Facebook is a Ponzi Scheme

http://blog.jperla.com/facebook-is-a-ponzi-scheme-0

by ljlolel • 16 years ago

213 111 16 years ago

blog.jperla.com

unignorant• 16 years ago

> Have you ever bought a Facebook ad? I have. I have talked to many, many people who have. We have spent hundreds, many have spent thousands or even more, experimenting with Facebook ads. They are worthless. Nobody ever looks at them, and nobody ever clicks on them.

Somewhat damning, if true... Has anyone here had a different experience?

defen• 16 years ago

At my previous employer, we hired an extremely talented engineer who found us via our facebook ad. Apparently he was looking for a job and had downvoted all the non-job related ads, so he was only shown job ads.

ephermata2• 16 years ago

Yes, I have had people click on FB ads. It's not clear to me if they are more effective than alternative ads, but people are clicking on them. The ads are not traditional, though.

I have an ad campaign running now on Facebook encouraging people to go to http://join.marrow.org/gosusan . ("My sister has cancer. Help her and people like her beat it by donating your bone marrow! Click here to sign up!" )

Short answer is I've yielded 6 people signed up out of ads from Facebook, Myspace, and others. The signups could be improved, but it looks like at least one of these methods is recruiting donors.

Overall Facebook campaign since 9 March 2010:

4,801,855 impressions 803 clicks CTR 0.017% Average CPC $0.99 Spend $796.99

My banner ads on MySpace ("A CANCER KILLA IS YOU! My sister has cancer. Help her or someone like her kill it by donating bone marrow. Click this ad to get started!") overall have these numbers:

973,774 impressions 452 clicks CTR 0.05% Average CPC $0.45 Spend $203.00

At first blush MySpace looks like a better deal (compare the CTR). The thing is, for targeted geographies, I am seeing a lot more clicks, faster, from Facebook than from MySpace. That is, while the clicks from Myspace are cheaper, I'm seeing fewer of them.

My most recent campaign is targeted to south Ohio and south-east Ohio. (Turns out this is where a lot of people with similar heredity as me and my sister live. Therefore I expect these people to be more likely to have a matching bone marrow type). The Facebook ad for this geography has yielded 95 clicks in the last two days. The MySpace ad has yielded 10 clicks.

TotlolRon2• 16 years ago

Maybe I'm outdated - but I find it disturbing that such a cause should be promoted in such a way.

mipapage• 16 years ago

We have a client right now who is in the real estate sector; they ran ads leading people to a free guide which itself eventually leads them to the clients sales people. They had a home sell on the first couple of thousand of FB adspend (~10 days) and this way outperformed adsense.

YMMV for all of this stuff; I have often thought the same as this author with respect to adsense and other PPC.

What isn't figured into "many, many people who have" is their ability to make decent PPC ads, landing pages and other creative solutions to making clicks work for them...

rhl12• 16 years ago

It would be interesting to have figures backing these assertions. What sort of conversion performance did you see Joseph?

krschultz• 16 years ago

I've been thinking this for years, glad someone articulated it.

1) Facebook's demographics suck. The people on there the most are broke college kids and younger. Sure older people check the site, but your average college kid is on all day - because they don't work.

2) When people look at an ad on Google, they are looking for something and the ad might be the answer. When I'm looking for something on Facebook, it is a picture/event/person/comment, the ads will never be what I'm looking for.

The one area I disagree is that I'm not sure a FB+1 will be able to undercut FB on price alone. If FB goes with a freemium model where only the people with 500+ picture and 200+ friends have to pay and businesses with fan pages have to pay, the "regular" users will probably stick around and keep FB the leader because of the network effect. The resulting revenue wouldn't match their valuation at all but it would probably keep them profitable.

kmavm• 16 years ago

"I've been thinking this for years, ... The people on there the most are broke college kids and younger."

Years are funny that way: things tend to change as they pass.

Facebook has 400 million active users, where "active" means the account has been used in the last 30 days. 200 million of them have logged in in the last 24 hours.

http://www.facebook.com/press/info.php?statistics

To put those numbers in perspective, the Internet itself has about 1.67 billion users. Even assuming, for the sake of argument, that many of those daily active users are duplicate or fake, for facebook's demographics to suck, the Internet's demographics must suck.

(Disclaimer: I work for facebook.)

zaidf• 16 years ago

Pay-per-performance is only one type of advertising.

Brand advertising is the big elephant in the room and might make fb a tonne of $ going forward.

fizx2• 16 years ago

You can target facebook ads amazingly well. I can reach only under-30 single programmers in San Francisco.

