This video is excellent. It gets to the nub of the problem much better than previous analysis which deals with Facebook revenue. This video breaks down where that revenue is coming from (which is the really important part)
Having said all that Facebook’s problem is very easy to fix.
Facebook simply needs to create their own version of adwords as a separate entity. Call it FaceAds (for example).
Facebook has a massive pool of advertisers which means they should have enough variety to show their viewers relevant adverts.
And this is the biggest hurdle any advertising network faces. Getting enough ads to be able to show relevant copies on whatever page the ads are showing on.
And there is a massive positive knock on effect of advertising in the traditional way ie copying Google adwords
Facebook’s FaceAds can then pay website creators to shows FaceAds on their website.
If there is one thing in the world that webmasters are crying out for it is for Google to have some competition.
It is a precarious existence for the income from your website to come from only one company.
FaceAds would give Facebook a massive new revenue stream (probably a bigger revenue stream than the Facebook site itself could ever hope to have) and the future of the business would no longer be dependent on the popularity of the Facebook site.
Given these two points, FaceAds is a no brainer and more than that, I believe FaceAds is essential to the long-term sustainability of the company.
Steve Balmer is making the same mistake with Bing Ads. Microsoft will not allow webmasters to show BingAds on their website. Bing will never be successful unless it starts sharing its advertising revenue with webmasters.
On site advertising motivates people to distribute free information and services. This is why Google adwords is so great, it waters the internet eco system, without adwords and revenue sharing, the internet would be a considerably smaller and less interesting place.
Instead of leaching off people’s content, Facebook and Bing need to start rewarding web site creators otherwise they risk being classed as parasites.
If I were an investor I would be demanding that Facebook create an adwords type system where advertisers on Facebook can also advertise on other websites.
Like I said, this would reduce Facebook’s dependence on the popularity of its own website ie facebook.com and it would stand every chance of bringing in more revenue than the Facebook site itself could ever hope to produce.
FaceAds would increase revenue and build an infinitely stronger foundation for the company in the long-term.