On business models

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There are rumblings coming out of facebook that all is not well. Experienced hands are leaving at a steady rate as the company struggles to find a business model. In March they turned to the person who ran Google’s money machine AdWords to come up with one. Her latest thoughts are:

She said that after six years in advertising at Google, she believes that there’s an “unusual and extraordinary opportunity” for advertising at Facebook. That opportunity is somewhere between major brand advertising like Super Bowl commercials and the direct-response search ads that Google sells.

Sorry, no.  The basic problem is that nobody looks at the ads served on facebook because they are barely relevant. This has resulted in low conversion and smaller CPM rates. What facebook needs is a creative solution and they don’t have the right person to deliver it. Sandberg ran AdWords well but she didn’t devise the business model for search engines. In fact nobody at Google did, it was Bill Gross who came up with paid search. Google was initially sniffy but adapted paid search into AdWords which Sandberg ran brilliantly.

The problem facebook has is that they need the creator, not the administrator. When they have the idea then Sandberg will be the person to grow it from a seed into an empire. But they haven’t had the idea. This was the thinking behind opening up the platform. If they couldn’t devise the business model then let someone else do it. Unfortunately so far all this has yielded so far is an army of applications none of which have got any closer to cracking the essential problem. Don’t get me wrong, I love Bowling Buddies but there is no cash in it.

Read more:
On useful advertising
On the future of social networks

Pic: Laughing Squid

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