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.”