Thursday, November 29, 2007

The MySpacing of Facebook

Puffy knew...Mo Money Means Mo Problems.

As Facebook's membership seems to be reaching 'critical advertising mass', the site has been exploring its options for monetizing its users. Notice I didn't say 'exploring options for improving the community's experience while also making money'.

First came 'sponsored listings', a small ad inserted in a member's news feed that really does nothing but get in the way. But Facebook's latest effort, Beacon, is drawing serious fire over privacy concerns. Charlene blogs about buying a table at Overstock and then seeing that activity appear on Facebook where all her friends can see. What if the table had been a Christmas gift for a Facebook friend?

I've already talked about Facebook's new idea to let members become 'fans' of companies, products, even people. There's one common thread running through all of these ideas:

These are efforts to directly monetize Facebook's members.

Which means that Facebook has followed the same path that MySpace did: give users a unique experience that brings them in, then once the membership reaches critical mass, you monetize it. Look at the traffic for MySpace over the last three months. Notice that it's finally leveled off and that page views have been falling since the end of June? Facebook's traffic is still rising, but their page views are already falling.

Paul offers another view on Beacon:
There aren't real problems with the bulk of the program. For both advertisers and the consumers they're marketing to, it makes a ton of sense to use shared data to increase relevant advertising messages in a non-obtrusive way. Everybody wins there. But this shit where companies can add online purchases to your facebook feed without giving you the ability to opt out completely beforehand, and only 20 seconds to opt out after the purchase, is ridiculous. And Facebook knows it. Zuckerberg is his customer base, trust me he gets it.

Just like he got it when they rolled out the feed in the first place. With obvious opt out and privacy issues. And not surprisingly, facebook eventually got what it wanted with the feeds, while the marketplace was quieted because they complained and felt as though they were still heard. The compromise was established. Users can opt out but facebook got the platform it needed to advance its own advertising interests.
Then Paul adds this: "You may have also noted that MySpace rolled out its own feed this week, also."

Actually I didn't, cause I finally closed my MySpace account a few weeks ago. You can only piss in the community pool so many times before everyone gets out.

This isn't rocket science, put the community first, and have any monetization of your community, also benefit the community. Threadless has been thriving for longer than either MySpace or Facebook with this model, and will probably be around after both are social-networking cautionary tales.

More thoughts:
Geoff Livingston - Facebook's lost way(great discussion in comments section)
Karl Long - Facebook jumps the shark

BONUS: Brennan more or less says I am full of it. ;) Again, I agree with Paul's point about Beacon, but that wasn't mine. My point is that if these sites want to think of themselves as being 'Web 2.0', then they need to apply Web 2.0 thinking to their business models. I have no problem with Zuckerberg trying to monetize Facebook. But the error (a very Web 1.0 error, BTW) that I think he is making is to look at this from point of view of what's best for Mark Zuckerberg, Facebook Founder. Not Mark Zuckerberg, Facebook community member.

That's not a business model that's conducive to long-term online growth, IMO.


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Geoff_Livingston said...

"This isn't rocket science, put the community first, and have any monetization of your community, also benefit the community."

A-fricking-men. Great post. Why is common sense so hard for marketing types?

Mack Collier said...

"A-fricking-men. Great post. Why is common sense so hard for marketing types?"

Not in the budget? ;)

I really think Threadless is a great example of a thriving Web 2.0 online community. I think it was Jeffrey that said that the company tells potential advertisers to tell them why it's going to be worth their community's time to have their presence on the site. Their thinking is that if they can't connect the dots as to how it benefits the community, then they don't do it. They don't look for selling advertising on the site, instead they will do things like have a company sponsor a design contest where the community gets extra prizes.

But to your bigger point, I think this is so hard for marketers and companies to wrap their minds around because they have the mentality that the founders and the community are two different groups. If that's your thinking, then you are dealing with two separate sets of wants and needs.

Which is dead wrong. When it gets to the point that Zuckerberg stops viewing himself as a part of the Facebook community, then the party's over. I think we passed that point about 5 squares back.

Anonymous said...


Check it out, man. Facebook already made the privacy changes to Beacon. I'm telling you, it's a bait and switch. Give users something you're willing to give up to complain about, which allows you to keep the rest of the program intact. Crazy...

Mack Collier said...

I think you make a great point Paul and I think that's probably exactly what Zuckerberg was wanting to do.

But my question is, is it too late? MySpace still has what, 200 million members? Facebook has about a fourth of that. And unlike MySpace, most of Facebook's audience is still college kids. For now, those college kids are sticking with Facebook as they graduate, but if they think that Facebook's ads are becoming spam, they'll drop Facebook in a second.

Facebook's membership is mostly college and high school kids. The group that's probably the most resistant to advertisers online. I think Facebook is going to have to be EXTREMELY careful with their monetization plans from here forward.

Anonymous said...

I can't agree with Paul's point that this was bait-and-switch, that Zuckerberg chose to do this on purpose.

The earlier newsfeed controversy was entirely in house. And while people complained about, they could easily see the utility to it. Now, suddenly people see their off Facebook activities get sent to their Facebook profiles for all to see. For many, with no warning. For others, a short term pop-up window that came out of nowhere. And disappeared into thin air.

But from a $$$ point of view, the reason that this wasn't a 'brilliant' move is because "Landmark Partners" such as Coke are putting their involvement in the program on hold. The NYT reported that Facebook had presented to both its partners and to the press itself that this would be opt-in. I'm sure the folks at aren't too happy to hear that an internet analyst from Forrester is writing about her negative experiences.

Either Facebook milsed these major companies that they now had deep business relationships with...or they simply changed the terms of the agreement without telling said partners. An extremely stupid and/or arrogant thing to do.

Facebook lost user credibility here, but also business credibility with those partners. That hurts valuation.

Mack Collier said...

"Facebook lost user credibility here, but also business credibility with those partners. That hurts valuation."

GREAT point there Jonathan. I think the question is, how much damage did they do, and can they cover from it? My guess is they can, but whether or not they will remains to be seen. From the member point of view, I think it helps that there doesn't seem to be a popular alternative at this point. There's doesn't seem to be the next MySpace waiting in the wings to accept any dissatisfied Facebook members.

Anonymous said...

@Jonathan -
To take a more cynical view on what you said:
"Either Facebook misled these major companies that they now had deep business relationships with...or they simply changed the terms of the agreement without telling said partners."

Or what if Facebook didn't mislead the companies at all? They told them exactly how it would be (opt-in), just not exactly when it would happen (now).

By not doing opt-in first, Facebook managed to make the blogosphere (and most online outlets) completely buzz about them. Then, after a few changes, they get to the end product- one that was exactly what they said to their business partners it would be.

So they covered the press, they made it look like they listen to their community, and Zuckerberg looks like kid-wonder with a public apology. To top it off, it worked, for example, Mack didn't even realize MySpace released the Friend News feature.

Or I could be completely wrong :)