BUSINESS BLOGS
BUSINESS BLOGS
category: business
01 Dec 2007

WHY IS BEACON AND SOCIAL MEDIA ADVERTISING DOOMED TO FAIL?

Part of the problem facing Facebook is that tech companies that rely on advertising have gotten lazy about content and don’t understand the media business. This is why many VCs have bad track records in web consumer media investing, because so many of them are not media, advertising or publishing professionals, but rather, technology guys who are smitten with Google’s success (the most successful ad-supported tech company).

When Mark Zuckerberg announced, somewhat sheepishly, that media changes every 100 years, it was ironic, and wrong.

It was ironic because the next day, William McGeveran, a professor at the University of Minnesota Law School, argued that Facebook’s new ad platform, dubbed Beacon, violated a 100 year law in the state of New York that “protects people from having their names and likenesses used for advertisements without permission”.

It was wrong because media and advertising have not changed for over 100 years, if not more.

Yes, technology has consistently changed the details: print, radio, TV, and now the web have created new environments where the details have changed, but the fundamental premise of advertising - what made Google a $200B and what Facebook relies on to justify a $15B value - has not.

Advertising is based on matching marketers with an audience given the demographics of the audience (be it readers, listeners or viewers).

But, the audience’s demographics are largely driven by the content.

However, the content has historically been created, edited and presented by the publisher.

That is key, but as Google did before it, and Facebook plans on doing, is to bypass a lot of the content creation, editing and presentation, and instead leverage content from others. In Google’s case, the content comes from public organizations; in Facebook’s case, it comes from private individuals.

That last underlined part is a major nuance and even more important on the monetization ability of search vs. social network.

If the geniuses involved with Facebook’s business model don’t realize the inherent challenge, limitations and complaints when they try to monetize that content, they are doomed to fail.

This is why Coca Cola - one of the world’s largest advertisers - balked at the idea.

WHAT FACEBOOK SHOULD DO

Oddly enough, earlier this year, when everything Facebook touched turned to gold, Zuckerberg announced proudly at Tech Crunch 40 that Facebook was neutral and did not editorialize, in other words, it was not a media company. That’s where Facebook erred in its platform. What Bebo did last month - open up and allow content creators to plug content and ads - and what MySpace is doing more and more of, is a much better marketing platform.

What Facebook has done as a tech platform works fine with software and what not, but last time we checked the score, software platforms were not doing too well in online advertising. Incidentally, maybe that is why Facebook and Microsoft were a match made in heaven…

But what Facebook can do going forward is to adopt its platform from one used to currently create vapid applications to one that allows content owners to really import and target users.

I know what you’re thinking: as a content owner, there is nothing stopping you from creating apps around your content, but it’s not the same. MySpace is a far better media platform, even though the demographic data on Facebook users are far more accurate, thus valuable.

I doubt users would mind if they were greeted with content… which in turn had advertising embedded in it… that is after all how media, publishing and advertising has worked for at least 100 years.

Mark Zuckerberg is all of 23 years old, but for someone who claims to being into history, he might want to freshen up on his history of media companies…