5 ms·

I'm not sure it's the advertising dollars that are addictive as much as it is "growth". To keep the stock price up you have sustain a PE that reflects revenue g

I'm not sure it's the advertising dollars that are addictive as much as it is "growth". To keep the stock price up you have sustain a PE that reflects revenue growth, and once you are done signing up new users... Well... Something's got to give. I see the ads as a lot like cutting timber out of a finite forest - it's profitable, but potentially harmful to the ecosystem in a way that can make it unsustainable. As long as you don't cut too much, replant aggressively, then you can make a sustainable business out of it - but it doesn't scale past the point where your harm to the ecosystem causes collapse. Once people exit FB because it's all ads, then the network benefits begin to evaporate, a little bit at first, then all at once... Then again I don't run a social media company, so what do I know. ;-)

dylan604 4y ago
>Then again I don't run a social media company, so what do I know. ;-) Maybe not a little as you think. Just because the social media companies are "runing", running into the ground is still running. They just have so much momentum that the ship is going to keep moving along.
nostromo 4y ago
Amazon seems to have taken a different route. Keep margins low and don’t make too much money in order to starve any potential competitors of capital. Of course - you still need to grow revenue for this to work - just not profits.
- danudey 4y ago
  Doesn't help that their recommendations are always "Oh, you bought an air conditioner? Come look at this wide variety of other air conditioners we have!" rather than, say, adapters for connecting air conditioners to different window types or home electricity usage monitoring or something.
  - nostromo 4y ago
    This is a common complaint. The reason they do it is because... it works! It can be counter-intuitive but this is often seen in recommendation systems. In music for example, the song most likely to be played after a song is... that same song again.
    - danaris 4y ago
      It may work in the general case. However, it is painfully clear that there are very obvious categories of products that it does not work on. 99% of the time, if someone buys a refrigerator, they will not be interested in buying another refrigerator. It would not be that difficult for Amazon to detect these product types and give other kinds of recommendations for them. Unless their algorithms and the data that drive them are much, much less comprehensive than they want us to believe.
      - swores 4y ago
        Nope, even with items like fridges it's intentional. Most people have not bought a fridge in the last month. Most people will not buy one in the next month. Taking your estimated 99%, that leaves 1% who just bought a fridge but it doesn't work, or didn't fit their room, or for whatever other reason they've sent it for a refund... and are about to want a fridge again! 1% might sound low, but if you look at the group of people who haven't just bought a fridge... maybe only 0.1% of them will buy one in the next year, vs. that suddenly huge-seeming 1% of recent fridge buyers. Suddenly, not such a bad idea to advertise to them :)
        danaris 4y ago
        But if I've bought a fridge from Amazon, and it doesn't work, surely the first thing I'm going to do is try to return it to Amazon? Most people, after all, don't really have the spare money to buy two fridges at once, so they're going to want their money back from the first one before they buy the second. Once they've started the return process, then Amazon can start recommending new fridges to them. Again: this is all data Amazon totally has access to. Whether they are failing to gather it, failing to recognize its value, or simply choosing not to use it when they know it's creating a lot of bad recommendations, is unclear.
  - sph 4y ago
    Or the random notifications I get on my phone from Amazon: "We thought you'd like a new air fryer." I bought one 6 months ago from you, I don't need a new one. Somehow it's always about some big appliance that lasts years and I just bought. It's never about "you might be running out of toilet paper."
- GartzenDeHaes 4y ago
  It seems to me that Amazon has the same problem, but with their physical products instead of ads. Cheap junk, fakes, and scams pushed up sales for a while, but then people give up on the site and go to other sources that are perceived to be more reputable.
  - JohnFen 4y ago
    This is most of why I stopped using Amazon entirely.
r00fus 4y ago
If our profit-uber-alles capitalist model has nothing to restrain it... it raises the question - is the growth benign or malignant?
- csw-001 4y ago
  If the logging analogy holds, then I don't think this is purely an issue of profits above all - it's more an issue of short-termism. If you are Facebook, you could reasonably stay relevant, focus on content quality, and shift to a profit model that looks a lot more like Morton Salt's - steady as she goes. In the long run, sans other goals, that might be the rational thing to do. On the other hand, if you are looking to preserve stock price in the short-term you need to at least create the illusion of sustainable revenue growth. And there is a lot to be said for this later strategy if you don't really want to run Facebook in maintenance phase. Seems that Mark and Co. might not be all that concerned about "deforesting" Facebook with ads because the end game here is the Metaverse...?...
JKCalhoun 4y ago
> To keep the stock price up you have sustain a PE that reflects revenue growth, and once you are done signing up new users... Well... Something's got to give. Facebook need to just settle back and offer dividends. It's over.

