As the news conversation continues to focus on Facebook's latest business venture I found this article a nice read to understanding the possible obstacles facing Facebook's business model. A colleague read a similar toned article from Forbes. Chris Dixon's post highlights some great points to the past and possibly future success of Google - while providing an interesting perspective to the potential problems facing Facebook. I recommend checking out Chris Dixon's post.
Dixon explains "Facebook relies on an old internet business model: display ads. Display ads generally hurt the user experience, and are also not very efficient at producing revenues. Facebook makes about 1/10th of Google’s revenues even though they have 2x the pageviews. Some estimates put Google’s search revenues per pageviews at 100-200x Facebook’s." Compared to "it’s that ads work dramatically better when consumers have purchasing intent. Google makes the vast majority of their revenues when people search for something to buy or hire. They don’t have to stoke demand – they simply harvest it." Dixon asks a great question "The key question when trying to value Facebook’s stock is: can they find another business model that generates significantly more revenue per user without hurting the user experience?" Dixon continues in his post about the potential outcomes facing the company. Finding an Adsense and different business model appears to be a must - while many see the potential of the 'social search' it has yet to be correctly implemented.
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