The beginning of the end if they're not careful.
Once site users start to be seen as cash cows not members the user experience can take a nosedive.
Now that Facebook is being scrutinised by its new-found shareholders, it really needs people to start clicking on its ads. That's a fact shamelessly highlighted by Mark Zuckerberg's right-hand woman, chief operating officer Sheryl Sandberg, who was speaking to business students at Harvard University this morning. According to …
Is there any time when users of FailBook *haven't* been viewed as cash cows? A lot of the changes that happened as the platform grew were to increase the amount of data you give them and that they can use to sell to aggregators and data brokers.
The difference is now that they'll be held accountable for their revenue stream and I suspect it won't be long before further changes are made to increase the monetisation of their data. Zuck's half-hearted "we screwed up" apology recently (regarding previous privacy failures) didn't strike me as an honest change of direction for the way the company thinks about privacy., especially with the IPO. Shareholders (rather ironically, probably people on the platform) will be demanding a plan to increase revenue per user or decrease costs.
I don't have a failbook account, and I'm not a shareholder. And I don't regret either omission.
As Douglas Rushkoff pointed out quite some time ago,
"Ask yourself who is paying for Facebook. Usually the people who are paying are the customers. Advertisers are the ones who are paying... We are not the customers of Facebook, we are the product."
Good post and spot on.
Like any other Web 2.0 (grr - frikkin´ hate that term) outfit, users are referred to as RGU´s (Revenue Generating Units). Same applies to all of the telcos etc. I have old spreadsheets from my days at some very well known Web and Mobile companies where the RGU moniker is applied, rather than something like Customers, Subscribers or such like. Still, they´re not doing it for the love are they? This is all about making a buck, so no surprise really.
There are other services that only have customers because people like them. Say, for instance, web comics. I've seen more than one web comic author down on his (or her) luck with medical bills or what have you, and his loyal fans actually sent money. no reason other than the fact that they really liked his comic.
On the other hand, there are services that people need, but don't want. If you own a service that everyone wants, fine; people hate facebook, and yet they still have accounts with them, right? To some, it's a necessary evil. They need a facebook account for their job, perhaps. They are locked in to a service that they don't want, but they still need. If facebook died today, there would only be sadness in that everyone would have to learn how to use Google Plus (or whatever), and they lost their scores on MafiaFarm.
The problem is not with thinking of customers as cash cows. The problem is *asking* customers to *be* cash cows. The webcomic author didn't need to ask to get money, because people loved him already. Facebook doing the same? They can expect, at best, a hearty laugh at their expense. People don't love facebook. People use facebook. When the next "best thing" comes along, facebook will be as dead as MySpace.
Can you point a single moment in F***book history (or web 2.0 history for that matter) when users were not perceived as a cash cow and their private life was not perceived as a "monetizable item".
One of the many reasons why I often say that I do not want to even learn what Web 3.0 will be about. My plan to deal with it is to communicate with any Web 3.0 entitiy from a firewalled, fortified and isolated bunker. With machine guns on the physical perimeter and hunter-killer progams on the "logical" one.
"Can you point a single moment in F***book history (or web 2.0 history for that matter) when users were not perceived as a cash cow and their private life was not perceived as a "monetizable item"."
Well, up until now, users have mostly been OFFERED as s monetizable item, i.e. FB has gotten big by the potential others thought they had. Now, with so much investor money flooded in and people expecting to get something in return, FB will be expected to DELIVER on their supposed potential. So yes, people have been the product all along, but now people have handed over money, they may expect that product to be made more use of.
I do not believe the two compare. That was yet another moment for Microsoft to look a bit wobbly. But Microsoft are sufficiently stable to weather the odd wobble because they make numerous products that are certain to be making money in a years time. They have supply contracts and support contracts to ensure it. This gives them a buffer against sudden market changes that Facebook does not have. If I had Microsoft shares, the thing that would be causing me to shit bricks is their having sweaty monkey boy for a CEO.
