The Trouble with Monetizing Facebook

Aside from the fact that the CEO is a very young man who wears a hoody, I believe there are few other fundamental impediments to Facebook’s future success based on the very reasons that have made it so popular.

Think about what Facebook is at its most basic – a self-aggrandizement platform that is entirely built around feeding our obsession with me, me and me. From status updates about myself, to wall posts about things I like, to the latest gossip I want to share – it is nothing more than a one-way megaphone to the world; a modern day digital soap box for the one billion people who now use it.

I believe this has in large part been the reason for Facebook’s astounding success; it feeds into our most basic human desire to have our voice heard, in a completely unadulterated manner. Often while never having to listen or pay attention to other opinions. It is the modern day equivalent of “I post therefore I am,” as Descartes might have put it. It is as if the act of posting today guarantees the existence of self, for this socially driven over-sharing generation that has never known the world without the internet and Facebook.

Arguably, we are all better at talking than listening. We humans have always yearned to be heard, preferably without anyone offering an opposing argument or opinion. Well, there is no better place or platform to fulfill this need, than Facebook. However, this does not exactly make Facebook a great platform to get my attention as a marketer, or to try to sell me stuff when you think about it in this way. So it is not surprising to me that among the hundreds of people I know, who use Facebook regularly, not one person who has ever clicked on (other than accidentally) or bought something after seeing an advertisement on Facebook.

The other fundamental issue with Facebook and the notion of social commerce that it is trying to tap into is that people don’t buy simply based on what they see their friends or family buying. Also, not everyone wants to broadcast their every purchase, publicly. We may go see a movie that has been recommended by a good friend or perhaps have our interest piqued about one being discussed on Facebook but I know that I will never buy an i-Pad or a new car just because one (or many) of my friends bought one and advertised it on Facebook. Not to mention the fact that it would become incredibly tedious (and sometimes embarrassing) to see a continuous list of purchases made by my friend list – find me one person who enjoys seeing each and EVERY song being played by their friends…

The fact that Facebook has always been free for users also poses a challenge when it comes to monetizing any of their features or services. The New York Times is struggling to gain paid subscribers after being free for so many years. Once you set such a basic expectation with people it will be viewed as a betrayal to try and charge for something they have come to consider a right. Facebook just started to offer the ability to pay to “promote” posts, this after a failed experiment in New Zealand, where they tried charging people a nominal fee to ensure that their friends could see what they wrote on their wall posts. Not surprisingly the pay per post experiment was a complete disaster because of the transient and self-obsessed nature of the information posted on Facebook; in my estimation. Not only is it societally worthless but certainly not valuable enough to people posting it, to pay to have it seen.  Think about how many of your status updates and posts on Facebook you think are worth paying to share with your friends?

The final part of Facebook’s problem boils down to behavior and human programming. Think about how we function in our daily lives; from brushing our teeth to the brand of toothpaste we are loyal to. The rituals and routines we develop happen over time and are formed due to comfort, familiarity and a level of trust that, over time, leads to an automatic-ease and unconscious behavior.  I go to Google to search, to Amazon to buy stuff, to a news site for the latest news – why do you go to Facebook?

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Art and Science of the Business Plan

If you are starting a business, you need to begin by writing a business plan; this much is obvious. However, asking people advice on how to write one can often be more complicated than writing it! Today, most people will tell you that investors (for whom most business plans are penned) are extremely time starved and have very short attention spans. Both these facts are true. So the logical conclusion one would reach is keep your business plan short but make it interesting, which also means not writing pages and pages that cannot be read on an iPhone screen.

That said I still strongly recommend to every entrepreneur I advise to always start with the old fashioned long form version BUT never to share that with investors. So why you ask should they bother? The reason it is really important to start with the long-form is because it helps accomplish two very important things; first, it forces you to really research and do your homework to explain and defend why the world needs your business, to study your competitors in-depth, to understand who would buy you and why – and explain how you think you can make money. Second, it is a great exercise (albeit painful one) that literally forces your brain to go through the rigorous process of thinking through your business fundamentals in the context of studying your category, customers and competitors in a way that helps you gain a depth and perspective that few entrepreneurs have when they start out. Trust me when I say that having a command of, and familiarity with this knowledge at your fingertips, will impress every potential investor. Once you complete the long-form version file it away and start work on the investor version. This should be no more than a 10-12 slide distillation of your long-form business plan.

It truly is a valuable process that one cannot appreciate unless they go through it. Not only will you feel more confident about your pitch but also have the laser focused essence of your big idea. Now there are good and bad ways to create slides. I suggest you start by thinking about it as a story; one that is personal and one that you have told millions of times. Your presentation should come across with this level of passion and familiarity. You should be able to bring the slides to life with rich details and anecdotes that help make it more real for your audience. Before you start to write the slides, imagine that your business is a short story and build an interesting plot around how you tell it. Think about an opening sequence, adding some tension and build-up before you do your great product unveil. Find ways to help your audience relate e.g. have interesting and real people to bring to life your target consumer(s), etc. Finally, remember that your slides are not there to do the talking – YOU are! This means that you should NEVER be reading off your slides (your audience can do that for themselves). Your job is to bring them to life by talking about all the things the audience cannot see or read on the slide. The slides are merely there to provide a point-of-focus for the audience and to move your story’s plot forward. You are responsible for making the story more interesting and exciting until your audience is so engrossed that they are clamoring to know how it ends. Most of all remember to have fun and don’t forget to be you. If you come across like a rehearsed robot, no matter how great, your idea will suffer too.

One final point to remember is that all smart investors make investments in people (and teams) and not an idea per se. The success of every idea is entirely dependent on how well it is executed; which is determined by the team’s passion, experience and combined talent. Investors already know that 90% of start-up ideas they invest in will fail but if they believe in the people, they also believe that one day these people will find success, even if it is not with their original idea.