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Facebook will never make money

April 1, 2009

Facebook is clearly in some kind of internal crisis with the recent departure of the CFO, it appears the company is engaged in some kind of soul searching around the need to demonstrate serious revenue growth.

Time Magazine seems to believe that Facebook can never make money.

“The reason that social networks will never do well financially is that
they break from the successful model that has brought so many marketers
to the internet. Display advertising can be targeted by subject.
Financial advertisers run messages on AOL Finance (TWX) and (TSCM). They avoid sites for children’s video games.
Search sites like Google refined the model by allowing advertisers to
buy search engine results pages. The Google results’ pages for the
search “heart doctors in New York City” is probably the best place in
the world for heart doctors in New York City to market themselves.”

Sadly, Time is missing the point. Facebook has a giant opportunity to leverage the relationships inside social networks for the benefit of brands.

The multi-billion dollar question is how?

Facebook could do worse than ask the best minds in the agency and media worlds for some creative consultancy help in coming up with ideas to make this work. Ideas that go beyond the banner and weak branded applications. Charging brands for “fan pages” is one way to go, but there are lots of others.

Many pundits suggest that social networks will revolt when ads appear, this hasn’t happened to date, and according to research from Razorfish, seems unlikely to.

Facebook is a media monster that will find a way to crack the code as recent events have shown, it just needs some patience to get there.

Posted by Ed Cotton

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