If the next new hot thing came along tomorrow (I'm obviously not talking Google+ here), Facebooks active user count could drop off a cliff so FBs only product - an advert delivery mechanism - would be seriously devalued. To accept it already needs a bit of help even with 900 million users when the market really doesn't know what to make of your share price... I see comparisons to Ratner but it looks like she got away with it this time.
"Now just configure it to block everything else from Facebook, and you'll really be cooking with fire."
Maybe I'm over the top, but I block those stupid little blue icons that plague all other web sites. I want nothing to do with them.
As for those people who believed that a company that produces and sells nothing is worth billions of dollars, I laugh in their faces. Unfortunately the morons who are in charge of my pension probably invested a bunch in it. And they'll still get their fat bonus.
I don't. I access the site via m.theregister.co.uk
But that is more because with the adverts, it's blatantly obvious to passers-by in the office that I'm reading a website.
The plain layout of the mobile site is perhaps a little less obvious that I'm not doing the work I should be doing. Just need to override the CSS that puts the big splashes of red at the top and bottom and then I can fully pretend I'm busy reading TPS reports....
From home I access the normal site though, so I'm not depriving El Reg of their income too much :)
OK, I'm prepared for the down-votes but...
Hang on, people piss and moan about us taking money away from our favourite sites by blocking the ads with adblock or similar. Fair enough. But I've _never_ ever clicked on an ad on a web site. I don't watch ads on TV. Don't ads make money for the host site via a click-through? If so, what difference does it make whether I've blocked the ads or not? I'm not clicking through. I'll answer my own question: the only difference is I don't get a migraine from all the bloody Flash and animated GIFs.
Yeah thats it in a nutshell.
Facebook, large multinational company, pays there staff alot, large marketing department. WHat do they come up with as a marketing stratergy to push the main selling points of Facebook. Well after much debate of genius minds they come out with: Pleeease!
What next 2013's marketing campaign is what - Pretty Pleeease followed in 2014 by Pretty Pleeease with a cherry ontop and finaly in 2015: You must click on 3 of the 10 adverts to verfiy your identity and login to your Facebook account.
Joke alert, though time may well prove me wrong on this.
There was a report recently that the click-through rate on Failbook ads was significantly lower than from competing ad brokers (e.g. Google). I suspect the conversion rate (people who click through AND buy) is probably also significantly lower, but I can't remember offhand.
ISTR the report commented that he ad relevance on Failbook was lower, despite all their tracking code that is scattered on other websites (that they claim they don't actually track you with). How long until the "like" buttons scattered through the web are secretly used to build better behavioural profiling to increase ad relevance?
I've never seen any data regarding what % of ad clicks actually end up generating revenue, but I suspect it's incredibly low. in my case that would be 0%, I've only ever clicked on ads by accident. I hardly even notice they are there so I'm fairly certain that they have had no influence on my purchasing habits.
Unless I'm rather unusual in my surfing habits then web ads would appear to be greatly over rated.
I am not saying you are wrong, I see about a 0.5% click through rate on my adsense, but how do you suggest a website pay for itself if no one is willing to click on an advert to fund the site?
Most users do not want to pay to access a site, especially a new site trying to establish itself, you might pay for Wall Street Journal Access, but not a new site about cyber security that previously you had not heard off.
If we want "free" content, like the Register, we need to find a way to make sure they can pay for their Journo's and servers and internet bandwidth etc etc
I would be keen to understand what model you would be willing to support, given the fact it is not adverts.
for another credit card. Sorry that's how the world got in to its current economic mess, to much credit.
Perhaps Facebook should do what other sites do and track your interests to provide suitable ads that you might be interested in. Of course I don't click them either so it won't change things but at least I'll be ignoring the things that I might possibly at some point in the future be interested in.
Mozilla is substantially funded by Google. You may have a long wait before the mainline releases of Firefox come with ad-block built in.
I am very well aware. It's not too much money though and even strategically cutting off a great lump of google revenue could be an interesting option for some.
When do you think they'll start charging for access?
