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Friday, January 11, 2008


Bruce Christensen

I just stumbled upon this post today while doing some other research...
I have a 4th way that Facebook could monetize...
Partner with Amazon and sell real gifts for all the birthdays, weddings, baby births and holidays that every Facebook user supports during the year.
Set up to be a gift merchant and sell real stuff. See this post:

Bruce Dietzen

Great article. I'm also keenly interested in your 3rd idea above.

How about a cost per fan (CPF) revenue model, whereby developers create custom apps for corporate pages (you know, the guys with money) and the developer is paid specifically for every new fan the app generates. It's clear cut and should be easy enough to measure.

Correct me if I'm mistaken, but in the olden days, it might cost you $5 to $100 per thousand to "rent" a good list an use it once. Since fans are able to be marketed to over and over again, wouldn't it make sense to start the price for capturing new fans at a minimum of $100 per thousand and go up from there?

It seems to me that a developer that creates a winning app for Budweiser, wouldn't have much work to do to tweek it for Miller...etc. Plus since its a pay for performance concept, there's no upfront risk to the page owner.

What are your toughts?

Account Deleted

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Jerry Fisher, The technic consultant of make money online


What Aaron said, above. The only intention of FB visitors is to waste time. Not connecting in o. to get info they need from people or sources they trust, finding stuff they want to buy, or coordinating/collaborating/organizing to get stuff done, or networking to find jobs or service providers, but just farting around.

Maybe FB should rebrand itself as a flatter, lamer version of Gaia or Second Life.


I don't know if I would completely agree... I think the growth is impressive either way. Although its highly unlikely, but maybe they don't want to monetize facebook to its full potential.

Lee Lorenzen


Google is my choice as an existence proof of the concept that a company can be worth over $100 billion by first having massive usuage and then adopting another company's monetization engine (e.g., Google circa 18 months before their IPO when they copied Overture's patented Bid-based Cost Per Click advertising model).

In the case of Facebook, there are numerous existing $100 billion sized business models to choose from:

1. Web Page Search with Sponsored Links -- one bizdev deal with Google, Yahoo or Microsoft and Facebook would be able to generate $1.2 billion per year from Bid-based Cost Per Click links. I'm guessing that they are currently prohibited from doing this by the Microsoft deal, so we probably won't see this low hanging fruit revenue until Facebook decides they want to start this. The only reason for delay is to get out from under their current restriction (which was probably part of Microsoft's first ad deal with them). At that point, they can put powering their Web Search out to bid. My guess is that Microsoft will win this bidding war and the rate will guarantee Facebook minimum web search revenue of at least $1 billion per year (i.e., 80% to 90% of the revenue Microsoft makes from this).

2. Person to Person Payment System -- one bizdev deal with eBay would lock in PayPal as the exclusive payment system for Facebook. eBay (or Visa, or AmEx or MasterCard) would pay at least $1 billion per year for this right because it would be a HUGE opportunity to lock in 60 to 200 million new users of their payment system and also allow them to sell other financial services to theese folks (e.g., off-line credit cards, loans, etc.)

3. OneCart Shopping Mall -- one bizdev deal with SHOP.COM (and Microsoft) would lock in SHOP.COM as the exclusive, multi-vendor mall for Facebook with 1,000 merchants (e.g., top e-tailers, catalogers, retailers). This Facebook Mall would have a single shopping cart, gift registry, store navigation and product search and these 1,000 merchants would pay $1 million per year in base mall rent plus performance-related rent equal to $5 per new shopper to their housefile. This type of system would generate $1 to $2 billion per year in mall rent and Microsoft would be willing to back this deal.

With $2.4 billion per year in revenue from 3 bizdev deals that leverage their 2008 install base of 200+ million users, all you need to get to a $100 billion valuation is a 42 P/E ratio.

Lee Lorenzen
CEO, Altura Ventures -- the first Facebook-only VC

(c) 2008 Altura Ventures LLC


one of Facebook's biggest issues is actually how to improve their UI so that information actually scales well within the UI. i'm sure their back end scales fine, but as all this information is growing it is becoming increasingly unusable. Properly organizing, mining, and harvesting user information will open the doors for some real revenue.