I have friends who've built businesses targeting exactly who they wanted to reach, in a way that would have been prohibitively expensive (and less effective) via AdWords. I'd love to share their specific stories, but I don't have permission (yet?).

Edit: I guess I can elaborate a little. What these businesses had in common:

1. You could nail down the interested demographic in facebook to reach ~0.01% of the population who would be immensely interested in your service.

2. The service itself made sense in a social context. I don't know if advertising a plumbing business would work, despite being able to drill down into local married people of homeowning age.

stcredzero4• 16 years ago

...What these businesses had in common:

1. You could nail down the interested demographic in facebook to reach ~0.01% of the population who would be immensely interested in your service.

So perhaps Facebook isn't bound to take over the whole of the Internet. It's just bound to take over as advertisement infrastructure for the easily categorizable subset of the Long Tail.

fizx2• 16 years ago

It's a good point, but we're all unique, so we all might be part of the "easily categorizable subset of the Long Tail".

Take the most average guy you know, and he still has unique qualities, and lives in a targetable location. Add any hobby or interest, and now he's part of some long tail group.

byoung2• 16 years ago

I've never advertised on Facebook, but it has some impressive targeting options: http://www.facebook.com/help/?page=863

mixmax2• 16 years ago

Some data instead of "I have a friend who..." anecdotal evidence would be nice. The author doesn't make a very strong claim as to why facebook ads don't work which is the whole premise of the article.

mnemonicsloth2• 16 years ago

Skepticism is always healthy, but being more skeptical of some than of others is the same as being biased.

The comments I saw about Facebook's big plan came in two flavors. Some said "Facebook is getting creepy. I want my privacy." The rest said "this will be awesome, you'll see."

This guy is saying, "yeah, but will they be able to execute?" You don't need data to ask that question, and we all need to know the answer.

rabidgnat• 16 years ago

I lightly approve of anecdotal posts like these. Facebook controls all of the data needed to make informed decisions, and they're not going to share if the OP's claims are accurate. Lots of bad press about CPM and cost/click will force Facebook to publish data proving the worth of getting Facebook ads that transcend the 'case study' nonsense. If they continually ignore lots of bad press, that's a big tell that the only party that benefits is Facebook, even though it's not a smoking gun.

I've taken this approach with PayPal. I'd use them for person-to-person finances, but I've heard so many small-business horror stories that I'd invest the time to make a merchant account if I made a startup. It's not exactly scientific, but PayPal's not exactly flooding the market with data either

mixmax2• 16 years ago

Excellent point.

ErrantX2• 16 years ago

I agree for the most part. The only problem I see in this post is that it mentions one specific form of ad (and one example) and then vaguely expands it to cover all forms.

It should be immediately obvious that the specific example mentioned is going to have a very poor ROI. Who sells on Facebook?

codyrobbins• 16 years ago

It's possible that they do not even realize that they are like a Ponzi scheme. That's right, they may not even realize that their ad platform is completely useless because they always get new clients signing up and giving up their offering to the god of web 2.0 hype. They may be blind, as I used to be. They may be truly surprised when the supply of suckers runs dry.

And does this guy really think that Facebook is incapable or unwilling of running projections on a key revenue indicator like their ad buys? An intern with a spreadsheet would be able to look at their internal data and realize that all their ad buyers are falling off a ledge and never returning.

huangm• 16 years ago

The author's thesis is that Facebook ads are bad because they can't harvest demand the same way Google ads can (no purchasing intent), so once Facebook has exhausted its share of 'gullible' or 'naive' businesses who give ads a try, their profitability will fall like a house of cards.

This is flawed in two important ways:

1. Just because people don't click on banner ads doesn't mean there isn't a place for advertising.

2. Facebook isn't only monetizing with ads. For example, they've proven themselves to be a killer platform for social games and Facebook Credits seems to have a promising future.

mnemonicsloth2• 16 years ago

http://cdixon.org/2010/03/25/stickiness-is-bad-for-business/

Chris Dixon posted on this recently:

Facebook is like a Starbucks where everyone hangs out for hours but almost never buys anything.

...

The vast majority of money spent on intent-generating advertising — brand advertising — still happens offline. Eventually this money will have to go where people spend time, which is increasingly online, at sites like Facebook. Somehow Coke, Tide, Nike, Budweiser etc. will have to convince the next generation to buy their mostly commodity products. Expect the online Starbucks of the future to have a lot more – and more effective – ads.

