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  • Ron Larson

    You are comparing their business to other ad-revenue businesses and finding they come up short. That was a mistake. There are two critical flaws in your business analysis of FB.

    (1) FB has something that no one else has ever done. The analytics and profiling they can derive from information that their users voluntarily give up is a gold mine. Even the credit bureaus will find it hard to get such information.

    FB really doesn’t need to sell ads. They can sell information. To be honest, I think FB could have zero ads and still make a fortune selling the information they have on users. And I’m not just talking about marketing demographic information to sell to corporations. I am talking about real scary information to sell to intelligence and law enforcement agencies.

    (2) FB can do more with a dollar in ad revenue than others. Here is why. Remember, the rule: It’s not what you earn, its what you keep.

    FB is the total opposite of other businesses that are ad revenue driven (free TV, radio, magazine, newspapers). They have turned the model on its head. Unlike the other businesses, they don’t have to pay for content. The content is free. Their users give it up freely, and it is consumed by other customers.

    So, unlike the others, they get to keep most of the ad dollars they take in. So their prices don’t need to be as high to be profitable.

    That, my friend, is a wicked combination of very targeted ads for not much expense. Plus the ability to sell the underlying connection and relationship information. Wow.

    The worry that users will block ads is inconsequential.

    • Bruce

      1. What ads? Kapich?
      2. What information? Mine is bogus. No one has any right or claim on my personal info on FB. Besides, personal info is part of my identity, and I do not want it stolen. So let them consume/sell my info.
      3. In spite of the bogus info, I still do not subscribe to or allow any apps that want my info. None. Period.

      So, what sort of model is that?

      • Bruce

        One more thing:

        Noscript in Firefox blocks all domains unless I allow them. That means Google cannot track me, as almost every website uses google analytics, google ad service, google apis, etc.

        And a whole host of other tracking sites are blocked as well, because, as I said, all sites are blocked until I allow them. I cannot imagine surfing the net without this protection, except on a public computer whereupon I would not care.


  • Patrick

    Without selling personal information and getting away with it, there is no way FB will be able to justify the current valuation.

    Any kind of intrusive advertising will cause users to leave FB. Any changes to TOS which would allow for the sale of personal information will cause users to leave FB. Backdoor access to government agencies (not that they don’t already have it) will cause users to leave FB.

    IPO “investors” were taken for a $100B ride. What’s new? The sums fleeced from individual market participants seem to continually grow larger.

  • Bill

    “…once again knavery reaped a rich harvest at the expense of cupidity.” The Madness of Crowds, Charles McKay

  • Peter

    Dear Mr. Doyle

    Everybody loves Facebook.

    I find myself disagreeing with you. There are tens of millions of people who just do not get Facebook-and I am one of them. There are hundreds of millions who have never heard of Facebook.

    I continue to enjoy your daily diatribe against the excesses of and the inaction within the US financial system.

  • Ron Larson

    Yes, there are still plenty of people who don’t like or use FB. That doesn’t mean that is a failure. I have an account, but I rarely use it. However, when I look around at my friends and family, I see it being used extensively. Especially if they are younger.

    I too put in fake information, such as birth year, date, and home town. But I find most people I know do have correct information in there.

    What I find interesting, and valuable, about FB, is the fact that connections can be mined to fill in gaps. For example, even though I have fake information in my profile, anyone with half a brain can figure out who I am by my connections.

    And I do find it hilarious that people assume that their private information isn’t being minded at FB. FB is notorious for making your information available, and for making it impossible to control what they do with it. It took threats from governments for them to finally make user controls accessible and understandable. But I really don’t think they have changed at all.

    I think it is being anonymized and aggregated, but it still has value even in that form.

  • Bill

    It may be apochryphal, but I heard a story about somebody who posted on their social media site about this great vacation they were going to take. When they returned, their house was empty.

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