gigaom reporting:
There’s been a lot of attention paid to Facebook’s business model recently, especially with the news that General Motors has killed a $10-million advertising campaign
devoted to the giant social network — not exactly a great sign of
confidence in advance of the world’s most eagerly anticipated IPO. And
GM’s move is only the latest indication of discontent, as other advertisers are also questioning their spending.
What all of these moves reinforce is that while Facebook may look like
and function like a social network for the majority of its users, on the business side it looks almost exactly like a traditional media company, and that is both good and bad.
Like Twitter, the content within Facebook may be generated entirely
by users, but the business model is all about advertising, just like any
other media entity. According to the social network’s latest S-1
securities filing, advertising accounted for more than 80 percent of its $1-billion in revenue
in the most recent quarter. And while some of that represents
experiments with “social advertising” such as Sponsored Stories and
other features, much of it is essentially run-of-the-mill banner and
display advertising — not all that different from what you would find on a newspaper or magazine website, or any blog network.
...As Dixon points out, what made advertising such a spectacular business
for Google was that people who are searching for things are already
part-way down the road toward wanting to buy something — in other words,
they are further along the spectrum of “purchasing intent.”
And at least the readers of newspaper websites and other media entities
are theoretically interested in information about the world, current
affairs, even entertainment. Many Facebook users are simply there to
socialize, share photos, etc. How does that translate into a receptive
environment for advertising?...
http://gigaom.com/2012/05/16/facebooks-biggest-problem-is-that-its-a-media-company/
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