The problem, of course, is that nobody knows how, but we expect someone to figure it out eventually.

So here's a fun question to overcome your status quo bias. What if brand advertising is an artifact of one-to-many communications tech, and can't work in a many-to-many environment?

rhl12• 16 years ago

My recollection is that Max Levchin presented his vision for Slide under these exact terms about two years ago. Interestingly enough, Lance Tokuda, who had launched RockYou with an analog vision, publicly buried the potential for brand advertisement last summer (in comparison with virtual goods). I imagine it's a reflection of the time it takes to ramp up sales accounts with large consumer products corporations.

There also was some great data on the wide disconnect between attention market share and ad spend market share of the net in the last Meeker report: http://www.readwriteweb.com/archives/mary_meekers_internet_t...

njl• 16 years ago

I suspect online advertising is undervalued precisely because it can be measured. I further suspect that "brand advertising" is a scam for all but the largest advertisers.

timr2• 16 years ago

The largest advertisers became the largest because they spend a lot on brand advertising. So perhaps it's true that you have to spend a lot to make brand advertising effective, but it's not a "scam" in any conventional sense of the word. It is what it is.

If we're going to sling arrows at online advertising, I think we have to start with the fact that there are a lot more publishers than there were back in the day, and virtually all of them have an undifferentiated audience of "eyeballs". It's still possible to get high CPM rates, as long as you've got a targeted audience and a sales team.

BRadmin2• 16 years ago

"Half the money I spend on advertising is wasted; the trouble is I don't know which half."

– John Wanamaker

Tichy2• 16 years ago

Still, I wouldn't mind to be in Starbucks or Facebook's shoes, financially.

nailer5• 16 years ago

You're aware Starbucks have shut down a lot of their operations recently?

dantheman2• 16 years ago

Obviously this guy doesn't understand what a ponzi scheme is. Perhaps if facebook took some of the money from new ad buys to purchase goods from slightly older ads so that they thought they were more successful a case could be made for it being a ponzi scheme -- this is in no way one.

If in fact they are selling a defective or useless product then they are in the lemon business -- a card dealership that sells crappy cars will stay in business until everyone realizes they suck.

Anyway, I've never purchased ads on facebook so this in no way relates to that; however, when you link to the definition of a word in your first sentence -- by god, use it correctly.

rhl12• 16 years ago

The analogy to a Ponzi scheme is actually pretty good: at a certain level a Ponzi scheme is any business that lives entirely off a positive and growing first derivative while heading faster and faster toward a certain death.

If eventually (though I'd personally find it extremely surprising) Facebook doesn't manage to find a sustainable and highly profitable business model, that description would have been accurate.

Still waiting for data from the OP though :-)

dantheman2• 16 years ago

Except the author doesn't say "like a ponzi scheme" it's unsustainable -- they say it is a ponzi scheme. I know this is just semantics, but the whole premise of the article is flawed... facebook doesn't need each successive generation of advertisers to be bigger than the previous which is what causes ponzi schemes to implode.

Now if we're saying that they need their advertising revenues to grow so that they can maintain growth -- well that's the same dynamic of almost every company.

rortian4• 16 years ago

No, it's actually really horrible. In a Ponzi scheme you:

1. Fraudulently promise returns. 2. Payout imaginary returns with other people's money.

>at a certain level a Ponzi scheme is any business that lives entirely off a positive and growing first derivative while heading faster and faster toward a certain death.

This is really silly because you don't even specify what quantity you are taking a derivative of.

Ponzi schemes are a certain type of fraud. There are many kinds of fraud. Amazingly, the author never asserts any sort of fraud.

I think you and the author of the blog post are thinking:

"Ponzi schemes are bad and I don't like facebook so they are kinda similar."

Anything substantive you'd like to add, or would you like to concede that absurd contrarian claims usually just confuse and waste everyones time?

ljlolel2• 16 years ago

Hi Dantheman, you are right. It's not a perfect analogy. There's not really any closer analogy, though. I state this later in the post, if you read through the whole thing (including saying "like a Ponzi scheme"):

"Yet, their value and growth continues because they can use that money to grow their user-base more and assert profitability (in this sense it's not quite entirely a ponzi scheme, but there is no closer idea). It's possible that they do not even realize that they are like a Ponzi scheme."

Moreover, I recognize that Facebook isn't necessarily doing this on purpose (whereas in a real ponzi scheme a competent accountant has to scheme willfully).

