Let’s Give Mark Zuckerberg a Break Already!

The press seems to be ganging up on Mark Zuckerberg for his apparent inability to articulate how he is going to monetize his phenomenal asset (see the WSJ Article: Facebook Tries to Woo Marketers

We all know that Facebook has tried several ad models and none have worked and it seems that they do not have any greater chance of finding the holy grail than you and I. But I think that the expectations for him have been set too high (granted he helped fuel them with his sale to Microsoft at an inflated valuation). First, he is only a kid and this has probably grown to be much bigger than his wildest dreams. Since he really does not know what to do, focusing on expanding the user base is probably the right thing to do at this time, especially as he has sufficient cash to last a while. The risk of moving too fast in opening the platform to marketers is alienating the users. Remember Beacon? It would not be a good idea to make that mistake again. Let’s look at the exisiting situation, According to the WSJ, they will earn an estimated $300-350M in revenue with $50M EBITA. This would be would be a home run for most startups at this stage in the game. They will go cash negative by spending $200M on servers. This is not necessarily a bad thing (plus they could conserve cash via a co-lo deal, lease or other financing option).

The fundamental problem with trying to monetize social networks (and why he and everyone else is having trouble with ad revenue) is that people are not interested in being “sold” while they are in their social environment (both in person and online). Therefore, marketers have to change their mindset in order to be successful, instead of trying to push messages and measure everything by sales, they have to engage the audience in a conversation, adapt the method and medium and offer something of value. (This is not a new idea, it has been written about in great depth – and I could digress into the whole behavioral targeting issue, but at another time).

It is easy to dump on him, and I am not one of his fans, but we should cut him some slack for not having a business model yet (I would give him another few months) and give him credit for bringing in adult supervision.

Tags: Beacon, Facebook, Mark Zuckerberg, WSJ