General Zuckerberg’s Last Stand

Is it me or is there a growing concern about Facebook’s murky future?  Oh wait it’s not just me.   To make matters worse, current employees now seeing their net worth drop each day, are blatantly being encouraged to stay the course by both their boss and the media.  Facebook’s mounting challenge seems to be worrying a lot of people lately, and the more I read the more I see everybody has their own opinion.

Well FWIW, here is mine.

As Facebook’s General, Mark Zuckerberg famously said:  “we don’t build services to make money; we make money to build better services.”

Mark would do Facebook Nation a solid by finally acknowledging ads annoy people and are not a “service” to users.  Ads might have worked as Band-Aid revenue generation during infancy and adolescence, but now they are proving insufficient as the company matures and struggles in it’s transition to mobile.

First, I have a bone to pick with advertising and why it should not be the future of Facebook.  The main problem with advertising is not rooted in inadequate technology; it’s rooted in the fact that it doesn’t actually add value to you or me.  Ads are meant to interrupt our natural pattern of thought in an effort to imprint a commercial message on the neurons of our brain.  An imprint that, in fact, I wasn’t wanting or I would have sought it out first.

Simply put, ads are an annoyance of life.  Ads are peddling at its purest form and humans have an inherent distaste for peddlers because the act reeks of desperation.  Innovating around ads won’t help either.   Trying to squeeze as many ads as you can in front of people, even deceivingly placing a friends picture on the ad to trick the user for a measly click won’t change the fact that ads suck.  And it doesn’t matter if we can develop a quasi-cool concept like “Pre-Ads” similar to the “Pre-Crime” concept in Minority Report, it will still be a net negative on our society.

(On a side note, propositioning people to buy things they may not be able to afford could be why our country finds itself in the precarious situation we are in today.  But I digress…)

Yet I am no Pollyanna, suggesting Facebook immediately turn off advertising entirely since this is the main revenue source, but they need to find a new self, and quickly.  Mobile is becoming the primary means of access for a growing number of users and Facebook is in desperate need of a long-term solution if it’s going to be a viable business.

So with that behind us, I sure hope Facebook can turn their attention towards more fruitful business models.

My answer: Add value to the consumer, not the advertiser.  Because Mark, I’m afraid under your leadership the servant is quickly becoming the master.

Adding Value To Users
So what does “add value to the consumer” actually mean?  Adding value means making what I do each day, as a consumer, easier and more pleasant to complete.  The success of any product or service lies is the richness of value it creates for me, as a consumer.  Early on (and arguably still true today) Facebook added much value to life by connecting us with our friends.  And that was all nice and neat back in the day before social networking became commoditized.  It’s become clear Facebook needs to stand up, rediscover, redefine, and re-institute a business model around the value it creates in its users lives.

So rather than ads – which I will continue to dodge and evade like the plague – why not focus on commerce, payments, purchases and creating value with the resulting data?  Why not, since Facebook already has my identity and interests all figured out, make my life as a consumer easier and more efficient rather than further interrupted?  I would appreciate things like saving me time, saving me money, helping me understand more about myself and my purchasing habits and then aid me in putting that information to work?  Help me identify where I buy things and why?  And maybe identify what brands I am attracted to and which ones I stay away from?

Further, Facebook could then quickly assist me in accessing specific brands I respect and usher in repeated interactions/purchases for me.  These are the things that matter to us as consumers.  These things help us better manage our lives.  And believe me, I would use Facebook more if it added more value to my life.

Again, we hate ads… but we like buying stuff!   A subtle but HUGE difference lies between those two concepts and if Facebook can dig deep enough into why there’s a difference they will discover the answer is found within the delta.

General Zuckerberg needs to plot a game plan for Facebook that is not only a sustainable but growing future as a business.  A number of business models – outside of the traditional “lead generation” advertising we’ve come to despise – are possible.  Here’s just a few focused on adding value to the everyday consumer.

Payments
The world is rapidly going mobile and an incredible opportunity is looking Facebook right in the face.  They have almost one billion identities of people around the world.  Amazingly, these Facebook users are also consumers who pay for things. And I bet if you polled a large enough subset of them about their online/mobile purchasing experience they would tell you much is to be desired.  I often wonder why we need to plug in the same damn information (name, phone number, card number, email address, physical address, phone number, billing address, first born, mothers maiden name, etc.) again, again, and again, again and again… and again, just to buy something on a website with Facebook connect sitting right there!?  I bet Facebook already knows that information about me…

This “revelation” is not lost on Facebook and they have already been dabbling in the digital payment experience over the last few years.  But something seems amiss.  Recently stated quarterly numbers show payments flattening due to people rapidly shifting to using the site from mobile alone, or at least spending a lot more of their time on mobile than desktop where it shows more ads.  Ah, there’s that damn mobile device again!

