability and privacy.
So many are quick to use Google as a benchmark when Google itself was an extraordinary circumstance. It was recently mentioned that Larry and Sergey were willing to part with their company for $750,000.[1] Now, you could argue if Bill Gross never existed, Google would never have be Google because they wouldn't have developed Adwords and have a perpetual license to Overture patents. And Google's advertising is its flagship product, accounting for 97% of its revenue.[2]
Google was a net win for the internet. It helped structure and organize the majority of information available on the net, and combined the best interest of their users (accurate, quality search) with the best interest of businesses (targeted advertising, purchasing intent). They unlocked tremendous wealth on a new platform and reaped the rewards.
Facebook has clearly had a social impact. Just like text-messaging and AOL Instant Messenger did. But the question of if it has unlocked any huge wealth the way Google has is yet to be seen.
Towards the end, the article inadvertently hints at how Facebook may actually collapse: a death of a thousand papercuts from more focused sites that include social features. However, this may come about in two different forms.
One way is akin to the "wheel of reincarnation" effect where social features centralize, then fragment, and then centralize again. One can easily see this in the lifecycles of most online discussion venues - a focused start, and then a gradual change and dilution of the site's character that hits a tipping point at some critical moment. Facebook has already gone far, far away from the "college facebook replacement" angle it started with, but it hasn't yet hit the landmine that might cause its own self-destruction.
The other way is the emergence of a dominant open system that is pound-for-pound similar in purpose and usability, and simple enough to run that it becomes a commodity. This can take eons of "internet time" to happen. Desktop Linux remains a work-in-progress(but one getting closer and closer to its competition), and Jabber, as a pure instant messaging platform, is still just one of many systems. So if a standard emerges for social networks(and we haven't really settled on one) it will still probably take decades.
Here is another argument for Facebook: hiring potential.
Right now, Facebook is the most attractive large tech company in the world. Out of 10 new geniuses 8 will go to Facebook, one to Google, one to Apple. Facebook is smaller (you can get a bigger project immediately), at Facebook your commits go live at the second day on the job ("Move fast and break things"), Facebook options are much more attractive, and also working for Facebook can get you laid (seriously, working there has much more sex appeal than working at other tech companies).
Because Facebook can snap the cream of the next generation of talent, it will be in ideal position to take on any big opportunity over the next 5 years.
With the appearance of "mezzanine" investors like DST, there is much less pressure to go public. So Facebook's IPO can be deferred by a few years. Google was not having this opportunity.
Let me just say from experience that Facebook ads haven't really generated the same type of return as Google ads. The thing about Google ads is that they are really good at capturing demand that is already out there, like for instance in a niche market where people are looking for a particular product or service (example, search "bike" and get advertisements for bikes of different types, etc.)
What I find is that money spent on Google is money spent on trying to get infront of people "who know what they're looking for." With FB, it's sort of the other way around, where you have all these people you can get infront of, but the demand is more opaque, and you're really searching for it instead of capturing established channels like with Google search terms.
All of this is really just chatter, only FB can know how to monetize FB, because they have the data, they have the information required to make a decision on what to do, and chances are, like with Google (remember in the early days they had no business model), they'll figure it out through just sheer luck or chance. What's amazing is that they have gotten this far already.
Did Rifkin make any other specific predictions? I thought about including each source of revenue as a prediction but wasn't sure whether those predictions were anywhere near as interesting/important as the overall sum.
So this article assumes Google is going to stay flat the next 5 years at 28 billion? Facebook has a lot of catching up to do, but Google isn't planning to sit on its thumbs AFAIK.
As a company, Google is way more important than Facebook. Facebook connects people, something that isn't difficult to do in ten other ways with 100s of different services. Google on the other hand seems to be really trying to change the world. Much like the Virgin Group.
Once the Facebook IPO happens, they would have more than enough cash to do anything they want. Which I hope is more inline with these other companies. Going outside their comfort zone and into entirely different industries to use their wealth and resources to make a more impactful difference.
When was the last time anyone here used facebook to get something done and I really mean get something done and create something of value? Anyone? As long as facebook caters to teen type activities like gossip and displays of vanity it can not compete with google in any serious way. The best it can do in the long run is become a glorified dating site where your friends recommend and vote on your dates and that is all.
I wish I could agree, but the reality is that my (physical, real life) social life is increasingly organised through Facebook. I'd miss out on a lot of social activity if I wasn't on it.
Scary perspective. Once Facebook becomes the social layer in every application out there, they will become too powerful. And I don't think Diaspora is the solution (in its present form).
By the way, why isn't OpenSocial, OpenID, etc. getting traction outside the tech community?
OpenID and OpenSocial aren't getting traction anywhere.
OpenID because it's a non-solution to a non-problem, and OpenSocial because Google didn't provide developers with the primary benefit of the Facebook Platform (distribution).
Plus the social networks that implemented it were lame and didn't monetize well. OTOH, Playdom gor their start on MySpace.
There is a possibility that the like button on external sites could morph into an adsense competitor over time, if that is the case (and it is successful) then fb revenue has the potential to really take off.
I guess my earlier attempt at humor wasn't received too well.
On a serious note, I think there are too many ifs and buts for all this to happen. Google for some "is" the internet. Facebook is a social network and for it break out and become this behemoth which helps you do anything and everything online sounds a little far fetched at this point.
But then again, Facebook users are addicts. In the absence of any real competing service, they will stick on in spite of all the extra fluff. Their problem will always be, if not Facebook, then what?
Techcrunch needs to lay off the crack...facebook might be a billion dollar company...it might even be a 2 billion dollar company...but there is no way it'd beat Google.
They compare it to Google revenues...but Google's ad product is a lot more effective. On Google the user is searching for widget, and Google tells them "hey widgets are 90% off at this site". With Facebook you are reading your friend's profile, and Facebook tells you "hey, I know you are busy, but this might possibly be of interest to you"
The rate of return is a lot worse with Facebook, because you can only target by demographics...not intent