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I think this issue with mobile users (harder to monetize) ties into the big problem for Facebook over the next 5-10 years. To turn into a profitable company, v

I think this issue with mobile users (harder to monetize) ties into the big problem for Facebook over the next 5-10 years. To turn into a profitable company, valued at (say) a hundred billion dollars, they need to start making more money. Now, there are two main ways they can do this. 1.) Increase number of users. 2.) Increase average revenue per user They can attempt to increase their number of users by focussing on countries with low penetration. The problem with this, is that these users are harder to make money off (on average poorer, advertisers less interested in their eyeballs). In fact the article claims that these users are loss-making for Facebook at this time. There is (I guess) little scope for absolute user growth in the US, UK and European markets, in fact, its been suggested that user numbers are tailing off here. Revenue per user: Given the constraints on users mentioned in the last paragraph it becomes really hard to increase your revenue per user. Especially if they're shifting to mobile which is harder to monetize. Any new users are probably going to harm this metric even more (as they'll tend to be poorer than existing users) So, if Facebook want to say double their revenues how are they going to go about it?

Tloewald 14y ago
All good points. The next step — pay a billion dollars for a company with lots of users and no business model — is still not leaping out at me though. It seems to me that, say, three years ago building an absolutely kickass mobile client, or just iPhone client, should have been a major priority (versus, say, randomly thrashing the timeline interface over and over).
- sp332 14y ago
  Paying for lots of engaged, loyal, and happy users is a very different thing from paying for eyeballs.
  - malandrew 14y ago
    I think paying for eyeballs is a stupid strategy as well that undervalues the network of users dramatically. Advertising is largely the art of throwing shit at a wall and seeing what sticks. Yeah, with a lot of tools and the information Facebook has about their users, we can perfect the art of how to make shit stick. This is the classic failure of big media: treating your users like an audience (eyeballs). Facebook understands its users interactions, designs around them and is doing brilliantly at keeping them engaged, then they bring in people from the advertising world and treat them like an audience. They should be monetizing the edges, not the nodes.
  - debacle 14y ago
    Users are anything but loyal. Mobile users have a bit better loyalty than web users, but lets face it - it's a free service with very little strings attached, and all of the lock-in that Facebook has tried to create has just frustrated users.
  - ZanderEarth32 14y ago
    I think the question of if the users are loyal is still up in the air. Facebook hasn't been around long enough on this massive scale to prove if the users are loyal. I personally don't think it's user base is loyal. The younger, more tech-savy generation on FB will jump ship as soon as something better comes along like some were doing already to Instagram or Twitter. The older generation might not necessarily be loyal to FB either, they are just too scared to move, or don't have the ability.
- droithomme 14y ago
  > versus, say, randomly thrashing the timeline interface over and over Hey don't knock timeline! It's incredibly valuable for discovering that the two most important times in most people's lives are the year they were born and the year they joined Facebook.
runako 14y ago
>> Revenue per user: Given the constraints on users mentioned in the last paragraph it becomes really hard to increase your revenue per user. This is true, but nobody said that growing a large successful company was easy. FTA: >> Daily Active Users (DAUs) have grown faster than the number of deliverable ads due to the limited mobile format So step #1 for growing mobile revenue is to insert ads into mobile. I'm guessing they can manage this. But the larger question of revenue for FB is interesting. And I think the conventional wisdom about their impending crash will be proven out if FB is managed poorly post-IPO. Specifically, if they don't innovate and deliver successful new products, they will fail. This is true of all technology companies. Facebook is no different because it's a social network. In fact, Facebook is much more like the past than e.g. Microsoft was at its IPO.

Tloewald 14y ago

All good points. The next step — pay a billion dollars for a company with lots of users and no business model — is still not leaping out at me though. It seems to me that, say, three years ago building an absolutely kickass mobile client, or just iPhone client, should have been a major priority (versus, say, randomly thrashing the timeline interface over and over).

sp332 14y ago
Paying for lots of engaged, loyal, and happy users is a very different thing from paying for eyeballs.
- malandrew 14y ago
  I think paying for eyeballs is a stupid strategy as well that undervalues the network of users dramatically. Advertising is largely the art of throwing shit at a wall and seeing what sticks. Yeah, with a lot of tools and the information Facebook has about their users, we can perfect the art of how to make shit stick. This is the classic failure of big media: treating your users like an audience (eyeballs). Facebook understands its users interactions, designs around them and is doing brilliantly at keeping them engaged, then they bring in people from the advertising world and treat them like an audience. They should be monetizing the edges, not the nodes.
- debacle 14y ago
  Users are anything but loyal. Mobile users have a bit better loyalty than web users, but lets face it - it's a free service with very little strings attached, and all of the lock-in that Facebook has tried to create has just frustrated users.
- ZanderEarth32 14y ago
  I think the question of if the users are loyal is still up in the air. Facebook hasn't been around long enough on this massive scale to prove if the users are loyal. I personally don't think it's user base is loyal. The younger, more tech-savy generation on FB will jump ship as soon as something better comes along like some were doing already to Instagram or Twitter. The older generation might not necessarily be loyal to FB either, they are just too scared to move, or don't have the ability.
droithomme 14y ago
> versus, say, randomly thrashing the timeline interface over and over Hey don't knock timeline! It's incredibly valuable for discovering that the two most important times in most people's lives are the year they were born and the year they joined Facebook.

runako 14y ago

>> Revenue per user: Given the constraints on users mentioned in the last paragraph it becomes really hard to increase your revenue per user. This is true, but nobody said that growing a large successful company was easy. FTA: >> Daily Active Users (DAUs) have grown faster than the number of deliverable ads due to the limited mobile format So step #1 for growing mobile revenue is to insert ads into mobile. I'm guessing they can manage this. But the larger question of revenue for FB is interesting. And I think the conventional wisdom about their impending crash will be proven out if FB is managed poorly post-IPO. Specifically, if they don't innovate and deliver successful new products, they will fail. This is true of all technology companies. Facebook is no different because it's a social network. In fact, Facebook is much more like the past than e.g. Microsoft was at its IPO.