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Wednesday, November 07, 2007

Finally Someone Willing to Admit Facebook Has a Problem

When you have nagging doubts about the business model of Facebook, professionally it's often not a good idea to voice them. It takes someone very secure in his credentials to speak up. Someone like Seth Godin. In this post Seth reminds us that Hotmail was difficult to monetize after Microsoft acquired it for $400 million. Wildly successful in viral and user terms; unprofitable for many years. All because it was an environment that people didn't want to see ads in.

Yesterday I took a meeting with some consultants now billing themselves as "Facebook marketers". With all due respect to the parties involved, I wondered just how the world could possibly become as Facebook-centric as portrayed by this growing sub-industry. Assertions like "people don't want to jump out of Facebook" to do other things, made me want to "jump out a window."

The other thing that sprung to mind was definitely the advertising problem. The more Facebook becomes like a platform - a starting point or an organizing principle - the more it becomes like your desktop. You don't want ads on your desktop.

Of course, from the standpoint of the current shareholders in Facebook, the fact that your acquirers are going to stumble on monetization issues when it comes to your tens of millions of users is a good problem to have. Still, I'd rather be selling it than buying it.

Posted by Andrew Goodman




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