Facebook Suckage Syndrome

I guess Facebook really is just for college kids to poke themselves on. Oh well.

[From Scobleizer — Tech geek blogger » Blog Archive Facebook continues to suck «]

Yeah, pretty much. I don’t know anyone doing “serious stuff” on Facebook, and vampires and food fights are so last year. This is a real problem for Facebook and not only is it in their interests to do something about it, but they also have an obligation to all of the companies that are basing their future plans on Facebook becoming a true utility service. Robert may have a bone to pick with Facebook but that doesn’t make his comments any less valid.

As a nice contrast to my previous post about LinkedIn CPM rates, check out this data on Facebook CPM rates which more or less triangulates to other datapoints that suggest social ads just haven’t had the impact that proponents had hoped for. But hey, they are generating, apparently, an impressive revenue number and have plenty of cash in the bank so do have time to work it out.

There’s still a big opportunity here, but I will certainly admit that in my case aspirations got ahead of reality. In retrospect it is clear that many of the bullish Facebook commentators, like yours truly, were painting Facebook with expectations based on what we wanted to see as opposed to what they were capable of doing. Fair or not, Facebook still benefited from a huge push upward as a result of this, but the problem with leverage is that it works going down equally as well as on the upswing.

Social Networking Ads Suck

Ads work on Google because people are looking for information. They do a search, and if the advertisement shows information that helps with the query, that makes everyone happy. However, when it comes to a social network, usage is quite different. People aren’t looking for information about products — they’re looking to communicate with friends. In that environment, ads are seen as an intrusion — which is the exact opposite of ads in a search world.

[From Techdirt: Surprise, Surprise, Social Networking Ads Suck]

I wrote about this a couple of days ago. We built both OpenSocial and Facebook applications and what we found is that people don’t use them like they do our other client apps. In fact, the conclusion I drew is that people don’t use social networks to consume external content much at all. They don’t search for things either, which means the CPC is almost certain to be a lot lower than search.

TechTraderDaily sums up nicely the financial consequences of lower monetization, higher traffic acquisition costs.

My advice to companies looking at running ads in social networks would be don’t. Focus instead on tactics that do work, like engaging customers/users in discussion groups and interactive widgets that users commit to and then share with friends (at best these are brand extensions as opposed to monetizable ad payloads).

PS- I haven’t logged onto Facebook in at least a month… I still believe it has value but the current state of the art just isn’t creating any value for me as an individual.

How Much Money Are Facebook Apps Making? Not Much Apparently

VideoEgg has announced that its ad network for Facebook applications – eggnetwork – has pulled in around $1.5 million in ad revenue over the past five months.

[From How Much Money Are Facebook Apps Making? Not Much Apparently]

This doesn’t surprise me at all. My almost year long affair with Facebook has enlightened me to many realities in this network.

Very few FB apps are what us old timers would refer to as applications, they are more like interactive games and gadgets. Video, music, and images are well mined out at this point and FB users don’t have much of an appetite for consuming content within Facebook. What FB users seem to do a lot of is consume the meta-content that other FB users are creating through their interactions with FB.

For the apps that actually do things, well none of them are all that good when compared to alternatives. Clearly there is value in having these apps in one place, but eventually the development platform strategy has to go beyond the goal of locking users into the platform.

For all the talk of viral features in FB, the fact remains that the most popular apps are still the early apps that benefited from scarcity and an ability to spam your entire friends list with invites.

Triers vs. users. The favored past-time for a vast number of FB users is adding apps to their profile pages, not actually using them for anything. In fact, profile clutter is now so much of a problem that FB released a clean up tool to deal with it.

I am skeptical of the move to enable FB apps outside of FB primarily because FB apps are themselves pretty primitive compared to what is capable in other frameworks. Now this is not to understate the value of the backend network, but getting back to that issue of these apps not being very good when compared to standalone alternatives, it’s pretty hard to drive adoption when the apps themselves are unappealing.

Users in general show little appetite for applications that feature advertising, even in Facebook, so while advertisers may salivate at the notion of driving CPM/CPA in Facebook, I think this goal will remain illusory. As the creative folks get more clever about how to insert brand and ad payloads we will likely see a shift here, and I am also not suggesting that all advertising is bad either. But in the end if we end up with incremental improvements in clickthroughs and other interactions, when compared to traditional forms of online advertising, well how valuable is the platform then?

I realize that much of what I have just written flies in the face of accepted wisdom, and RockYou and Slide both just raised big $$, as well as Facebook itself, but I would caution anyone that private company valuations have never been a proxy for broader mainstream market success. I do believe that gold is indeed in them thar hills, but mozying on up with a couple of picks and shovels and dreaming of riches without understanding the intricacies of what it takes to be successful will probably just result in fool’s gold.

Is Plaxo Worth $3,810,000,000

Only if you take Facebooks recent fundraising that valued that company at $15 billion at face value (no pun intended). The FB transaction valued each of the company’s 59 million users at $254, which when applied to Plaxo’s reported 15 million users nets the $3.8 billion valuation. So what is interesting about Plaxo reportedly hoping to fetch $100 million is that this valuation implies each user is worth $6.66 (hmmm 666…), which when applied to Facebook suggests not a valuation of $15b but rather $400 million.

Obviously, this kind of speculative math is just that for two reasons, a Plaxo transaction has not been completed and valuation is a lot more complicated than simply looking at how many users a company has. Also taken into account would be how much time they spend on the site, competitive dynamics, cash flow, headcount, new user acquisition costs, and who the users actually are… among a thousand other things. But it’s a fun little exercise to do.

Plaxo, an early social networking site that helps people keep their address books updated, is up for auction, people briefed on the offering said Wednesday night. The company, which has not made a profit, is seeking as much as $100 million, these people said.

[From Social Net Site Is Said to Be for Sale – New York Times]