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Friday, May 25, 2012

Facebook, it's all good 

Wait, what, Facebook sucks?

Like no way. I can't believe it.

All right, extract us from our dreamy Valley persona and perhaps we can believe Facebook stinks, after all we have been writing about the ways they have been screwing their users for years. As the Los Angeles Times notes, "[Facebook has] what is widely regarded as the world's largest cache of personal data — a treasure trove for businesses looking to reach their ideal customers."

Your info is for sale.

Unfortunately for investors in Facebook, the company has not figured out how to make money on all that data it owns. As the Wall Street Journal notes, "[Facebook] revenue fell 6% in the first quarter. Profit fell 32%. [2012]" As any Facebook user can tell you, no one clicks through on the ads. Corporate America, still slowly extracting their heads from their proverbial bums, is just coming to terms with this reality. General Motors recently pulled all of its ads from Facebook, saying it wasn't seeing a return on its investment. A recent AP/CNBC poll found 57% of Facebook users say they never click on ads or other sponsored content and another 26% said they hardly ever click through ads.1

And when the Facebook posse fishes for ways beyond traditional advertising to exploit its massive network, nearly one billion users, it often ends up running afoul of the law.2 For example, Facebook is still trying to settle a lawsuit regarding what it called 'sponsored stories.'

Beginning in 2011, Facebook let brands pay to retransmit users' activities to their friends' pages. So that, if someone clicked the "like" button for a corporate brand, the activity would show up as a "sponsored story" on their Facebook friends' pages. Sued for using its account holders images and likeness for commercial activity without their permission, Facebook is settling out of court without admitting wrong doing reports The Seattle Times.

Facebook's anecdotal popularity could hardly be lower among our peer group. Witness the hue and cry when Facebook bought popular photosharing service Instagram. The instantaneous reaction was, 'that sucks' and 'say goodbye to Instagram' and 'sh*t, how do I take my photos down.' The polling data backs up what we are hearing, the same AP/CNBC poll we cited above found 59% of respondents said that they had little to no trust in Facebook to keep their information private.

Facebook's fastest growing demographic of users is now the least technologically savvy, old people. It is rapidly gaining users in the fifty plus age set. And as we know, nothing makes something 'uncool' to youth than a bunch of old folks digging on it.

Facebook's footprint is far too big for it to go away completely, or even to collapse like MySpace, but it would not surprise the Clarion Content at all to see it lumbering down the dead end paths to irrelevance followed by the likes of once untouchable internet behemoths AOL and Yahoo.

As we have stated many times before, it is our contention that the internet's primary purpose is not simply to be a better sales tool than television.

The historical pattern on the internet3 has been when an organization tries to disguise its intentions, yet its ultimate and evident goal is 'Sell, sell, sell,' users eventually react with distaste, moving on to nimbler, more entertaining, less fiscally obtrusive sites that have likely yet to figure out their own revenue model; see Twitter, Pintrest, Tumblr, et al.

Facebook's huge public offering, the one that valued the company at upwards of $100 billion, marked a beginning all right, the beginning of its decline.45

1Not a math major, but 83% of your users hardly ever or never click through ads? What are you selling? The Brooklyn Bridge, you don't say...

2We are not referring to its monopolistic practices, although it is blatantly in violation of existing anti-trust laws in America.

3To date the internet has proved itself fairly well able to be lateral in its ability to adapt around and/or subvert existing hierarchies.

4They do have nearly a billion users so this fall may be glacial at first, but momentum in the internet age is a brutal leveler this is not the Roman Empire, Facebook's power is far more virtual.

5All predictions offered with heaping handfuls of salt.

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The freak out by the business and commentariat media regarding the fall in the stock over the last week has been hilarious. When people invest, sorry, but it is caveat emptor, let the buyer beware. The blame for the fiasco should fall on high frequency trading, NASDAQ, Morgan Stanley, among others. There have been lots of IPOS that generated obscene profit for insiders. This time they screwed up.
Ross Douthat, in the New York Times, notices Facebook not only doesn't make a lot of money, it also doesn't create a lot of jobs. Of course, Jeremy Rifkin was warning about his two decades ago, in "The End of Work."

Unoriginally, Douthat says, "the problem is not that Facebook doesn’t make money. It’s that it doesn’t make that much money, and doesn’t have an obvious way to make that much more of it, because (like so many online concerns) it hasn’t figured out how to effectively monetize its million upon millions of users. The result is a company that’s successful, certainly, but whose balance sheet is much less impressive than its ubiquitous online presence would suggest.

This “huge reach, limited profitability” problem is characteristic of the digital economy as a whole."

Glad the mainstream media is catching up to this meme.
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