Archive for May, 2012


How Facebook will grow earnings by at least 50x: #1 – Build an ad network [Update: Here it comes]

[Update: Here it comes. Interesting that they are starting with the remarketing version first]

Recap: Identity is Facebook’s not-so-secret weapon

In my previous post I covered why Facebook’s mobile app is critical to their future, not because they have to monetize mobile eyeballs (as current analysts are fretting about), but because mobile is the gateway to recording and learning about someone’s identity. It is the most important asset Facebook has. Not the audience (in terms of eyeballs anyway).

So how can Facebook actually use this to achieve the 30-50x growth in earnings that their current stock price implies? The first thing, I would say, is that they shouldn’t worry about it. The best thing that Mark Zuckerberg’s control of the company can offer, to the chagrin of its now new cohort of flaky retail investors, is a single minded focus on avoiding trying to push ads into every crevice of the desktop and mobile experience, and focus instead on removing ads and strengthening the depth of resemblance between a person’s actual and virtual Facebook identity. Read more…

Facebook mobile ads a red herring

Here’s why Facebook’s Mobile ad performance is a red herring

Analysts claiming the demise of desktop are wrong

There has been a lot of fuss lately about Facebook’s mobile performance relative to its desktop performance. In fact, Morgan Stanley even went so far as to cut FB’s forecasts on the even of the IPO based on the fact that “Mobile advertising to date has been less lucrative than advertising on desktops”. I think that’s just ludicrous. And mostly because none of these analysts are skating where the puck is going… As with most things, I think the source of Facebook’s strength comes from a source not yet fully captured by anything I have read so far.

Analysts have been assuming that as global internet service consumption shifts to mobile devices, that any drop in mobile ad eCPMs (effective revenue per 1000 views) would lead to a reduction in overall revenue, as mobile cannibalizes desktop views and average revenue per view declines. Seems to make sense, right? Except that this view somehow magically tries to hold all the other variables in the equation constant. Ceteris Paribus. Just like the analysts’ economist lecturers taught them…

Backing up a second, I think it’s important to realize what mobile really means for a web service, since there is an enormous amount of hype about it, and for my money it’s mostly misguided. People go as far as suggesting ridiculous things like “in the next few years, people will not need laptops, as they switch to mobile”. Or “Mobile is the future, and you don’t want to be left out”. This demonstrates a fundamental lack of understanding of user behavior – that device form factors are finally cheap and specialized enough to match consumption patterns. In other words, the days of having to do everything on your single device, purely because it *could* do everything, and because it was too expensive to split these use cases, is over. Read more…