dylan604 4y ago

>Then again I don't run a social media company, so what do I know. ;-) Maybe not a little as you think. Just because the social media companies are "runing", running into the ground is still running. They just have so much momentum that the ship is going to keep moving along.

nostromo 4y ago

Amazon seems to have taken a different route. Keep margins low and don’t make too much money in order to starve any potential competitors of capital. Of course - you still need to grow revenue for this to work - just not profits.

danudey 4y ago
Doesn't help that their recommendations are always "Oh, you bought an air conditioner? Come look at this wide variety of other air conditioners we have!" rather than, say, adapters for connecting air conditioners to different window types or home electricity usage monitoring or something.
- nostromo 4y ago
  This is a common complaint. The reason they do it is because... it works! It can be counter-intuitive but this is often seen in recommendation systems. In music for example, the song most likely to be played after a song is... that same song again.
  - danaris 4y ago
    It may work in the general case. However, it is painfully clear that there are very obvious categories of products that it does not work on. 99% of the time, if someone buys a refrigerator, they will not be interested in buying another refrigerator. It would not be that difficult for Amazon to detect these product types and give other kinds of recommendations for them. Unless their algorithms and the data that drive them are much, much less comprehensive than they want us to believe.
    - swores 4y ago
      Nope, even with items like fridges it's intentional. Most people have not bought a fridge in the last month. Most people will not buy one in the next month. Taking your estimated 99%, that leaves 1% who just bought a fridge but it doesn't work, or didn't fit their room, or for whatever other reason they've sent it for a refund... and are about to want a fridge again! 1% might sound low, but if you look at the group of people who haven't just bought a fridge... maybe only 0.1% of them will buy one in the next year, vs. that suddenly huge-seeming 1% of recent fridge buyers. Suddenly, not such a bad idea to advertise to them :)
      - danaris 4y ago
        But if I've bought a fridge from Amazon, and it doesn't work, surely the first thing I'm going to do is try to return it to Amazon? Most people, after all, don't really have the spare money to buy two fridges at once, so they're going to want their money back from the first one before they buy the second. Once they've started the return process, then Amazon can start recommending new fridges to them. Again: this is all data Amazon totally has access to. Whether they are failing to gather it, failing to recognize its value, or simply choosing not to use it when they know it's creating a lot of bad recommendations, is unclear.
- sph 4y ago
  Or the random notifications I get on my phone from Amazon: "We thought you'd like a new air fryer." I bought one 6 months ago from you, I don't need a new one. Somehow it's always about some big appliance that lasts years and I just bought. It's never about "you might be running out of toilet paper."
GartzenDeHaes 4y ago
It seems to me that Amazon has the same problem, but with their physical products instead of ads. Cheap junk, fakes, and scams pushed up sales for a while, but then people give up on the site and go to other sources that are perceived to be more reputable.
- JohnFen 4y ago
  This is most of why I stopped using Amazon entirely.

r00fus 4y ago

If our profit-uber-alles capitalist model has nothing to restrain it... it raises the question - is the growth benign or malignant?

csw-001 4y ago
If the logging analogy holds, then I don't think this is purely an issue of profits above all - it's more an issue of short-termism. If you are Facebook, you could reasonably stay relevant, focus on content quality, and shift to a profit model that looks a lot more like Morton Salt's - steady as she goes. In the long run, sans other goals, that might be the rational thing to do. On the other hand, if you are looking to preserve stock price in the short-term you need to at least create the illusion of sustainable revenue growth. And there is a lot to be said for this later strategy if you don't really want to run Facebook in maintenance phase. Seems that Mark and Co. might not be all that concerned about "deforesting" Facebook with ads because the end game here is the Metaverse...?...

JKCalhoun 4y ago

> To keep the stock price up you have sustain a PE that reflects revenue growth, and once you are done signing up new users... Well... Something's got to give. Facebook need to just settle back and offer dividends. It's over.