Tuesday, October 14, 2008

I Figured Out How to Monetize Facebook

As my roommate was flipping through Newsweek this week, he came across an article entitled, "Facebook's Roar Becomes a Meow" (here). He started reading out portions of it because it was something we'd discussed a few months back. In fact, I wrote about it in May (here). My post just talks about the ridiculously baseless Facebook valuation. I lived through the dotcom bust. I had seen these types of valuations before. Why was it any different this time? They couldn't figure out how to make money! And yet they had a $15B valuation. Come on! You can read it yourself, so I won't repeat it. Anyway, Daniel Lyons, who wrote the Newsweek article, wrote basically the exact some thing. Although it's a bit easier to write about it now. One point that he made that I thought was pretty indicative of their success - which I didn't know, is that Facebook makes about $2.50 per user per YEAR! Nice. And now people (even the co-founder) are apparently jumping ship. Where are they going? Who knows. But they're leaving.

Anyway, I spent about 3 minutes thinking about Facebook. They obviously can't make money using the traditional online advertising methods. But I think I figured out how they can be a little more traditional and start to generate some revenue. All I did was think about a comparable. Not a comparable company - but a comparable metaphor. What is Facebook? Is there anything that they're like... in the real world? In my opinion, it's basically a playground. It's a much bigger playground than the one we're traditionally used to - ya know, the one I played kickball on and the one my dad played handball on. Think about it. You go to Facebook to keep up with friends. Sort of like what you used to do on the playground. You can see them (photos), talk to them (messages/posts/mail), play games with them (apps), advertise your party or event, etc.. I mean...that's what it is. You don't really do anything else there. So how do companies make money on playgrounds. They make money advertising the things you do and use on the playground. You are playing basketball with a Nike ball - there's an advertisement. You are wearing a North Face jacket - well, there's an advertisement. Drinking a coke... you get it. FB is an expression of your life. The things that matter to you. If there are products that matter to you - what better way for an advertiser to leverage that?

So here are some options. How about instead of dressing yourself up, you dress your page up? But make it integrated. Not the "I Like" application. Or Beacon. Because that's too in your face. Too forced. But actually integrate it. When you wear a Nike hat or drink a coke on the real life playground - you're not saying to everyone, explicitly, hey...I love coke! It's more subtle. It just fits in with you. And by association, that model works! And that's why when celebs use stuff. It works. I'm not going to go into my ideas of exactly how you could do this... because I'm sure you can go from there. Just give me some credit when you start generating revenue Facebook. And kick me back some cash.

Just as an aside... another angle is to sponsor certain actions. Like I could dictate that my Wall was brought to you by "Coke" or whatever. Now Coke is getting a billion page views. People actually notice it. And it works better than those ads that show up on the side of Facebook. Because nobody looks at those anyway.

Just my 2 cents...


Unknown said...

I like this idea, but I was expecting a much more "abstract" idea 0.o

I think if any reasonably large social network would simply team up with a music label, you'd get such a great model. So facebook, because its huge, can affiliate with sony. In one way or another, you get a platform that promotes new releases, allows users to engage based on music taste and get % of sales referred.

Even for smaller social networks, its possible to seek out indie labels...

Anonymous said...

Facebook Microsoft partnership gone one step closer by incorporating live search in their site.. Its simple effective way to make money.