Facebook, Social Media & Making Money

Saturday, June 7, 2008 0 No tags Permalink 0

June 7 2008 – I read Mark Sutcliffe’s editorial in the Ottawa Citizen today – “Still hard to see how Facebook will make a buck with social networks.”

He establishes his position right from the start:

At the risk of sounding like a heretic, I don’t get Facebook.

It’s not that I don’t get the concept. I suppose I understand why some seven million Canadians are now active users of the social-networking site, even though I’m not one of them.

He further adds that he can’t grasp Facebook’s business model and makes the following statement about advertising:

But social-networking sites have no such ability to target. An advertiser on Facebook has no idea who he’s reaching. And any attempt to discern logical advertising connections and create targeted subgroups of Facebook’s audience from the information posted on user pages has proved futile.

This is clearly ignorance on his behalf – there is some remarkable targeting offered to advertisers via the Facebook platform.

He further compares Facebook with Threadless.com:

Threadless.com’s approach is brilliant and simple. Users create T-shirt designs and the online community votes on the ones they like most. The winning designs receive cash awards, and Threadless.com produces the T-shirts and sells them to the community.

He adds it is a business model he gets. Of course, a tee-shirt is a tangible product.

This is an unfair comparison – a tangible product that evolves through consumers voting with their dollars versus A UTILITY that connects people over a range of interests and communities. As an editorial writer, Mr. Sutcliffe should compare apples to apples.

Facebook has been around, in the public domain, for under two years. There are about 9 million Canadians on it. To a large share of these members, the social networking utility is meaningful in presenting themselves and connect with friends and colleagues. It also provides an opportunity to maintain continuity with a host of friends but also communities of interest.

Threadless may have capitalized on the the social networking revolution and found their niche. Good for them! However, Facebook is an evolving concept that has captured the imagination of millions of people. A fairer comparison would be Google (who he references in the article), even Amazon and Research in Motion. All of these companies were banking on a bigger idea and were not profitable for years. We wonder if Mr. Sutcliffe would have written the same thing about search engines and online shopping 10 years ago? However, we live in a world now where these three companies’ offerings have fundamentally changed how we live and work. And these companies have evolved to become more relevant to increase our productivity, connectivity and how we shop.

While Mr. Sutcliffe may rightfully challenge the Facebook business model, he remains shortsighted in what the platform offers and how it will evolve as a utility. His article is on the Internet, so he must have some faith in what cyberspace has to offer.

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