Since long before the IPO, we’ve been fascinated by Facebook. Many of us can’t get enough of it. It’s a fun way to express ourselves, keep up with our friends’ and family’s doings, as well as discover adorable kitten videos.
Marketers are also mesmerized by the website that embodies social media for most of the world. Facebook has detailed data on more than 900 million people — and advertisers are panting to get their clutches on it. This is the scale that mass advertisers want with the targeting potential digital and direct marketers covet.
But no one has truly cracked the code on Facebook advertising. Yet.
That’s why Technology Review is predicting that Facebook will die
— eventually — and take the entire (ad-supported) Web with it. Why? Facebook won’t be able to figure out how to make money fast enough. Per-user revenue is falling — and there’s no way to turn it around. "Facebook’s business only grows on the unsustainable basis that it can add new customers at a faster rate than the value of individual customers declines. It is peddling as fast as it can."
How does Facebook’s demise lead to the death of the Web? “As Facebook gluts an already glutted market, the fallacy of the Web as a profitable ad medium can no longer be overlooked. The crash will come. And Facebook — that putative transformer of worlds, which is, in reality, only an ad-driven site — will fall with everybody else.”
Perhaps it’s because we know so many smart marketers, but we’re not completely convinced that no one is going to figure out how to make Facebook work for advertising.
It’s unlikely to be a single idea, like Google’s decision to turn itself into a combination of the local newspaper’s classified advertising section and the Yellow Pages. Facebook may need to incorporate a variety of initiatives — including the mom-and-pop ads you see to the right of your newsfeed.
In fact, Facebook has already started offering more innovations to advertisers with larger budgets than the local nail salon — including Sponsored Stories, Reach Generator and Logged Out ads.
Facebook has enough money to buy itself time to figure out how to balance advertisers’ and its users’ needs. It’s not Pets.com.
In the meantime, brands who feel that Facebook is helping them get a better idea of who their customers are probably ought to support efforts like the new mobile ad offering on Facebook — or risk the Internet falling down around their ears.