The print version of the FT today had a backpage article about Facebook entitled “Why we’re worth $10bn“.
From a journalistic point of view this is interesting because this article was first made available on their blog last week and because a traditional financial paper is willing to debate whether Facebook might be worth $10bn (to an extent at least).
More interesting for me though were the comments towards the end of the article about Facebook heading towards an IPO.
I hadn’t before thought of using Google Adwords as an analogy for social networks. As you recall, for a long time Google and tons of traffic and no revenue model. Then they found Adwords (or more properly copied Overture). In the words of the FT social networks need to find a monetisation model:
that fits naturally into the experience in the same way that search marketing complemented Google
Adwords is awesome for a couple of reasons:
- It adds something to the core search experience
- It is hugely scalable
I don’t think Facebook and the other social nets have found anything that hits both these criteria. Banner ads are hugely scalable, but are annoying for users and the other most talked about model “engagement marketing” suffers from the opposite problem – it should add something to the social networking experience, but I’ve yet to understand how it scales. (Engagement marketing is the process of engaging the users of a social network in the evolution of a brand – i.e. becoming their ‘friend’, entering into dialogue with them and encouraging the user to promote the brand to his or her real friends.)
That said – I would love it if Facebook has got this challenge licked and goes public (provided it was at a valuation that isn’t over the top). I say that partly because it would be great to have another good exit in this space, but mostly because it would put details of social networking revenue models and their success firmly into the public domain. That would make new social media businesses more financable and be good for the industry as a whole.
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