I’ve collected quite a few articles about Facebook in the period immediately preceding and following the IPO, so I thought I’d share them all in a single post. These are not primarily about the IPO and the issues surrounding that process. It’s a collection of interesting (and sometimes controversial) viewpoints about where Facebook is headed, and what that means for the wider web. I don’t necessarily agree with all of it, but it’s always good to look at a variety of perspectives and then find a version of the story that you feel comfortable with.
The articles are listed in chronological order, starting with the oldest. Enjoy!
The economics of digital sharecropping:
Because Facebook’s content is created by its members, ARPU (Average Revenue Per Users) also tells us the monetary value of each member’s labor. If the average Facebook sharecropper were to be paid a revenue share for his or her work on the site, that member would make a buck and change every three months – about enough for one crappy cup of coffee. Needless to say, the amount is so small that Facebook members never think about it. The amounts only become economically interesting when, as I wrote earlier, you aggregate them on a massive scale.
I would argue, in fact, that while Facebook very much wants ARPU to grow steadily, it probably doesn’t want the number to get so large that it becomes a meaningful amount to its members. If that happened, members might start thinking about the cash value of their labor rather than just its attention value.
An appreciably abashed John Smith struggled to figure out how his reading habits had become public knowledge. After clicking on the Kardashian headline, he hadn’t clicked a Facebook ‘recommend’ button or anything. So why were all his Facebook friends being informed that while perusing the Huffington Post he’d surrendered to primordial yearnings?
Because at some point over the past year he had clicked a button without reading the fine print and thus had entered the world of “frictionless sharing.” In this world, if you’re on a website that permits frictionless sharing, every time you click on a headline, the site can report this behavior to your Facebook friends.
The good news for Facebook is there is a lot of room to target ads more effectively and put ads in more places. The bad news is that, if there is one consistent theme in both online and offline advertising, it’s that ads work dramatically better when consumers have purchasing intent. Google makes the vast majority of their revenues when people search for something to buy or hire. They don’t have to stoke demand ““ they simply harvest it. When people use Facebook, they are generally socializing with friends. You can put billboards all over a park, and maybe sometimes you’ll happen to convert people from non-purchasing to purchasing intents. But you end up with a cluttered park, and not very effective advertising.
In the long run, people will trust Twitter more than they do Facebook. And when it comes to building a long-term, trusting relationship with its users, Twitter will take it slowly and steadily, and in doing so, could win the race.
How Mark Zuckerberg Hacked the Valley:
Zuckerberg and his crew have made a series of high-risk moves – five hacks that have changed Silicon Valley forever “” that were far more daring than wearing a hoodie to an IPO roadshow.
I don’t know anyone in the ad-Web business who isn’t engaged in a relentless, demoralizing, no-exit operation to realign costs with falling per-user revenues, or who isn’t manically inflating traffic to compensate for ever-lower per-user value.
Facebook, however, has convinced large numbers of otherwise intelligent people that the magic of the medium will reinvent advertising in a heretofore unimaginably profitable way, or that the company will create something new that isn’t advertising, which will produce even more wonderful profits.
The distance between what tracking does and what users want, expect and intend is so extreme that backlash is inevitable. The only question is how much it will damage a business that is vulnerable in the first place.
There’s a Zucker Born Every Minute:
While playing on the audienc’s desire to get rich quick has often been enough to launch a tech stock into the stratosphere, it doesn’t seem to have been enough to help Facebook reach escape velocity. Why is that? Well, from a story perspective, we believe it’s because of an inherent dissonance between the gold rush mentality and the meaning of the brand.
Facebook was trying to tell both stories at the same time. The social network is about community and connectedness, while the public stock offering was all about getting rich quick. Of course, every successful brand has a human story and a money story living side by side. The question is, do the two stories complement each other in some interesting way, or do they cancel each other out?