Thursday, November 22, 2007
How Not to Think Strategically...Pt 1830032
So there's this kind of massive myth floating around the mediaverse today:
"I don't mind Beacon, because it lets Facebook make a buck, and stay in business".
Unfortunately, this isn't economically valid.
Facebook doesn't need to make a buck - not really. To provide connected consumers with, well, Facebook - as it is today - doesn't require a lot of cash. Maybe a few million a year.
See the point yet?
Let me spell it out.
There's a set of dynamics at work that limit the returns to evil. If the costs of entry are so low, consumers will always have alternatives to evil players; players who are essentially competing by not being evil.
So the logic of the argument is backwards. It should be the other way around: "I don't mind Beacon, as long as it creates value for me, because it's letting Facebook make a few bucks. Otherwise, I'll defect to another network".
And that goes for both advertisers and consumers.
I need to congratulate you for staying with this one. I anxiously follow my RSS feed each day to see the next installment in your thoughts on the Facebook saga. I know you are right and I trust that people are not so stupid as to not see what Facebook is up to.
Hence indeed Craig, whose main competitive advantage seems to be a perfectly genuine indifference to the billions of dollars he could make from his site - I love his claim that "the only think I lack in my life is a humming bird feeder that actually attracts birds".
I would say probably closer to $10mm per year to maintain the codebase, pay for the sever costs, and do customer service. Point taken, though.
Umair, I read somewhere they had 300 staff, going up to 700 next year. Thats quite a cash burn. Also, if you take the transport costs of 50 million people times a claimed average of 1,000 page views per month that also adds up.
A related thought - is Google still being serious with their 'Don't be Evil' motto? They have won big with it - but now it looks like they think more about taking over the world than not being evil. Their secrecy looks really paranoid and it is in direct conflict with not being evil. I cannot believe it is required just to stay alive - and if it isn't than this shows their priorities.