facebook strategy – ads or platforms?
I get Google. A billion people use the website, stick advertising on it. Amazon and Walmart destroy the competition with economies of scale. Facebook’s strategy is a little more opaque to me. Right now, it’s going gangbusters on ad dollars. Is that the main strategy? Envelope calculation: $100bn in market cap/a claimed 800m active users = $125. Does that sound right? Does that average user generate at least $125 of income for Facebook’s advertisers as a whole?
I suspect Facebook’s strategy is mixed. It’s obviously ads because young people (=discretionary income) love Facebook. But I suspect that Facebook is gearing up to be a major platform, an all purpose social space where people can do things. That leads us into the world of apps and income sharing from apps. Developer Steve Yegge made this distinction in a much hailed rant on Google+. Yegge pointed out that Amazon had built an amazing library of APIs that allowed third parties to collaborate with Amazon and mine its databases. I suspect Facebook is committed to this direction. Ads create enough revenue, but the goal is to create an appapalooza on par with Apple’s App Store. It’ll be interesting to see if that’s worth $125 a user.