Yesterday’s Mix Session ‘Web 2.0 and Beyond: What Is the Business Reality?’ would more accurately have been called ‘how are we going to make money out of this stuff?: no new information here’.
Panelists were Bryan Biniak of Jacked, Tim Kendall of Facebook, the ever charming Loic Le Meur, now of Seesmic, and brainiac Chris Saad of the data portability project. The host was Frank Arrigo of Microsoft (his write-up here).
All very promising, but unfortunately it was all over almost before it began as TechCrunch (see their article) asked the first question: ‘Are any of you planning on getting a business model anytime soon?’. A simple enough question you might think, but one that was met with… well… nothing. Loic Le Meur opined that not wanting to know where the revenues were coming from was the hall mark of an enlightened investor these days – palpably a ridiculous comment anywhere but in our current 1999-deja-vu-fest.
Tim Kendall suggested brands should get the audience first and think about money later. Well OK, but how much later? Given that Facebook now definitely has the audience. This is, bear in mind, coming from someone who’s job is to look after monetisation of Facebook.
Loic did add that the options are advertising, ‘pro-’ versions, and creating a resalable platform. Of course the number one ‘monetisation’ strategy of .coms always has been and always will be to sell themselves to someone else.
Biniak was unique amongst those on stage for having a business that you could sort of see where the money might come from – creating a sort of TV ‘plus’ space for advertising, although that doesn’t take account of how much might have to be paid out to legitimise the content in the first place.
The main reason most people were at the event – I’m sure – was to hear if Facebook does indeed have a secret plan to make money, especially after the bizarrely revealed company’s earnings. Kendall warmed a little in the middle with a couple of interesting ideas, saying the site’s goal was for the ads not to feel like ads because they were so tailored. especially where friends preferences could be re-cycled to encourage word of mouth. There is, he tells us, great click through rates on their ‘social ads’, although he then suggested these rates were ‘almost double’ normal ads – so therefore twice virtually nothing.
I find a great deal of fault with this formula. Social ads might sell me an iPod or the latest marketing text book, but it will not sell me heamorraoid cream. And if I’m buying a car, I will ask my friends myself for recommendations – so how will Facebook get to charge for that? selling is simply NOT all about targetting, and – this is a well rehearsed argument – timeliness is the most important factor in relevance, and when I’m on Facebook, I don’t want to buy cornflakes or whatever someone is trying to sell me (this is why, of course, ad words are so valuable).
After a bit of prodding Kendall started talking turkey. While saying it wasn’t what was happening on Facebook (and a somewhat bizarre dig at Microsoft which sells display advertising on the site), he suggested that 10c might not be an unreasonable CPM rate for what display was currently selling at on the site. Search by contrast is more like $60. If Facebook could get it up to $1 he argues, that would be a very big business.
The sheer vagueness of this claim seems to me to be quite outstanding. Even if that is is the end game, the sums don’t appear to add up, and in any case, and it is essentially a goal of increasing selling price 10 fold without any visible corresponding strategy.
Chris ended the session on an interesting note talking about ‘VRM’ – vendor relationship management, which is essentially the idea that consumers could get paid to get advertised to. Clearly the detail of getting that to work is incredibly difficult but it remains a lot more plausible than some of tonight’s more whimsical musings.