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Summary:

On Sunday night, Facebook CEO Mark Zuckerberg will appear on “60 Minutes” to tell the world that Facebook is in trouble. He doesn’t say that in so many words, of course, but his participation on the weekly news show, given the unlikelihood that many in Facebook’s […]

On Sunday night, Facebook CEO Mark Zuckerberg will appear on “60 Minutes” to tell the world that Facebook is in trouble. He doesn’t say that in so many words, of course, but his participation on the weekly news show, given the unlikelihood that many in Facebook’s existing demographic of 12-to-24-year-olds watch “60 Minutes” on a regular basis, signals that the social networking site is trying to connect with a larger audience.

Sure, Facebook has 60 million members and is valued at $15 billion, but it is still the No. 2 social network. To defend its lofty valuation, Facebook needs to grow its user base and figure out how to make money off of it, and those two things are looking like they may be mutually exclusive. Consider the reaction of the social networking site’s users to its Beacon advertising program. Om certainly didn’t think too highly of it.

But before the privacy agitators get excited all over again about the fact that Beacon collected and then posted purchases made on partner sites to all of your friends on an opt-out basis, it’s important to realize how fast users have let their privacy erode in the online world. Facebook may in fact be able to walk the line between building a community and selling that community to advertisers.

It has to. Zuckerberg gives several clues as to the catch-22 facing the social network in the interview, while also indicating that Facebook plans to continue pushing the envelope on advertising.

“It might take some work for us to get this exactly right. This is something we think is going to be a really good thing,” Zuckerberg tells correspondent Lesley Stahl about Beacon. “I mean, there have to be ads either way because we have to make money…We have 400 employees. We have to support all that and make a profit.”

Facebook’s shilling and advertising flubs show how hard it is to make money operating a social network, and how short-sighted people are when it comes to valuing these sites based on users. Advertisers want to see lots of engaged users on a site, but users don’t really want to see too much from advertisers. So Facebook has to walk a fine line to make both parties happy. If they can do it well, they’ll be a case study for building a social operating system. If they can’t, then they may become just another commodity.

And until Facebook figures all this out, the company apparently doesn’t plan on going public. Zuckerberg also told Stahl: “I think…what I can announce is that it is highly unlikely that we will go public in 2008 and when going public makes sense to do, we’ll do that.”

  1. Excellent comment and analysis- thank you. Just anecdotally, while the opening of the platform has definitely made Facebook more of a time-sink, its usefulness has dropped precipitously. I hear from my still-in-college friends that the overload of apps has seen their times-per-day to login drop quite a bit.

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  2. While Facebook has tons of users and media attention, the social online community is a fickle group and could turn on Facebook quickly if a newer and cooler service comes along. Longevity of many years is what Facebook needs to prove it has legs. Until then there wont be an IPO.

    This could either be HUGE or looked back on by history as the most over valued flash in the pan of all times.

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  3. Maybe Facebook should embark on a mass consultation with its users as to what they want and what they’re willing to put up with?

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  4. Facebook’s revenue model? What’s that?

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  5. Facebook has continually diluted their brand. When it first started, it was something of a mark of distinction to be able to have an account. When I started my profile in April ’04, the site was basically limited to the US News Top 20. Sure it was elitist, but that was a lot of the draw. They continually opened the platform to more and more colleges, and then to high schools, and then the military and the major corporations, and then any Tom, Dick or pedophile.

    But at least they kept their superior user interface, and didn’t let people muck it all up with useless widgets and applets like MySpace…oh wait…

    Facebook no longer carries that mark of distinction vis a vis MySpace. Sure it may have been elitist and snobbish, but at least it differentiated Facebook from MySpace.

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  6. I don’t think Facebook has diluted it’s brand at all. It may have among it’s original user base, but from a marketing and revenue perspective, that’s irrelevent.

    Facebook now crosses almost all demographic lines which is extremely important. The buzz is still there and although some may be negative, people have short memories. What they’ll be left with is THE NAME.

    Zuckerberg and company need to vision the next step and a continuing revenue stream that won’t violate privacy. Not an easy task but certainly one that can be achieved.

    TV exposure won’t hurt regardless of the spin.

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  7. by taking independent route Zuckerberg may have already taken loads of headache and may have to think about keeping himself on top of both product and technology!

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  8. The issue with Facebook is that it has this fantastic social networking platform, but it hasn’t done anything with it. It’s great to have a way to connect with friends and share messages and photos but outside of that how many times does a person want to “rate your IQ” or work out “your pirate name”?

    Facebook needs to add useful features such as file and document sharing, be able to add and share RSS feeds, and create a more usable and fully featured messaging system. And if they don’t want to do this they need to open up the system and let other people do it for them.

    Facebook needs to watch out; Google’s open platform looks very promising and they already have the applications that people want.

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  9. It’s unfair, as you suggest, to place the erosion of privacy online on users. The government (state and federal), the online marketing industry (see iab.net and its board of directors, for example), the failure of much of the traditional and online news media to investigate the problem, are primarily responsible. The default created by the online marketing and publishing industry is a ubiquitous system of collection, analysis and targeting across multiple sites and platforms. Facebook, while it should not be the sole focus of criticism about privacy threats, has consciously created a multi-dimensional data collection scheme outside of the awareness and control of its users. As an leading social network, Facebook (and MySpace, etc.) must meaningfully protect privacy and user autonomy as they pursue “monetization” models.

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  10. I’m starting to wonder if there isn’t something wrong with this mentality of “get eyeballs and figure out how to make money later.”

    It seems completely against anything that anyone who’s actually been in business in any other sector does. Sure, your business may change tact in the process of growth – but you’ve always got an idea of how you’re going to make money.

    One of the reasons Facebook is having trouble with the older population (as well as social networks) is as someone gets older and has more responsibilities, there just isn’t time for it. When you have a girlfriend, a business, a job, a house, frankly, I want things that save me time not suck it. People spend more time on LinkedIn instead of Facebook or MySpace – because after a certain point, you don’t need to “hook up” anymore, you’re not going to the bar as much, and you hate the world a little bit less when you get older and have your own place and life.

    The best hope they have is to not court the current older population, but try to keep the people they have as they get older.

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