Nevertheless, I hope you agree that the positive feedback, the bubble effects, and the deceptive illusion of growth all have analogs to Facebook (if you assume the premise, of course).

I think you are right that I should have used "like a" Ponzi scheme throughout the post, but the writing and the point would have lost a lot of its effect in explaining that. The metaphor is better than the simile.

My main motivation was to make people think about the reality of Facebooks revenue. It may be less solid than social proof makes it seem.

jfager• 16 years ago

If you think FB ads suck and provide no return, fine, say so. I mostly agree. But you shouldn't go around accusing people of criminal activity on the grounds that you couldn't come up with a better analogy and your post wouldn't be as effective.

gabrielroth4• 16 years ago

I think you are right that I should have used "like a" Ponzi scheme throughout the post, but the writing and the point would have lost a lot of its effect in explaining that.

Yes, describing things in an overheated, sensationalistic way has a more powerful effect than describing them in an accurate way. Congratulations on figuring that out.

By the way, referring to a business as a Ponzi scheme is prima facie defamatory. I don't think you have much to worry about, since I doubt Facebook will bother to sue you on the basis of a blog post, but you might write differently if you were more conscious of the fact that you're accusing someone of a crime.

rortian4• 16 years ago

>(in this sense it's not quite entirely a ponzi scheme, but there is no closer idea)

Why not just say, "I'm super ignorant. Sorry about this post."

A lot of companies have made statements that in retrospect, and maybe even at the time, can be seen as pure hubris.

You could say something cliched like, facebook: web bubble 2.0. Another cliche, facebook management: irrationally exuberant?

Or you could reference companies that failed: facebook: the Global Crossing of our social network.

There are a great number of ways for a company to fail. Many of them do not involve being a fraudulent investment scheme.

mattmaroon3• 16 years ago

You don't understand Facebook's revenue at all, which is why you think that. App developers spend hundreds of millions per year promoting games. They aren't making the big money from businesses that lose a couple grand and then find out it's unprofitable. They're making their money from Zynga.

That's sustainable. Facebook is probably going to make their own payment platform mandatory for apps, and they rake 30%. They could quite easily grow to a couple billion in revenue if nobody new ever advertised there again.

Also, local advertising does much better there than most stuff. Better than on Google in some instances.

mak120• 16 years ago

I think the author at least has a point, but I totally disagree with his use of the word 'ponzi' here. It looks like yet another cheap attempt to make something look horribly bad by just tacking on a term that is hated/disliked widely.

mattmaroon3• 16 years ago

Hilariously he has a link to his own blog post accurately describing ponzi schemes. My guess is he was just baiting.

mattmaroon3• 16 years ago

He's somewhat incorrect. Facebook ads work great for some things, and those things are where most of the money comes from. Right now it's games (which I have much experience with first hand, having spent somewhere in the 6 figures in ads) though I'm assuming also t-shirts and dating sites given the number of ads I see for those long-term.

jmm• 16 years ago

Well, not literally a Ponzi scheme, but I guess I get the point. He means to say, simply, that advertisers will eventually catch on and stop using facebook ads because they're ineffective.

The analysis suffers in trying to shoehorn facebook's biz model into google's. Facebook is relatively young and may very well find different ways to make money. If their push to be a major platform pans out, they're in a powerful position.

aheilbut• 16 years ago

Part of the motivation for putting 'like' buttons all over the web is to gather more granular behavioural data on users, which is eventually going to enable much better targeted ads. They aren't stupid. That said, I'm still mystified by the low quality/relevance of the current ads given what they already ought to know about me.

lotharbot• 16 years ago

When I get on Google and search, typically there are a few ads keyed to my search. These ads are selling real products, often the exact product I'm looking for, from legitimate and well-established companies.

When I get on Facebook, my sidebar is filled with ads. I would estimate 50% of them are scams. About 25% are for Facebook games, which I am not interested in. The remaining 25% are legitimate ads which are rarely targeted toward something I want, but even when they are, I won't click on them because of the 50% of ads that are scams.

BRadmin2• 16 years ago

This is the interest v. intent paradigm.

Listing 'photography' as an interest on a social network and typing it into google with the intent to research, purchase, learn, etc., represent fundamentally different mindsets.

ErrantX2• 16 years ago

Ok, so possibly (though not empirically proven) there is some misleading going on. Bad, I agree.

But a Ponzi scheme? I think that damages his argument because it doesn't really resemble a Ponzi scheme - indeed it sounds like an attempt to rationalise what is going as something illegal and thereby win support for the argument.

