Mark Zuckerberg: When in doubt, follow the money

It is the day after the OpenSocial announcements Google has made. I like it already. The scooping part of such events isn’t nearly as interesting as the period afterwards when everyone starts analysing and speculating. It is from these brainwaves that new insights and ideas erupt. It makes you (Re-) discover things on the web. Forget about the scoops, they are just the dying out echos of eager beaver blogging sites bringing the “exclusive breaking news”.

Yesterday I wrote in a first analysis that the user is finally back into the equation. My main point was that now things might be broken open, we shouldn’t forget about the user and his needs. Reading through a lot of the posts today I feel that a lot of articles focus (again) on the wrong side of this equation. For example, TechCrunch suggests Facebook should join the OpenSocial movement because it might just let them become the advertisement network of choice in the social network Walhalla. Robert Scoble wonders whether or not Facebook is scared and advises them to join the party.

If I were Mark Zuckerberg, or any other Social Networking guru I wouldn’t worry a day about OpenSocial. Stop messing about and join the party and break down current walled gardens. It is what users want, and you can’t ignore that. Bad for (advertisement) business? Sorry guys, can we please stop this advertisement business model thinking and come up with something better?

In a previous post I discussed why there is an advertisement trap and possibilities to get out of it. Reading Mathew Ingram not being impressed by Orkut triggered me to think back about some things I wrote earlier. He said:

By contrast, Google doesn’t really have a horse in this particular race — unless you include Orkut, which I don’t — in the same sense that Microsoft didn’t make hardware.

I don’t agree with you Mathew. Orkut might not be the biggest social network in the US, it is very strong in Asia. Asia is the fastest growing mobile market in the world!

Toni Ahonen publishes good examples of successful mobile (Internet) cases on a regular basis, some of them mentioned here. The mobile device will be the most dominant Internet terminal in the world. Already there are more mobile phones than computers available, and the mobile user is definitely finding his way into the Internet. The iPhone has just been called the ‘Invention of the year’ by Time Magazine.

But there are 2 aspects to a mobile phone that are of huge importance when thinking about next generation web services:

  1. The mobile phone platform has billing capabilities
  2. The mobile phone user pays to interact with others

Think of the US on-line advertisement spent 2006 ($16 Bln) as a small hill,

800px-clouds_over_hills.jpg250px-everest_kalapatthar_crop.jpg

think of the worldwide spent on SMS as the Mount Everest (btoh images taken from Wikipedia). It is estimated that the SMS market alone will be $ 67Bln in 2012 (or 3.7 trillion messages a year!) .That is excluding Mobile Internet services. In Japan alone more than $ 1 Bln revenues are generated from mobile data services. So stop thinking ads and start thinking payed services.

Let us not forget about China and India where the mobile phone is building a user base very fast. So Google has Orkut, only the biggest social network in Asia and a major traffic driver for them. And, didn’t Google just buy Jaiku, thus adding mobile presence and mobile feeds into the social networking scene? And they are working on the GPhone trying to become a dominant mobile platform as well.

In order to get out of the free (ad-based) web 2.0 thinking that leads to walled gardens and network value instead of user value we need new business models. Business models that create revenues because they are based upon user value. In my opinion there is a whole lot to be learned fro the mobile market. People pay to interact, and they interact like crazy.

All we need now is entrepreneurs and investors that are willing to support developments that connect mobile to Internet and vice versa. Business in which the user doesn’t get it all for free (no such thing as a free lunch). Instead he will be willing to pay for interaction, because that is what brings him the most value. And he will pay more than ANY social networking advertisement model will ever generate in revenues. Google understands that. That is why they are opening up social networks. Unlike Facebook, they don’t need to create advertisement revenues in such small walled gardens. They will make these revenues elsewhere. Their garden is the entire Internet.

So Mark, when in doubt what to do next? My humble advise to you, just follow the money!

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This entry was posted in Facebook, Google, iPhone, Mark Zuckerberg, on-line advertisement, OpenSocial, Orkut, Toni Ahonen, Uncategorized, web 2.0 and tagged , , , , , , , , . Bookmark the permalink.

5 Responses to Mark Zuckerberg: When in doubt, follow the money

  1. Kirill Bolgarov says:

    Interesting point, Alex.
    I agree on everything you said about mobile and of course it is the future. But mobility alone won’t change a lot – it is just a key to a more open world – true social networks which should break the barrier between online and offline living. Accordingly will change the advertising model but ads will always be there. Just like porn, just like britney spears. Advertising model speculates on one of the “basic” desires – to get it all for free :)

  2. Doug says:

    I see where you’re going with this but…

    I see mobile devices moving closer to the ‘computer-like’ internet (for lack of a better word) in all respects – in the end mobile devices will become – as is the case with the iPhone – an easy/intelligent way to access the internet on the go.

    If there is a service worth paying for on a mobile phone – that same service need be accessible on the web as a whole.

    IMO – networks need to move beyond the advertising play and get into the retail marketplace. That’s where the $$ is.

  3. Alexander van Elsas says:

    @Kirill, It is as youpoint out rightly neither black or white. Ads will always be there, but my main argument is that it should not be the main business driver for any social networking service. By nature of the revenue model it leads to containment, walled approaches, and possibly a total mismatch between the advertiser who thinks he is reaching someone, and the user who symply ignores the advertiser.
    @Doug, the whole point in the mobile space it is that it is by nature not a free space. If the mobile operator has done one thing right, it has made the mobile phone a payed access terminal. If you want to connect, to go on-line, to call or sent messages you pay for it. In the on-line world this has been decoupled. You pay for Internet access, but the services beyond access are free. Currently no such model exists on your Mobile. And it need not, as the user is fine with paying for something that provides him with value (the value being interaction of course). That is why I don’t think making services like Jaiku or Twitter free when the user sends messages from his mobile to the Internet. It would have been more obvious to let the user pay for it. Now that he doesn’t, we are back at the dreaded advertisement model

  4. Eric Eldon says:

    The most interesting thing about mobile advertising is that it can be used to funnel users into paid services.

  5. Alexander van Elsas says:

    @Eric, I’m not sure what you mean by that? Do you mean paid services on-line? In that case I understand what you mean. Otherwise, the user is already paying for mobile services, you don’t need an extra ad model on mobile. As you might have guessed, I’m not a big fan of that ;-)

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