A lot of posts appeared this morning on Steve Ballmer who has made some provocative statements about Facebook. They seem to contradict each other. Robert Scoble writes that Steve Ballmer still doesn’t understand Social Networking. Robert makes a couple of valid observations regarding quotes by Steve:
There can’t be any more deep technology in Facebook than what dozens of people could write in a couple of years. That’s for sure,” Ballmer said. Robert replies with a solid argument that it isn’t about technology, it’s about the community. I would add to that that it is also about the brand (Community dominates Brand right ). The Facebook brand is very strong at the moment. Robert also argues that Facebook isn’t just young people and that he is not moving away from Facebook unless his “friends”do so too. Facebook has become a LinkedIn (but better) to Robert. Although I perfectly understand this arguement, I cannot help but noting that Robert is not your average Facebook user. Most Facebook users have a very different motivation of using it (see how most Facebook users are spending their time on-line looking at other users profiles for example). The average Facebook user spends more time investing in updating his personal profile to make it look better than reality, looking at other profiles , and gets much less or no value back from the network. Not like Robert who can leverage the network for tech conversations and personal marketing (nothing wrong with that btw).
Finally this quote by Robert. “It also makes me realize that Ballmer has no clue about the future of advertising. If he did he’d be talking about how Facebook’s ability to concentrate people into buckets in a new way should be copied and studied. That’s where Facebook’s real advertising value is and Microsoft hasn’t demonstrated ANY ability to see that yet. Of course, Facebook itself hasn’t shipped its advertising platform that’ll demonstrate its vision there either, but I hear it’s coming. “ Now here is where it gets interesting to me. I have some serious doubts whether or not Facebook will be able to monetize their incredible amounts of user profiles. As I have argued before, Facebook users will see their profiles as their personal space. They will not like it a bit if they are harassed by advertisement. Looking at how most Facebook users are spending their time on-line looking at other users profiles, I don’t think advertisement will fit in. That is the strength of Google. If I am searching for something advertisement is much more convenient than when I am searching for/or peeking at other humans.
TechCrunch seems to disagree with Scoble on his analysis of Steve Ballmer not getting it. Their most important arguments include the “what if another social network craze pops up”and “the technology can be duplicated”. Sorry, I don’t agree easily with those arguments. Robert is right about the technology. Duplication isn’t a thread at all (more on that in a second). And, there will always be new startups or services becoming more popular than the largest one. that is a fact of life. The question is however if Facebook can withstand those by not becoming too corporate (inflexible) or closed (walled gardens will not do in the end).
Kara Swisher has published a few excellent article son the possible investment of Microsoft in Facebook, the latest, called “PopQuiz:Skype = Hype, then Facebook=?” I agree that investing $500 million in Facebook would be way over the top. But, as I commented here, it would give Microsoft and Facebook another more subtle issue. The ad pressure on Facebook users would have to increase with such an investment, and they won’t like it a bit.
So, what is the real threat to Facebook? It can be summarized in 2 simple points:
- Facebook, as most other social networks, remains a closed network
- Facebook is network value centered not user centric (see point 1). Facebook wants to leverage the value of the network, not necessarily bring value to its users. See my earlier post on that.
So is Steve Ballmer really smart or really dumb? I’d argue for smart. Either he gets social networks in the current state and doesn’t want to invest too much in it (talking down the Facebook hype, AND trying to keep Google away from Facebook), or he doesn’t really get it, but because of that will probably make the right choice by mistake and remain very suspicious of monetizing social networks. And if he does invest 500 Mln in a company that barely makes $ 30Mln a year right now, well……
@vanelsas 
I agree with you about the success of B2C advertising on Facebook (or lack thereof). There will be some monetization, but I don’t think there is much evidence that brand advertising has successfully migrated to the social web — not at $.25 CPMs! And I’m not sure Facebook has sufficient context/behavior to drive a Google-like rev model.
One thing I’m experimenting with is a C2C (person to person) advertising model — contextually/behaviorally driven. Given the trend of online consumers connecting with each other more than brands/businesses, I think this could possibly represent a very interesting market opportunity. And a monetization strategy for social networks.