Bad rhetoric.

aresant• 16 years ago

Facebook seems to overwhelmingly treat their users as just "metrics" instead of individuals.

Their short term revenue has been supported by:

a) Small businesses - like this story mentions - buying into an ad platform that performs on the low end of AdSense.

b) CPA scammers pumping rebill offers and breaking through FaceBooks meager ad-clearance department to get anything they can on there.

c) Sketchy fly-by-night dating sites & apps that take advantage of lonely hearts.

d) 25 - 35% of the ads are simply facebook app makers, who in turn sell users "credits" in a model more akin to selling addictive narcotics to addicts than anything else.

That's all bad enough, but the complete disregard for user privacy through their continued "opt-out" policy is out of control.

Through each update of Facebook we've seen bolder and bolder violations of user data , and I think that will ultimately be Facebook's undoing once people recognize just how much your typical advertiser can uncover with your profile.

References:

Zynga - http://www.businessinsider.com/gossip-2009-11

Zoosk - http://manybodytheory.com/777/ive-spent-over-5-million-dolla...

patio11• 16 years ago

low end of AdSense.

I'd be freaking ecstatic if my Facebook campaign had performed on the low end of my AdSense performances. Instead, I ended up paying about $50 for each signup to my free trial of a $30 product.

noelchurchill2• 16 years ago

I manage over $100k/month in adwords advertising spend for clients who demand results. I've also spent a few thousand dollars on Facebook ads for those same clients. Facebook ads do not work as a direct response type of advertising.

However they work fabulously well for sending traffic to your company Facebook fan page and building your fan base. You can typically get new fans for about 40 cents to a dollar a fan. These are people who you will be able to influence on a daily basis for years to come, and although you won't be able to directly track sales/leads/whatever to your Facebook advertising, I also believe there is tremendous value in interacting with your fans in this more personal way. It's a lot harder to convince clients of this value, but it's real.

stcredzero4• 16 years ago

I don't ever recall being influenced through Facebook by anyone I'm a fan of.

rhl12• 16 years ago

I think he means that you are signed up on the fan page's mailing list. Companies of which you are a fan gain access to your social inbox, which I would assume allows them to garner much more of your attention than if they reached for your spam-filtered, labels-and-filter-ridden, adblocker-protected email inbox.

Another intangible but real benefit is the backchannel that fan pages open from the users to the company, and the other fans. Hard to quantify indeed.

What I am curious to see is hard data on acquisition cost of fans vs. mailing list subscribers, and subsequent mailing conversion rates.

waterlesscloud• 16 years ago

Everyone says they aren't influenced by advertising.

The fun part of that conversation comes when you point out that they're wearing Nikes.

noelchurchill2• 16 years ago

People who are up to three degrees of separation can still have an influence on us. If you have a friend of a friend of a friend who has been influenced by advertising, the influence can trickle through his friends to you, and you don't even realize you were effected by advertising. The influence of advertising is pervasive and unavoidable.

praptak• 16 years ago

"A useless product is never sustainable. I wish I could short Facebook."

Knowledge about lack of sustainability is not enough to short. Even if you are sure about the imminent collapse, they might skyrocket before that point. In this case you are forced to cover at a huge loss.

LiveTheDream2• 16 years ago

Buy a put option instead of shorting, and you are protected against rising share price.

ljlolel2• 16 years ago

Haha, yea, you're completely right. Also, don't forget that Facebook can monetize in ways other than ads. So even if I were right, my short would still probably lose.

I said this merely for effect. I wanted to emphasize a point: I think its unlikely that their ad platform will add value long-term.

LiveTheDream2• 16 years ago

Facebook ads serve a different sweet spot than Google ads. The latter excels at capturing purchase intent for the obvious reason that people will run a search specifically for something they want to buy -- it's a no-brainer.

Given that people do not hop onto Facebook to buy things, it is the ad purchaser's fault for expecting great direct sales from their product ad on Facebook. Use the right tool for the right purpose. To be fair, the article doesn't give details on the book promoter example, but given the statement "nobody ever clicks them", I feel safe assuming that they did not use all the social features you can build into ads. I've used FB ads and achieved excellent click-through rates. With FB (unlike Google) the promoter could have made a fan page for the book and attracted users to like the page by a) targeting people who would like the book based on demographics and b) showing "your friend Foo liked this page" sort of teasers. Once someone likes the page, you can get stories into their newsfeed for free, which is a pretty darn good return on your ad investment.

jgilliam• 16 years ago

But this week didn't Facebook take one big step closer to their own version of AdSense? Put those social ads all over the internet, where they aren't just hanging out with their friends, and it's a whole new ballgame.

chaostheory• 16 years ago

The article assumes that Facebook will never change or evolve, which I think is wrong given Facebook's history.