So with the Zyngapocalypse upon us, most are wondering what comes next.  My view focuses on tying a mobile experience into our consumer experiences, namely real world payments and transactions.  It all comes back to consumer ID and expediting the payment experience.  Yes, I am talking about the same trillion-dollar market Square, PayPal, LevelUp and many others including my company Seconds are aiming to re-create.  Using the device we carry with us all hours of the day – the very same device we are always logged in as a Facebook user – these emerging business are actually adding value by solving a problem and making life more efficient.  More importantly, they figured out a way to make money while not annoying us!

Donations and Giving
A mobile payment doesn’t just mean buying a latte with my phone.  Donations, giving and social gifting are another potential home run for Facebook payments, since these are transactions people want to talk about and share with friends.  Donations are unique in the fact that the desired outcome is to influence others to join us and make a similar purchase.

So how big is this opportunity? Charitable giving is a $300 billion market, and Facebook would be wise to understand greater than 2/3 of that total – more than $200 billion per year – was given by individuals or household donors.  In fact, gifts from individuals represented 73 percent of all contributed dollars.  Wouldn’t it be great if we had a quick and easy account from which to give to our favorite charity without having to plug in those damn credit card numbers or be required to mail a check that we don’t have, (kinda like a pay button?)

It will be interesting to see what they do with Karma, the social gifting business they purchased the day of their IPO.  Social gifting and quick mobile based donations present a very promising opportunity and the Karma acquisition could be a beachhead to the milestones Peter Volgel predicted, where Facebook’s revenue from payments will double every year for the next five years.

Social Commerce
Finally, a low hanging fruit example for Facebook is the often propagated but yet to be commercialized social commerce concept.  If you think about it, it seems as if we are still in the stone age of social commerce, and have been for years now.  Facebook has been around for almost a decade and before that we had Friendster and Myspace.  What most don’t realize is how close we actually are to merging social and commercial actions, by simply talking about products and purchases with our friends.

How many times have you read a Facebook update from a friend, for instance, saying something like “I just saw ____ and it was the best movie I’ve ever seen.  Or what about the posts that show off a new car or recently purchased clothing?  Those posts, in a small way, are the beginnings of social commerce.

I discovered one startup in particular, Note Social, seeming to be gravitating towards all the ideas of value I bring forth above and from the looks of it they are just about to launch their solution.

Social commerce will usher in a totally new shopping experience, by sharing things such as a new purchase or a cool new movie you are influencing your friends’ commercial interests, which can quickly turn into another purchase.

Commerce taking place on and off Facebook, utilizing the social graph they built over the last 8 years, could be another huge business for them.  Imagine if they charged a 20 or 30% fee on any purchases within the platform?  With a half a billion daily people interacting on the site each day, that’s quite a bit of potential revenue just from social commerce relationships.

So Facebook and General Zuckerberg now stand at a crossroads.  Looking left, they hang onto advertising and hope people can deal with more unwanted interruptions on a smaller screen, leading to Facebook’s demise.  Looking right, they peer down a road full of potentially new and innovative social commerce businesses, ones which actually add value to users and possibly a brighter future.

It’s your move General.

5 thoughts on “General Zuckerberg’s Last Stand

  1. Facebook is now a corporate answerable to shareholders, the advertising model is here to stay because they have no immediate alternative to raise the money to keep shareholders happy.

    Facebook is investing heavily in new buildings for its employees, so whilst their shares collapse in value Facebook is hoping investing employees will retain their talent.

  2. I don’t think ads are dead but I do think they’ve been a bit slow to innovate. Anyway, this will see them going in the right direction:

    http://techcrunch.com/2012/08/25/facebook-exchange-retargeting/

    I’m sure they’re also working on commerce and payments. They’re at the point now where they could easily bring in an alternative to PayPal. The “people wouldn’t trust Facebook with their credit card” argument would soon fade away. People seem to trust Facebook with everything else so it’s only a matter of time.

    The product is still as strong and still has huge potential for the future. Half a billion active users all providing realtime data on how your last iteration has gone down makes it damn near impossible to screw up.

    I doubt Mr Z is that worried.

  3. My fear for FB is that Social + Commerce won’t merge on Facebook, but on eCommerce sites instead. Its the opposite direction… rather than sprinkle eCommerce into Facebook, we should be sprinkling social into Amazon. You think Bezos hasn’t already thought of this? They’re first in line, I believe, to get it right. After you read a great Kindle book, or order a pair of sneakers on Amazon, you can review it right there, and post that to Twitter or Facebook. That’s actually interesting.

    On the other side is…. ads on Facebook that does little for users and advertisers…:/

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