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"Facebook is the single largest threat to its long term business." Okay, so I keep trying to wrap my head around this, but I just genuinely don't get this idea

"Facebook is the single largest threat to its long term business." Okay, so I keep trying to wrap my head around this, but I just genuinely don't get this idea. Facebook is huge, at the moment, but it has one public facing product. What does that product let you do? Be social, within its confines, and connect to everyone you ever knew, sharing links, photos and text snippets. Yeah, there's a lot of end-user value in that and, for as long as they can ride the power-law effects, Facebook will be an ad-revenue generating monster. Google, on the other hand, has a suite of tools that lets people do almost everything else in the online world. Search is moving ever so slowly into the 3D/"real-world" through maps and product searches and now the goggles project (if it stands the test of time, of course). In short, google helps its users manage their worlds whereas Facebook manages people in the Facebook world. Without significant expansion and diversification, Facebook has a much more precarious position, at least as far as producing end-user value goes. Thus far, that innovation and expansion has been what? Facebook connect? Putting "like" buttons all over the web and tracking my every move? That's not value for the average Facebook user (for advertisers? sure, very much). So, what else? Letting me share all of my activities like what music I'm listening to, etc? All of that happens within the facebook walled garden – and that tactic makes the whole thing a bet the house gamble. As long as people stay with FB, it works, but once they drift away, it all falls apart just as quickly as it grew. (The power law can cut both ways) I don't deny Facebook has a lot of value, but I just think that the more open framework/platform presented by Google is going to play out much more strongly in the long-run...

dchuk 15y ago
when facebook launches their adwords/adsense competitor, they will cause serious opposition to google. They're the only company out there with the reach and most importantly, demographic data for 1 in 7 people in the world, to disrupt google's stranglehold on internet advertising.
- incongruity 15y ago
  That's exactly my point, however – both Google and Facebook are in a similar business – connecting advertisers to consumers. Their supply chain is driven by their ability to get consumer attention/eyeballs. In that light, Facebook's supply chain is much more precariously situated, in my never to be humble opinion.
- williamchang 15y ago
  It doesn't seem clear to me that demographic info will make Facebook's ad platform significantly more compelling to advertisers than Google's. Remember Google has a lot of data too (ie search logs).
  - mtts 15y ago
    In principle you are correct. To an advertiser it's much more significant what it is you do when you're on the internet than who you do it with. So in that sense Google is much more valuable than Facebook. The problem is humans are social creatures. So if all there is is Google, humans will do stuff on the internet and Google will know about it, but the social aspects of life remain offline and therefore inaccessible to advertisers. Facebook has managed to get people to spend a much larger percentage of their time online by moving part of their social lives there and they're gambling that a significant portion of that time people will do things that advertisers will be interested to know about. Personally, I doubt this gamble will have the payoff they're apparently expecting. The primary focus during social interaction seems to be on, well, social interaction. Consumption only plays a very small role (though I'm sure Bacardi would like to pop up ads while you're chatting with your buddies on Facebook). Facebook basically catches people only when they're in the mood for fun and relaxation, whereas Google captures people right when they're in the mood for consumption and for spending money and to an advertiser that is much, much more valuable.
- jaredsohn 15y ago
  My understanding is AdSense is only a small portion of Google's revenue. For their Adwords competitor to be successful, they'd essentially need a search engine for people to specify their intents which they'd either need to write themselves or license their technology to work with a search engine such as Bing.
zaidf 15y ago
That's not value for the average Facebook user (for advertisers? sure, very much). Google still makes bulk of its money from advertising. As you admit yourself, facebook has precious data for advertisers that Google doesn't. Facebook is pretty directly competing with google already and getting ad dollars that would have otherwise gone to Google. This is not easily noticeable right now because advertising is still growing pretty rapidly so everyone(including google) can show growth but over time, it will begin to show that Google has lost a specific type of ad market. As long as people stay with FB... So I have been on facebook since 2005. For over 5 years now, I have heard the argument that facebook is going to be another friendster and then myspace. I think it is time to put this argument to rest. Sure, facebook will die some day but I don't think its death is imminent.
gbog 15y ago
I'd go further: Facebook has no value. Fred Wilson was talking about musical chairs recently, my reading of this oracle is that the end if the game might be Facebook IPO: everyone jumping in, enormous uncontrolled valuation, and at the same time all the cool kids leaving FB for a newer cooler thing where their parent or bosses are unlikely to be.
- rimantas 15y ago
  Some people use it as a means to communication. Are you saying that this has no value?
  - gbog 15y ago
    Do you mean companies or groups or bands using it as a mean to communicate with their clients, fans, etc? Then, I guess it has some little real value, as had Myspace pages and second-life real estate.