For one thing, Facebook does have extremely valuable data, and they're not too shy about starting to sell it to the highest bidders: http://social.venturebeat.com/2010/04/22/facebook-lobbying/

jamesjyu• 16 years ago

Totally agreed here.

I have seen too many articles lately that examine Facebook's strategy and business model based on the present. FB has been extremely agile for a large company, and they have proven this fact again and again. They are not afraid to throw things away and try new tactics.

Even if they aren't doing well with their ad system right now, there is a big chance they will stumble upon an even bigger goldmine through their concerted and iterative effort (ie. Zynga + social gaming).

greg• 16 years ago

I worked on Facebook ads for the past year so I know that some of the claims in this article are just wrong, but I think the average reader can figure that out for themselves.

> People go to Facebook to interact with their friends. It is fundamentally different from the ad platform that is Google.

All true, all what Facebook tells its advertisers. www.facebook.com/ads

> They spend hundreds or thousands or more on Facebook ads. At the end of the first run, they see bad ROIs.

Because advertising on Facebook is not typically about buying something, it is often difficult to measure direct ROI in $. In this, it is like the majority of all advertising.

> ...Facebook ads are worthless. Everyone I've talked to who has actually bought Facebook ads knows this

Have you talked to Zynga? They make Facebook games. It is speculated they are making $300M+ a year. You can see their ads all the time on Facebook. Either they are incredibly incompetent, or FB Ads delivers positive ROI for them. Search google for "zynga revenue estimate".

seregine2• 16 years ago

I always hear Zynga mentioned as the success story for Facebook Ads. If you had to name an example other than Zynga, who would it be?

swivelmaster2• 16 years ago

As a PM at a company that uses Facebook ads extensively to attract users, I can tell you with absolute certainty that Facebook ads are worth it and the author of the article doesn't know what he's talking about. At all. End of the story.

jfarmer• 16 years ago

Groupon and other deal-a-day coupon sites spend tons of money on Facebook ads.

Since Greg (hi Greg!) works at Facebook, it'd be a gross breach of trust for him to reveal who Facebook's ad clients are. Zynga is a well-known example, often mentioned because they spend a ridiculous amount of cash on FB ads.

mrtron2• 16 years ago

This feels like a 1960s article stating:

TV ads don't work because people change the channel when commercials are on!

easyfrag• 16 years ago

In the 60's you couldn't prove it

mrtron2• 16 years ago

The point is television ads have been incredibly good at generating revenue for 50 years.

binspace• 16 years ago

What isn't a Ponzi Scheme?

-- Sorry I edited my question, and then reverted it back.

evanrmurphy• 16 years ago

Anarchy.

robryan• 16 years ago

I think to work a facebook ad can't be trying to directly see something. Providing a link to a game or a fan page or anything the person wants to do I think would be the way to succeed. I've seen figures before for a direct sell type campaign, they were horrible, the cpc was a lot higher than the usual long tail adwords stuff and the ctr was a lot lower.

I think if nothing else brand advertisers and facebook app advertisers would keep them going, I can see how it would be cheaper continuing to shove something like coke in our faces on facebook than TV ads.

rradu• 16 years ago

Facebook is well aware of this, that's why they're experimenting with payment platforms and credits as a form of making money.

c00p3r• 16 years ago

Seems like no one could tell how they would return an investment. Of course, their exit strategy could be an IPO, but it seems too late - looks like they were reached their peak, and in-browser social networks in general is not a so cool thing anymore.

They got the hype, the users, and the data. The data is what someone might want to buy when users start to shift to some new emerging service (something truly mobile and location-based, I guess).

So, it is an established communication platform for people across the globe, but they still unable to make a profit from it, while it is already on the peak.

It that sense it is a true Ponzi scheme. For investors. =)

poundy• 16 years ago

The author basically says that ads on Facebook are a Ponzi scheme as it is often taken up by newer advertisers who then dump it as it produces no results. He estimates Facebook will make about 10 billion doing this.

$10 billion is a lot! by the time they run out of the ad based ponzi they can well find another scheme and keep making huge returns!

Facebook is a Ponzi Scheme

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