Is Facebook Toast?: Page 2

The social networking giant needs radical change if it wants to avoid a Digg-like slide into irrelevancy. Here’s the problem.
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The fake Zuck said: “We don’t even know what it is yet. We don’t know what it is, we don’t know what it can be, we don’t know what it will be. We know that it’s cool, that is a priceless asset I’m not giving up.”

At some point, the real Facebook did give up being “cool,” and started selling advertising. But as investors made clear in Facebook’s recent IPO, the company isn’t selling enough advertising -- or making enough money.

Not to worry, said pundits. With all those users, Facebook can easily monetize.

And that’s the problem. Facebook can and will monetize. They must.

The reasons Facebook scores at rock-bottom in the ACSI user satisfaction survey are advertising and privacy.

Facebook has to monetize its social network, because right now the social network is the only asset Facebook has. Yet it’s monetization through advertising that makes users unsatisfied with Facebook.

Meanwhile, Facebook’s main rival, Google+, is still “cool” -- no advertising at all.

Even more threatening to Facebook is that Google may never have to put ads in Google+. Google can harvest social signals on Google+, then apply them to Google sites that already have advertising -- sites like Search, Gmail and YouTube.

Facebook and Google+ are characterized by an imbalance of “cool” -- Google’s got it, and Facebook doesn’t.

What Facebook Needs Now

Facebook finds itself in a catch-22. Facebook can minimize monetization and keep its users. Or the company can monetize and lose users -- thereby reducing its ability to monetize!

A third option is to monetize in a way that makes users happy. Good luck with that.

And yet a fourth option is the one I believe Facebook needs to embrace in order to survive: Facebook needs to gather user data internally, and monetize externally -- just like Google does.

One way to do this is with an external ad network, which Facebook has already started to do. Facebook should create an ad system whereby web sites could place advertising, which would be unique for each user based on social signals harvested on Facebook.

Another way is to do what Google did, but in reverse. While Google had a search engine, an email service, an office suite, a video site and more before getting into the social networking racket with Google+, Facebook could launch alternative sites like this as locations for its advertising.

None of these options are appealing or likely to succeed for Facebook.

But despite the echo chamber’s assumption that Facebook is sitting pretty with nothing to worry about, I believe Facebook is a dead man walking, and needs to radically change its entire business model to survive.

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Tags: Facebook, google+

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