RED FLAG for Facebook – Groping for Business Model ??

Facebook is an amazing application. used by almost 1 billion people.  It’s no secret that I’m a big fan of Facebook and also a critic of their lack of scalable business model.

Regarding the business model question for consumer companies, I have said publicly many times that you can’t change the user experience to force a revenue model.  This is the Facebook dilemma.  Contrast that with Google in 2001.  Google had established their excellent user experience and revenue model (aka Adwords) long before their IPO.

The Big Red Flag – Mark Cuban Calls Out Facebook

“The big negative for Facebook is that we will no longer push for likes or subscribers because we can’t reach them all. Why would we invest in extending our Facebook audience size if we have to pay to reach them? That’s crazy. – Mark Cuban

Here are some comments from my Facebook Friends From Facebook  – Reposted here

  • Lisa Johnson I so, so, so, so agree with Mr. Cuban … we’re pulling our clients back from FB too and focusing on Twitter, Pinterest, blogging and email …
  •  John Furrier I tell my friends (and my team) control your narrative and infrastructure use channels but don’t rely on them..
  •  Doug Crets Fred Wilson has something to say bout this. At the end of the day, your node of influence centers on your name, your reputation, your ability to create a story and lead people from that story to action. Facebook has it half right, but Facebook built a business with its interests in mind, not ours. You can only lean on half a wall for so long.
  • Rick Bauer We’re winding down a Kickstarter fundraising campaign. We were approached a week ago by a company that offered us their services to drive fans to our page to “like” it. How that helps us with donations is beyond me. There is no guarantee that likes or subscribers translate into business. Our stats are proof…638 page likes but only 74 backers.
  • Elisabeth McLaury Lewin Yes — you’ve articulated exactly what we’ve been thinking and talking about here in our little business.
  •  Lou Covey Cuban doesn’t understand the value of Facebook. He thinks its Google. And as more people suggest going to Twitter and Myspace you’ll find those platforms do the same as Facebook.
  • Rick Bauer ^^ Agreed. Our KS campaign has been tweeted and re-tweeted to hundreds of thousands of people over the last three weeks with little results.
  • Lisa Johnson @Lou I can tell you that the value of FB has dropped significantly for some of the brands that we’re working with. A year ago most of our social media conversion sales came from FB, now it’s Pinterest … and FB is barely anything. We’re following the ROI, the ROI isn’t on FB right now.
  •  Lou Covey Depends on how you use it, @Lisa. If you use it to sell stuff, you have a problem. If you use it to build awareness and clientele. It still works well. I’ve had clients that have seen 600 percent increase in repeat business just using Facebook.
  •  Lisa Johnson We’re starting to use it drive more people to our email lists for one. We previously had stellar numbers like you’re saying, but how true is that number since September?
  • David Evans A lot of straws on the camel’s back, nowhere near the breaking point yet, maybe when we have 4 stories a day in our feeds.
  • Lou Covey What FB is doing is making an intelligent attempt at reducing the incredible amount of spam on the news feeds. I’ve been advising people how to set their feed to filter the crap out, most of which has been implemented in the past year, which is probably why you are seeing a drop in advertising effectiveness. My view is FB is actually trying to eliminate 25 percent of its user base that people see as spam.
  • Phil Burns This is a perfect example of why the recent push to originate content from within a social network (blogging, et al is dead:go social) is a very bad idea. If you cannot control the platform, you cannot control your content. Social distribution from a central origination point gives you the ability to create multiple audiences on multiple networks and if one network decides to eat itself as Facebook has done, you can easily adapt. Those who have focussed on popularizing their Facebook page and building an audiences there instead of focusing the audience to their site will find themselves at the mercy of the actual owner of their audience and content.
  •  John Furrier awesome thread… FB is good for traffic but not conversion at the moment.. people use it for personal use not much action other than the random click on an ad..
  • David Evans Case in point, I see Friends liking the website builder Wix all the time. Not to pick on them, but I’ve blocked the ad several times and it continues to show up at least once a day in my feed. Perhaps Wix is buying a lot of sponsored ads and people keep liking the ad, further boosting exposure. But why are the same two Friends showing up with the ad? There are so many strange/unexplainable things happening in out feeds. Remember back in the day when it was fun to test marketing messages by running a few dozen ads on goog? Simple, straightforward and really worked well (for the most part).
  • Phil Burns @Lou Facebook is attempting to algorithmically determine what a user wants to see when the user has already specified they want the content by liking the page. If they see it as spam, it takes nothing for them to unlike or block it. Claiming that fb needs to do it for me is a red herring, especially when they are happy to still ‘spam’ it if I pay them. By that argument, fb is saying they are the only ones allowed to spam. My audience has already opted in to my content feed, bottom line is fb has decided to interject themselves in the middle and hold the audience I invested in to build captive until I pay them the ransom.
  • Lou Covey Again, @phil that depends on what you want to do. But if you didn’t pay anything to build that audience to Facebook, then Facebook doesn’t need to honor that investment.
  • Lou Covey @john, I kinda agree with your version. I see FB as a communication tool, not an advertising platform. FB is willing to take payments for that purpose, but it is contradictory to its purpose. If you use it for the purpose it was designed for, it can make your advertising investment valuable. If you do the opposite direction you’ll be unhappy. That’s why GM failed and ford continues to succeed.
    •  Lisa Johnson OK Lou, just read the post, there are definitely points I agree w/if you blare at your likes then you get what you deserve as GM did. I also agree that Cuban doesn’t quite have a grip on social media (although he thinks he does). I was in the unusual position of working with a local Naked Pizza franchise (Cuban is a big investor) and was in an email exchange where I told him his brand engagement was .5% where brand page average is about 2.5 to 3.5% (this was a few months ago). Our local Naked Pizza FB page had gotten up to 7% which we thought was pretty good for 45 days or so of work. He wanted more faster … but wasn’t willing to do FB advertising. Oh yeah, and the corporation had pulled all the FB page names wrong it was NPBoston instead of Naked Pizza Boston so there was zippo for FB search. That said, I still think paying to reach people that you previously had engagement with is pretty crappy … If they like you, they want to engage with you. You shouldn’t have to keep earning that right over and over again …
    • David Evans Phil, in the case of Wix, not true (un-liking or blocking removes sponsored posts). I see that I like any of their pages and trying to find them in my list of likes is difficult as well. As I said I’ve blocked the ad several times now, with no effect. Ransom indeed. Lou one could argue that we *have* paid- with hundreds of hours of experimentation, reading articles about best practices, creating posts, spending thousands on ads, pages, notes, tagged photos, events and many other things in order to take advantage of what Facebook promised. I’m not bitter, its all part of the evolution of social marketing. How interesting that the real value in FB for advertisers is its nascent ad retargeting system, which relies on none of our information.

About John Furrier

Founder and CEO of SiliconAngle.com.