I actually think that this will happen with a year. I don't think they will charge much, but if every facebook user paid 1$ on top of the advertising this would be quite a money spinner.
Like most of you lot, if that happened I would close my account.
they won't charge for access *as such* (didn't boy Zuckerberg promise FB will "always be free").
What they will do, is ensure that there can be a differential between "premium" and "classic" accounts. My guess is that "premium" will have previews of new features, be invited to "preview only" groups, and have fewer restrictions (based on the fact a credit card was used) than "classic". Ironically, I'd bet the first distinction between the two will be the ability of "premium" accounts to opt-out of advertising.
They might also try and find a way to get commercial organisations to pay for their FB accounts
"make you watch an advert before you can access the s*it(e)."
Reminds me of another website I used to visit occasionally.
Some distant connection with this one.
Some bloke called Magee.
Can't remember the name, TheRequirer or something.
Last few visits before I gave up, before entering the site it offered you the opportunity to watch a Dell/HP/IBM/whocares video on the history of computing or similar. Or "click here to go straight to the site".
I mean, wtf? Top-tier (?) IT advertisers *pay* for opportunities that?
Well if you sign up for google adsense its very clear that you are not allowed to click on ads on your own sites (obviously) and you can't ask people to click on ads either.
What this facebook exec is suggesting destroys the entire integrity of facebook as an advertising medium. She should be sacked as an example before the advertisers begin to walk.
My immediate thought also. Any reputable (relatively speaking) ad network will dump Facebook immediately for this soliciting of fraudulent clicks. That looks REALLY good to the shareholders who held their heads resolutely in the sand as even the BBC thoroughly explained what fools anyone buying would be.
It depends how the advertisers are paying. If they are paying per click then yes, this is blatant ripping off advertisers. The sort of thing that gets you kicked off any advertising network that cares about still being in business next year.
But if they are paying for impressions or pay for conversions then it isn't - the click doesn't change the cost to the advertiser; if anything it is beneficial to the advertiser since some of the people making the click may actually read the landing page, hence see more of the marketing, hence increased sales.
I signed up to Facebook not long after they opened it to the general public. The younger members of my family use it and as a result the aunts and uncles have joined. I have a few friends who're members too. Beyond a vague keeping in touch utility, I really dislike the user interface which strikes me as essentially unfathomable to all but the very keen users. It's just a very big contact database and not a very well organised one at that.
The only thing they've got going for them is the game side. I find it intensely irritating to be pestered by people to play some poxy game which seems to be a borderline extortion racket designed to extract cash from the gullible. I'm sure these games will become ever more prevalent and instrusive in the search for revenue.
I suspect the whole thing is very lastminute.com and the shares will be down 90% to about fair value in a few months. It does have nearly $4 billion in revenue from last year after all, with over $1 billion in profit so I think it'd be worth a punt at $3 a share.
$3 a share is too low - but at least you are in the right ball park.
Roughly - if they are making $1bn a year a normal valuation for this type of company would be around 15bn - so their IPO valuation was about 7x too high - so instead of $38 a share they are probably 'worth' more like $5-6 per share.
Makes Apple look positively cheap in comparison - they made profits after tax of $26bn (so they made what Facebook made in a year every 2 weeks). Apple's 'value' is $528bn (about 5x the Facebook IPO valuation) yet they actually make 26x more profit - PLUS - Apple have over $100bn 'cash' sitting in the bank.
So take out the cash and Apple's 'business' is actually only being valued at around $400bn - less than 4x the Facebook IPO valuation for a company making 26x the profits - of the two who would you buy?
Your analysis only works if the business is sustainable, and will generate at least the same profits for maybe 10 years, and if the company actually does distribute those profits to shareholders. If all this is true, then your share of the business will eventually start to make real money for you.
In short, even if FB was at a normal 'fair' valuation, you'd have to be incredibly optimistic to buy in at that price, given that there's no protectable IP involved, and the entire history of the web makes it painfully obvious that the FB product will get up off it's collective arse and walk off as soon as it finds a greener field to chew its cud in.