I bet you spend more time using Google Image search for your blog, hunting down awesome photos, than you do thinking about what burger place you will be flipping meat at when your web 2.0 bubble bursts

Charles Hudson

One thing worth noting. When Google was grappling with their business model, search monetization was by no means new ground - was already basically doing AdWords on their own. Google's genius was to realize that search monetization works best when you have the best search technology and that there are clever things you can do with auctions to both raise revenue received and improve ad quality.

I think it's a lot harder for Facebook. Whose model do they want to copy? Look at some of the other great platforms. Ebay had it "easy" in a sense - taking a transaction as an auction house is a well-worn model. Cracking this nut will be much harder. And potentially much more lucrative.

Ted Rheingold

Does Facebook really need a developer community or can they be sacrificed if needed? If they can be sacrificed then is it all that important that Facebook figure it out now?

Facebooks' communication tools are what drives the new registrations and what keep people returning, not for the most part the F8 Apps. So if it takes them a year to find the real gold vein and developers don't get to join the party will that stop them from IPO and joining the ranks of eBay & Goog?

David Ambrose

ok, so this is the best post i read from you since i started tracking this blog in early summer. awesome dave.

as for suggestions, i do believe there's money to be made within the newsfeed, particularly within your circle of friends. i remember scoble talking about the idea of paying him or having him earn some component of cash since he's such a valuable "commodity" (if you can call him that) within the proverbial FB ecosystem.

if FB could begin something like feedsense + feedsearch perhaps in Q2 of this year to a select few of users, i think it could garner some interesting traffic en route to IPO in 2009.

however, at the same time, i TRULY believe that socialads will never live up to its hype until we see INTERNATIONAL attention by MSFT this year (that's the plan, as i understand it).


When I first heard of the Beacon initiative, before the more formal explanations were out, I thought it would be a more traditional behavioral & demographic based ad network. This is perhaps more of an in-the-box thought, but I see no reason for why FB couldn't be an ad network that can target on the basis of demographics, psychographics and behavior given that they have access to all 3. Leveraging the knowledge about its members in FB to appropriately target advertisers' ads to them on other sites. This could be an opt-out capability as I don't believe too many people would care.

There would be no Beacon-like feedback of users' activities on external sites feeding to FB. This would help keep away fm the messy privacy issues. This would in effect provide the first behavioral ad network where users could opt-out if they chose to. The ad rates here, given the fact that they could deliver a very specific targeted audience, are closer to lead generation rates than pure contextual ad rates.

This could be deployed much like AdSense but with advertisers bidding on what audience they want, rather than on keywords. Sure, this is far less innovative of a model, but it has possibilities w/o rocking too many boats and delivering an audience using similar metrics that advertisers are accustomed to in the TV world.


I completely agree with your premise, but I think your potential solutions ignore what made your examples work. Intel, Cisco, Microsoft, and Google all profit by making available very tangible products. Google's are less tangible, but the system is designed to give a direct ROI per click.

Meanwhile, you're basically making suggestions which extend the idea of Beacon... and nothing more. Unless a large percentage of Beacon messages can be converted into a direct sale (and I suspect the answer to this is "they can't"), then finding new and creative ways for people to merely *associate* themselves with a brand is not too many steps up from the "per view" ad schemes that brought down the first round of crazy internet companies.

As has been mentioned before, probably on this blog as well, Google has the major advantage of 'intent.' People come to Google looking for something, and if the advertisement looks to satisfy that requirement, it gets clicked.

People go to Facebook to connect with their friends... and nothing about your suggestions addresses this. Facebook is going to need to find something that extends what they already do into something profitable, not just find new ways to cram more information into the site. Google found a direct correlation between search and advertising on the search. (Well, duh.) As for Microsoft, Intel, and Cisco, they're selling actual THINGS so that's a different ballpark entirely.

So... how could we EXTEND how Facebook is already used to make money? Well, FB always brags about how they've got more photos than Flickr, more events than EVite; Why not expand those? Expand the Gifts payment system and allow people to sell tickets to events via the Events application... and maybe that widely available enough that it becomes practical for local bands or party promoters to profit through Facebook.

Just one idea...

Zach Allia

it is all my fault. i'm stealin' all their gift revs.

Lora Lufark

Privacy, monetization, better monetization, evil Google, poor Facebook, innocent Mr. Zuckerberg, apps, developers, Show Me The Money, Money, Money... maybe we should look at the problem from other side: what users really want? ;)

Justin Smith

McClure, you're all over it with your suggestions - fantastic! "FanPageApps" is my favorite as well.

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