Facebook Tries to Sell Out on "60 Minutes"

33 Comments

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.”

33 Comments

A.T.

Oh, poor-poor Zuckerberg, he seem to ignore an option to resign if he can’t keep both ends (ads/money and user’s wish to NOT see ads) together, shifting blame on us, who drive his business further and further… I wonder why he doesn’t ask industrial moguls to let their robo-equipment to register on Facebook and keep all those millions of accounts without necessity to please us, ignorant human beings.

Max

Facebook and all the other free sites are doing more than just showing you ads, the big ad companies that power those ads are tapping into the “context” of your browsing habits and trying to create a picture of what you, the individual user are doing online across all sites. This has a lot of implications, beacon is only the beginning. I’ve started using PEERmadness, an adblocker that stops the requests from ever happening. This or any other one like it can help not only make your browsing cleaner and faster, but also protect your online identity.

Grog

I certainly hope they go public sometime soon, and get a market value of $15 billion, so I can sell them short and make a bundle. When FB opened up to the world they blew it. The future of social networking is in niches. I don’t see how any one network will serve everyone’s interests, so it’s more likely that people will find different social networks for different parts of their lives.

Secondly, the notion that FB will threaten Google, because people will be more inclined to get info from their social network, is absurd. My network will quickly dump me if I constantly ask them where can I find a printer driver for my obsolete printer. Social networks might be good for finding a decent restaurant, but that’s rarely what I search for.

michaelportent

It’s really sad that they’re so starved for ideas on making their amazing product worthwhile. Their social networking experience is a dream compared to MySpace. I guess only crappy sites are marketable.

David Mullings

I use both LinkedIn and Facebook and have used FB to land speaking engagements, get meetings with VCs and Angel Investors, landing a book interview, as well as a number of other things so there are people who find value in it while using something like LinkedIn.

As a user, Beacon scares me and I have long learned to ignore most banner ads on websites I go to, even right here on GigaOm and I know I am not alone.

Advertisers today have forgotten that engaging a person is more important than advertising to them, hence the statistics that people tend to skip commercials or change the channel should be no surprise.

Would I pay a small monthly fee to use LinkedIn or Facebook? YES, if it means I don’t get annoying advertisements on every single page.

So my revenue model is simple:

  • Free ad-supported accounts combined with paid-subscription model with no ads at all (Freemium model).
Tibor

Here is the crux of things. FB needs advertisers to make money, but the site is one of the worst performing when compared to others. we have spent about $100K in ’07 on it. We will cut back dramatically on basic advertising in ’08. We will still spend $100K but find other ways to engage the users. Trouble is FB won’t see a penny of that the way it’s currently planned.

ted dunbar

What a surprise…a socially awkward kid who has a parent that is a psychiatrist.

Note: I have a brother that is a therapist.

Dale D

Facebook appears to be entering a transitional phase.
MS has taken a stake and now they are attempting to figure how how to capitalize on the extraordinary amount of traffic and still keep users happy.
Mistakes are being made.

Mark Zuckerberg does not appear to have the experience to pull this off.
Remember it’s Eric Schmidt behind Google’s moves.

my 2 cents..

Lou Covey

The problem with media in general is a dedication to content exclusivity, glorification of audience size and a dependence on advertising. All of that is interrelated. The information available on Facebook is valuable to a very limited audience and that audience are unresponsive to advertising. Facebook, however, can’t survive without advertising.

The web 2.0 culture needs to assign a value to the information and entertainment they offer and the audience is going to have to start paying for it if the medium is to survive. Advertising is a mass market financial model. Web. 2.0 is a community responsibility.

Curtis

I have never understood the “value” of Facebook. It is true that it is “hot”, however it built its’ reputation on the interests of college students, followed by high school students. The web itself has already proven to be an “entertainment” medium in and of itself when you measure the rise in online consumption versus the decline in television viewing.

This said, like many websites and television shows before it, I expect Facebook to be a spectacular “flash in the pan” along the lines of Geocities, TheGlobe.com, Excite.com, Ampd Mobile, etc.

I wish Facebook well, but I find LinkedIn very useful in many ways, while seeing no value in Facebook whatsoever. Note that I have no professional or financial interest in either service.

Bummer Han

It’s not only Facebook, they have company in many web companies that, too, have not a true revenue model ( that’s a truth whispering constantly in the surreal Web 2.0 background )

Facebook is a much more immature business then people can see it for – for on – the users are tweens that could and will get suckered into buying stuff and generating traffic with their plentiful time. Mature users will not so easily get swooned.

Online advertising isn’t going to do much for FB in 2008. Facebook, not being any kind of technology company, needs to start digging deep for something to differentiate (and I don’t mean harping on the I-have-an-open-API) and use the invested millions to preserve their “media darling” multi-billion status.

Don Jones

The Internet is all about pushing boundaries, finding out what “too far” is, and then adjusting. Facebook is doing just this.

Stacey Higginbotham

Jeffrey, my intent was not to blame the consumer for the erosion of privacy. That’s a complicated problem that I believe the consumer is complicit in, but not responsible for. I do believe you don’t get something for nothing, so I think with all of the free software and services online, it is up to the user to ask what they’re giving up, and if it will last. Free shipping during the dot-com boom was something for nothing, but was unsustainable. On sites such as Facebook, the question is what the consumer can and will give in exchange for a fun, free service. So far we’ve exchanged privacy instead of dollars. If we don’t give up something of value, then their business (as well as many others on the Web) is unsustainable.

Jeremiah Staes

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.

Jeffrey Chester

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.

Karl

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.

360view

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!

Charlie Anzman

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.

Lost Cachet

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.

leon

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?

thom singer

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.

Gerard

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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