dchuk 15y ago

when facebook launches their adwords/adsense competitor, they will cause serious opposition to google. They're the only company out there with the reach and most importantly, demographic data for 1 in 7 people in the world, to disrupt google's stranglehold on internet advertising.

incongruity 15y ago
That's exactly my point, however – both Google and Facebook are in a similar business – connecting advertisers to consumers. Their supply chain is driven by their ability to get consumer attention/eyeballs. In that light, Facebook's supply chain is much more precariously situated, in my never to be humble opinion.
williamchang 15y ago
It doesn't seem clear to me that demographic info will make Facebook's ad platform significantly more compelling to advertisers than Google's. Remember Google has a lot of data too (ie search logs).
- mtts 15y ago
  In principle you are correct. To an advertiser it's much more significant what it is you do when you're on the internet than who you do it with. So in that sense Google is much more valuable than Facebook. The problem is humans are social creatures. So if all there is is Google, humans will do stuff on the internet and Google will know about it, but the social aspects of life remain offline and therefore inaccessible to advertisers. Facebook has managed to get people to spend a much larger percentage of their time online by moving part of their social lives there and they're gambling that a significant portion of that time people will do things that advertisers will be interested to know about. Personally, I doubt this gamble will have the payoff they're apparently expecting. The primary focus during social interaction seems to be on, well, social interaction. Consumption only plays a very small role (though I'm sure Bacardi would like to pop up ads while you're chatting with your buddies on Facebook). Facebook basically catches people only when they're in the mood for fun and relaxation, whereas Google captures people right when they're in the mood for consumption and for spending money and to an advertiser that is much, much more valuable.
jaredsohn 15y ago
My understanding is AdSense is only a small portion of Google's revenue. For their Adwords competitor to be successful, they'd essentially need a search engine for people to specify their intents which they'd either need to write themselves or license their technology to work with a search engine such as Bing.

zaidf 15y ago

That's not value for the average Facebook user (for advertisers? sure, very much). Google still makes bulk of its money from advertising. As you admit yourself, facebook has precious data for advertisers that Google doesn't. Facebook is pretty directly competing with google already and getting ad dollars that would have otherwise gone to Google. This is not easily noticeable right now because advertising is still growing pretty rapidly so everyone(including google) can show growth but over time, it will begin to show that Google has lost a specific type of ad market. As long as people stay with FB... So I have been on facebook since 2005. For over 5 years now, I have heard the argument that facebook is going to be another friendster and then myspace. I think it is time to put this argument to rest. Sure, facebook will die some day but I don't think its death is imminent.

gbog 15y ago

I'd go further: Facebook has no value. Fred Wilson was talking about musical chairs recently, my reading of this oracle is that the end if the game might be Facebook IPO: everyone jumping in, enormous uncontrolled valuation, and at the same time all the cool kids leaving FB for a newer cooler thing where their parent or bosses are unlikely to be.

rimantas 15y ago
Some people use it as a means to communication. Are you saying that this has no value?
- gbog 15y ago
  Do you mean companies or groups or bands using it as a mean to communicate with their clients, fans, etc? Then, I guess it has some little real value, as had Myspace pages and second-life real estate.