5 ms·

Wow. This is an excellent, realistic article. Some of the great nuggets: "Consumer loyalty is directly linked to the amount the consumer invests out of pocket.

by AF 19y ago

Wow. This is an excellent, realistic article. Some of the great nuggets: "Consumer loyalty is directly linked to the amount the consumer invests out of pocket. Apple has a fiercely loyal base partly because they feel really stupid spending an extra $300 on a product that isn't something special. With social networking sites the amount spent is zero - and the loyalty corresponds. Facebook and mySpace are only as valuable as the next big thing. In other words: they are fads. Now, fads can be successful if they're managed right, but they all share one thing in common - they won't be around tomorrow. If you need proof, look no further than Frendster. In 2003 they had 20 million users. Today, they have less than 1 million die hards. Those are fickle crowds. So, why is this a problem? Because eventually investors - be they VC's or acquiring organizations - want to see some growth in their investment. With a fad-based industry, all value becomes speculative and opinion based. In order to make money, investors need to assume that tomorrow, the perceived worth of the product will be higher. Let's pick on Facebook a little. Facebook now needs the next investor to believe it's worth $2 billion at least. - invest $1 billion, recoup $1 billion. Sorry if I laugh a little." And: "Let's put this into perspective: We have a product that has a monetary value of zero to its users being used to build further products of negligible value - and these products are actually being sold or invested in!" And this has me asking the question: is it not better to charge for a product and therefore create a loyal and mature customer base on top of actually getting some real revenue? I mean sure, you might not have 30 billion users, you will probably have to make something that is higher quality than something that is free, but the results to me seem to be much more valuable.

