The problem at Facebook: their business model

The tide of concerns around privacy is rising at Facebook, as they try to leverage the personal information you’ve given them (who you are, who you know, your photos, your notes) to make money. They try to sell it, they try to offer it to other websites who can use it to attract your attention, they try to use it to target you for ads on their own site. Why are they acting so . . . evil, as many have put it?

You haven’t given them anything else.

You haven’t paid them cash. You don’t like ads on the site and don’t pay attention to them when they run them – you certainly don’t click on them. What’s a Facebook to do to keep the doors open and the investors happy?

It’s not really your fault. Facebook started doing what they’re doing with no real plan to make money, a common form of hubris among many start-ups these days. Over the past decade, it’s been all about getting people’s attention online – and the slam-dunk advertising model (or the idea of it) was always there to help cash in on that attention.

But it’s not a slam-dunk any more. People have sipped the sweet elixir of ad-free business models and developed a taste for them. $15 a month for ad-free HBO or satellite radio? Sure. Downloadable iTunes music, apps, and more? Sign me up. Netflix and now streamed movies through On-Demand services? Yes.

The heart of Facebook’s problem is their business model. You (we) are the ones getting the value, but we aren’t willing to pay for it in the way they are asking us to . . . but could they ask us in another way?

What if Facebook charged you $3 a month, locked your data down (no more privacy issues), and focused all of their energy on providing more features and value for you (vs. building out fan pages and hiring sales people to attract money from brands)? Would you pay them? I would, actually. But a lot of people, perhaps most people, might not.

But don’t underestimate what Facebook could do if it were the first subscription social networking site and was suddenly only serving one master (you). They are big enough and have enough resources that they could steadily and rapidly absorb the capabilities of every other networking site you use – and serve you at a higher level than any of those other sites, many of whom are still clinging to the empty promise of the ad model also.

I don’t think Facebook would ever do this, they are making some good money from advertisers and are rushing in that direction guns a-blazing. They have too many cooks in the kitchen to change approaches now – and I know if I was in their shoes and I read this blog post I’d think “yeah, easy for you to say dude.”

So does the subscription model opportunity exist for another fledging general-use social network? I think so. Facebook’s second (and perhaps final) hubris would be to underestimate users’ willingness to switch to an alternative who is solely focused on user needs. Ultimately, two masters – the users and the advertisers – might be one too many.

Facebook Connect: An Open Invitation to the Party

mashable_sxsw_v1_posterThis post was originally published over on the Powered Blog, The Engaged Consumer.

Have you ever been so steeped in something that you see it everywhere you look? Standing in the middle of the Powered-sponsored Mashable party during South by Southwest Interactive, beer in hand and exploring the various rooms of the Six night club, I started to think about Facebook Connect. Yeah, this is how bad it’s gotten.

Facebook is a party. It’s a huge place where you can share content and news, play games together, engaging in many of the activities you do with friends in the offline world. The problem is that the party, up until now, has really just been for Facebook itself and its users. If you were any entity with commercial interests, the best you could do is give Facebook a banner to hang somewhere for you. This would be like if Powered sponsored the Mashable party but we could only hang a banner inside the bar. How effective would that be for our marketing, over the din of the music and rumble of conversation?

With Facebook Pages, now you can attend the party. You’re just like I was at Six, a sponsor floating around the crowd, having a few conversations and talking about Powered. This is much more effective marketing-wise than a few banners (at least I think so!), but still I’m just one guy and although there were a few other Powered employees our impact at the event was still limited. This was compounded by the reality that people didn’t always want to talk about Powered, a fact that is even truer in the personal-conversation world of Facebook – which is about as far away from an industry party as you can get.

Facebook Connect is really where things get interesting. It allows you, as a brand, to have your own room in the bar. By that I mean you can build your own communal experience and attach it in a meaningful way to the Facebook experience. People can walk into your room, find the people they already know, and message people outside the room about the cool things going on there.

Word-of-Mouth Traffic Flow

This doesn’t absolve brands from creating an engaging experience in their own community environment. You still need to populate your room with interesting content, people, and programming. But it really helps with one of the main problems branded communities have, which is getting people in the door. There is only so much you can do with email marketing, media promotion, and search. Here, Facebook runs the party, and you just hook into their flow. You are instantly rewarded for creating engagement, versus having to create engagement and then work hard to get the word out.

The Power of Context

The reasons why you would build your own room (Facebook Connect) versus just attend the party (Pages) are similar in both the online and offline world. With Connect, you gain context. Everything that happens in your community is in the world of your brand, versus the world of Facebook. Context is extremely powerful in the user’s mind, and it has a lot to do with building people’s brand affinity, advocacy, and loyalty. Does reading this blog entry on the Powered blog make you attribute the value to Powered, or to me (Wick, Doug Wick)? How would that change if you read it on my personal blog? If you walked into the Powered Room at the Mashable Party, how would this be different than just meeting someone from Powered?

Learning Ability

Also, with Connect comes data. Your ability to listen and learn as an organization is significantly enhanced when the technical handoff between Facebook servers and yours happens. What if the Mashable party went on indefinitely (I felt like it might at some points) and you never adapted your room to be more reflective of partier’s preferences or need – or even just freshened things up a bit? If you don’t have the data, you won’t have the visibility into individual behavior on a quantitative or qualitative level. You won’t learn or adapt as effectively, and you’ll start sounding like that boorish guy who’s always at the party saying the same things. Yes, we’ve heard that story about how you went bungee-jumping in Cancun eight times, thank you very much.

So now that you’ve been invited to the party, will you get in there? Or will you sit at home and let other brands have all the fun?

Meme-Tags and Vintage Photos

Mr. Aaron Strout, who recently joined Powered as our CMO, just meme-tagged me! When the message came over via Twitter that I had been tagged, I have to admit that had no idea what it meant. Meme-tagged, me?

But after reading Aaron’s blog post, it became clear that a game of meme-tag is really a more fun version of those “20 questions about you” email chain letters that used to go out. In fact, I have seen these little games perpetuating not only through Twitter but through Facebook. Last month my Facebook friends and I had fun with the “open the nearest book and type in the 7th sentence on the 53rd page” game.  Some of the quotes were pretty funny taken out of context, but the more interesting thing was to see what people had on their bookshelves. These are a great way to feel connected to the folks in your extended network.

The other, somewhat-related trend I’ve seen in Facebook over the past few months is that several unrelated people in my network are starting to upload really old photos – soccer team pictures, second grade pictures, prom pictures.  Another small way to feel connected, or to reconnect, with old friends through the sharing of a small piece of media. And Facebook continues to cement its position as the truly de facto social network.

Amit and BeckyBut back to Aaron – his challenge is to upload and display the sixth photo on the six page of your Flickr photostream in your blog. Here’s the embarrassing thing: I am barely a Flickr user. I checked and I only have 23 pictures in my account. So as a stand-in I am going to upload the 66th photo in my iPhone camera roll . . . it’s a picture I took at the Seattle wedding of friends Becky and Amit this past summer (friends from business school).

And who will I tag to do the same? Let’s tag Josh Wills (@dukethug), Rebecca Frasier (@bexmix), Amy Mendel (@atmendel), Shwen (@shwen), Brianna Barnes (@briannab), and Ryan Joy (@atxryan). You’re it.