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?

@AmericanExpress – Innovate or Die…not Quite!

Many companies feel overwhelmed by the need to constantly innovate, in an age where the next new and improved, ground breaking or revolutionary product seems to have become the norm. True innovation requires thinking out-of-the-box, taking risks and not being afraid to fail, often.

However, there are two things I tell clients; first, that the word innovation has taken on numerous dimensions that maybe did not fully exist prior to this digital age. A company can be considered innovative if it manages to find a new revenue stream or new use for an existing product; it does not have to come up with a “new” product or service each time.

Secondly, truly innovative companies are one’s who constantly watch cultural trends and adapt and evolve their existing strategies, products and services to take advantage of them. A great example is America Express. Rather than fall into the trap of launching new or improved products all the time, they re-shape their existing ones to keep pace with changing behavior.

Amex recently re-branded their long running Membership Rewards Program as the New Social Currency; tapping directly into the growing global social commerce trend. While it is a masterstroke, companies too often fail to follow-thru on brilliant ideas like this – which means that in the end many such initiatives resemble hollow, smoke filled efforts that simply re-brand with no real substance behind it.

Not Amex; which is what makes them such a formidable and admired brand. On the heels of this re-branding (of their rewards program) they made three announcements that provide the substance and follow through needed to make it real to their customers:

  1. Use your Amex Rewards to pay for purchases on Amazon
  2. Foursquare check-in’s now provide access to special discounts and Amex rewards, at certain retail locations
  3. Yesterday, they announced that their OPEN small business card members can use rewards points to buy and pay for ads on Facebook

Innovation – absolutely! In one fell swoop not only did they re-energize their rewards program by making it more valuable for existing card members, but also tapped into the heart of a younger generation, filled with future card members.