brlewis 19y ago
That first nugget ignores that some people invest a lot of time and effort into their online identity via a social networking site. They aren't going to switch in a heartbeat.
- run4yourlives 19y ago
  Social App users don't switch by packing up all their belongings and moving them to another site, they just start up a new profile and build there instead. If you think of it that way, it's not an either-or proposition. I can continue to have my profile on your site, but I won't venture there as much, you lose the ad revenue, and the downward spiral continues.
  - brlewis 19y ago
    I agree with you. I disagree with the article's "zero loyalty" claim.
    - run4yourlives 19y ago
      Point is that it's close enough to zero that you won't be able to react fast enough to it.
- deleted 19y ago
  [deleted]
- sabhishek 19y ago
  I don't know how much true is what your saying, a month back I switched to Facebook from Orkut and I find lots of ppl doing the same. Facebook is a clear winner thats why I joined in and if something better comes, I won't mind switching again.
  - brlewis 19y ago
    You're making my point. Facebook started to pass Orkut three years ago, and you didn't change until last month. It doesn't happen in a heartbeat. "Zero loyalty" just doesn't fit the facts. 2007, fb way ahead: http://blogs.zdnet.com/social/?p=114 http://blogs.zdnet.com/social/?p=114 2006, fb ahead: http://changesgood.wordpress.com/2006/09/23/myspace-is-in-vouge-but-orkut-is-the-real-winner/ http://changesgood.wordpress.com/2006/09/23/myspace-is-in-vo... 2004, fb catches up: http://www.blogpulse.com/2004_review/2004review_socialnetworks.html http://www.blogpulse.com/2004_review/2004review_socialnetwor...
    - sabhishek 19y ago
      Yeah true, I agree. Call it resistance against change or little loyality, it takes some time to shift. Friendster is still #1 in Philippines.
awt 19y ago
One thing is certain -- without users, you will not make money. With users, you have a chance.
nostrademons 19y ago
I actually thought those were some of the worst quotes in the article, not because the conclusion is wrong (IMHO, I don't have enough information to tell), but because the reasoning is wrong. For example: "With social networking sites the amount spent is zero - and the loyalty corresponds." Except they put time and emotional investment into the site. That often holds users to a site more than money. Take a look at the recent fanfiction/LiveJournal kerfuffle. LiveJournal is essentially saying "We don't want you here, and we will suspend and delete your journals until you leave." There has been discontent - both technical and business - with LiveJournal's policies for the past 2 years. There is a widespread belief among many users that LiveJournal has lost out to FaceBook, and FB is now the superior offering. And yet the bulk of my friends are unwilling to leave, because LiveJournal has been a major part of their life for 5 years. It's too much of a logistical hassle to bring all their friends over. (Strangely, it was not much of an issue 5 years ago when my friends all abandoned DeadJournal for LiveJournal. Perhaps it's because they were mostly 13-15 year olds then, and mostly 20-somethings now. Adults don't deal well with change.) "Facebook and mySpace are only as valuable as the next big thing. In other words: they are fads. Now, fads can be successful if they're managed right, but they all share one thing in common - they won't be around tomorrow. If you need proof, look no further than Frendster." That's a non-sequitor. The reasoning is the same as "Google won't be around for long; for proof, look no further than AltaVista" or "Microsoft Word won't be around for long; for proof, look no farther than WordStar and WordPerfect" or "Excel won't be around for long; for proof, look no further than Lotus 1-2-3 or Visicalc". A product is vulnerable only so long as they have left consumer needs unmet. Early word processors did, but now MS word does a pretty good job for most users. Early search engines did, but now Google does a pretty good job for most users. Whether FaceBook meets everyone's social networking needs is an open question; IMHO they don't, but they're rapidly filling the gaps with the FaceBook platform. "Let's put this into perspective: We have a product that has a monetary value of zero to its users being used to build further products of negligible value - and these products are actually being sold or invested in!" Users and customers can often be two disjoint sets. Broadcast TV provides significant value to its viewers, but its viewers aren't the customers; the advertisers are. Bond rating services provide significant value to bond buyers, but bond buyers aren't the customers; bond issuers are. Facebook provides significant value to its users; there's a lot of potential to monetize that through local ads, distribution partnerships, etc. I also think the reasoning behind this line is quite flimsy: "I'm sorry to those that are caught up in the madness, but you have to have a few screws lose to think that we're not in the middle of a bubble." What's that, argument-by-repeated-assertion? Personally, I think we're in the beginning of a bubble - but I can think of several points that suggest we're not in one at all. I certainly think it's premature to dismiss anyone who doesn't believe so as "a few screws loose". Remember - Greenspan gave his "irrational exuberance" speech in December 1996. The bubble burst in early 2000. That was 3 years between "We're in a bubble" to "Uh-oh, the bubble's bursting." Other bubbles have had similar timescales - my friends were saying "We're totally in a housing bubble" as of 2003 (it peaked in 2005 and is bursting now), people were saying "We're in a dot-com bubble" in 1997 (burst 2000), people said "Japan is undergoing an asset bubble" in 1986 (burst 1989), Warren Buffett got out of the stock market in 1969 (burst 1973), and the 1920s stock market boom started in early 1927 (burst 1929).

by AF 19y ago

brlewis 19y ago

That first nugget ignores that some people invest a lot of time and effort into their online identity via a social networking site. They aren't going to switch in a heartbeat.

run4yourlives 19y ago
Social App users don't switch by packing up all their belongings and moving them to another site, they just start up a new profile and build there instead. If you think of it that way, it's not an either-or proposition. I can continue to have my profile on your site, but I won't venture there as much, you lose the ad revenue, and the downward spiral continues.
- brlewis 19y ago
  I agree with you. I disagree with the article's "zero loyalty" claim.
  - run4yourlives 19y ago
    Point is that it's close enough to zero that you won't be able to react fast enough to it.
deleted 19y ago
[deleted]
sabhishek 19y ago
I don't know how much true is what your saying, a month back I switched to Facebook from Orkut and I find lots of ppl doing the same. Facebook is a clear winner thats why I joined in and if something better comes, I won't mind switching again.
- brlewis 19y ago
  You're making my point. Facebook started to pass Orkut three years ago, and you didn't change until last month. It doesn't happen in a heartbeat. "Zero loyalty" just doesn't fit the facts. 2007, fb way ahead: http://blogs.zdnet.com/social/?p=114 http://blogs.zdnet.com/social/?p=114 2006, fb ahead: http://changesgood.wordpress.com/2006/09/23/myspace-is-in-vouge-but-orkut-is-the-real-winner/ http://changesgood.wordpress.com/2006/09/23/myspace-is-in-vo... 2004, fb catches up: http://www.blogpulse.com/2004_review/2004review_socialnetworks.html http://www.blogpulse.com/2004_review/2004review_socialnetwor...
  - sabhishek 19y ago
    Yeah true, I agree. Call it resistance against change or little loyality, it takes some time to shift. Friendster is still #1 in Philippines.