Which only leaves one reason to buy in at a stupidly high price - a belief that the market will expand enormously. There's absolutely nothing to indicate that this will happen. There aren't even enough people on the planet to make it happen. And most of those currently left over are Chinese, and nobody in their right mind would expect them to flock to FB when they can do it their own way.
that this was a joke. Since advertisers pay for clicks, clicking on an ad if you're not interested in possibly buying whatever it is - just to give the website a boost - constitutes fraud!
Or, at least, it comes close enough that some online advertising providers view it that way. And that is a fair concern for protecting the value of ad banners and the like.
Once they start displaying proper ads, not scams, I'll click on them. I mean, I'm always clicking at least an ad a week, on Google and other sites, if they catch my eye as remotely interesting. Having 20 ads saying "date person with 7 heads", I'm not clicking on them, ESPECIALLY if they say a friend of mine did so. Give me proper ads, that don't tie a click to my profile.
Well, not the ad itself, the little symbol at the side to hide and say why. I tend to go for 'offensive' as the reason. I don't think they've yet worked out I'm offended they think I'm stupid enough to click any old crap they show me instead of going and finding what I want myself when I actually want it.
because 100bn doesn't disappear without someone asking for a handout.
Probably not just FB, but there are banks, pension funds etc
It isn't all dumb VC and dumber grannies buying those shares.
You'll be paying for it with your taxes. Better to spread the cost around the economy so no-one goes down.
Oh the joys of "too big to fail!"
in other words in order to keep our share price up and keep us nice and wealthy will you please waste your bandwidth clicking on things that you have little or no interest in, that will inevitably result in your FB profile being "sterotyped" to deposit more ads at you.
watch me NOT care.
The advertisers will be 'well happy' that people are being encouraged to (indiscriminately) click an ad or two to generate some revenue for Facebook. In the long term it's a bad idea as ROI for advertisers would drop and they may stop advertising altogether.
The whole Facebook IPO etc. sounds worse every day - would you invest in a company where the CEO spends 1bn (their entire profits for a year) on a company that probably also makes little / no money with little regard to the rest of the board. Also rigs the voting rights on the shares so he retains more than 50% - sounds a pretty poor bet before you even look at the financials.
I click on the "X" and when prompted for a reason why I don't like it, I always answer "Because it is an advertisement".
The advertisements are served from Facebook's own domain, so I can't even block them.
Surely I am not alone in feeling I would sooner pay for the Internet than have to look at adverts?
The vast majority of FB users I know (about) are kids ... well known for their (parents) disposable incomes.
Or, to put it another way, if you needed a credit card to log into FB, how many of it's "users" would disappear overnight.
Tulips, anyone ?
Given most of the ads I've seen on facebook are of the scammy 'you've just won an iPad!' or 'You have a secret admirer, click here to find who' variety it's no surprise people aren't clicking. There's a finite amount of morons. I suspect those kind of companies don't pay their bills either.
Google is a litte, ahem, different regarding this - and have a lot more experience. From support.google.com: "Publishers may not click their own ads or use any means to inflate impressions and/or clicks artificially, including manual methods.", and "Publishers may not ask others to click their ads or use deceptive implementation methods to obtain clicks. This includes, but is not limited to, offering compensation to users for viewing ads or performing searches, promising to raise money for third parties for such behavior or placing images next to individual ads."
I thought asking people to click ad's was one of the great no-no s of web advertising.
(Along with clicking your own ad's).
She is basically advocating defrauding the people paying for advertising.
It is click fraud I think.
The only ad worth clicking is the one for the 55 gallon drum of personal lubricant.
(The comments are hilarious on Amazon (US))
(I hate ad's probably more than 99% of the population but I don't agree with Facebook doing this).
Asking users to click on ads is something low-level sites do in desperation. But people click because the ads interest them - not because they are charitable. It's FB's job to make the ads something people *want* to click upon. And, apparently, the software that decides which ads to serve isn't doing a good job.
The onus is on FB - not it's users.
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