awt 19y ago

One thing is certain -- without users, you will not make money. With users, you have a chance.

nostrademons 19y ago

I actually thought those were some of the worst quotes in the article, not because the conclusion is wrong (IMHO, I don't have enough information to tell), but because the reasoning is wrong. For example: "With social networking sites the amount spent is zero - and the loyalty corresponds." Except they put time and emotional investment into the site. That often holds users to a site more than money. Take a look at the recent fanfiction/LiveJournal kerfuffle. LiveJournal is essentially saying "We don't want you here, and we will suspend and delete your journals until you leave." There has been discontent - both technical and business - with LiveJournal's policies for the past 2 years. There is a widespread belief among many users that LiveJournal has lost out to FaceBook, and FB is now the superior offering. And yet the bulk of my friends are unwilling to leave, because LiveJournal has been a major part of their life for 5 years. It's too much of a logistical hassle to bring all their friends over. (Strangely, it was not much of an issue 5 years ago when my friends all abandoned DeadJournal for LiveJournal. Perhaps it's because they were mostly 13-15 year olds then, and mostly 20-somethings now. Adults don't deal well with change.) "Facebook and mySpace are only as valuable as the next big thing. In other words: they are fads. Now, fads can be successful if they're managed right, but they all share one thing in common - they won't be around tomorrow. If you need proof, look no further than Frendster." That's a non-sequitor. The reasoning is the same as "Google won't be around for long; for proof, look no further than AltaVista" or "Microsoft Word won't be around for long; for proof, look no farther than WordStar and WordPerfect" or "Excel won't be around for long; for proof, look no further than Lotus 1-2-3 or Visicalc". A product is vulnerable only so long as they have left consumer needs unmet. Early word processors did, but now MS word does a pretty good job for most users. Early search engines did, but now Google does a pretty good job for most users. Whether FaceBook meets everyone's social networking needs is an open question; IMHO they don't, but they're rapidly filling the gaps with the FaceBook platform. "Let's put this into perspective: We have a product that has a monetary value of zero to its users being used to build further products of negligible value - and these products are actually being sold or invested in!" Users and customers can often be two disjoint sets. Broadcast TV provides significant value to its viewers, but its viewers aren't the customers; the advertisers are. Bond rating services provide significant value to bond buyers, but bond buyers aren't the customers; bond issuers are. Facebook provides significant value to its users; there's a lot of potential to monetize that through local ads, distribution partnerships, etc. I also think the reasoning behind this line is quite flimsy: "I'm sorry to those that are caught up in the madness, but you have to have a few screws lose to think that we're not in the middle of a bubble." What's that, argument-by-repeated-assertion? Personally, I think we're in the beginning of a bubble - but I can think of several points that suggest we're not in one at all. I certainly think it's premature to dismiss anyone who doesn't believe so as "a few screws loose". Remember - Greenspan gave his "irrational exuberance" speech in December 1996. The bubble burst in early 2000. That was 3 years between "We're in a bubble" to "Uh-oh, the bubble's bursting." Other bubbles have had similar timescales - my friends were saying "We're totally in a housing bubble" as of 2003 (it peaked in 2005 and is bursting now), people were saying "We're in a dot-com bubble" in 1997 (burst 2000), people said "Japan is undergoing an asset bubble" in 1986 (burst 1989), Warren Buffett got out of the stock market in 1969 (burst 1973), and the 1920s stock market boom started in early 1927 (burst 1929).