Finally! My Prayers Will Be Answered. In 3 years.

9 Oct 2008 - 7:27pm
5 years ago
33 replies
823 reads
Jared M. Spool
2003

What I've been praying for, to learn what Facebook's business plan is,
will be finally answered!

In 3 years, once Mark Zuckerberg figures it out.

http://is.gd/3MSY

Silicon Alley Insider: Zuckerberg: Facebook Will Have A Business Plan
In Three Years

If you've had a nagging suspicion that Mark Zuckerberg really doesn't
know how he'll turn Facebook into a business, wonder no more. You're
right. Here he is talking to German newspaper Frankfurter Allgemeine
Zeitung:

'What every great internet company has done is to figure out a way to
make money that has to match to what they are doing on the site. I
don't think social networks can be monetized in the same way that
search did. But on both sites people find information valuable. I'm
pretty sure that we will find an analogous business model. But we are
experimenting already. One group is very focused on targeting; another
part is focused on social recommendation from your friends. In three
years from now we have to figure out what the optimum model is. But
that is not our primary focus today.'

If you're counting, three years from now would be nearly 7 years since
Mark (and others) started Facebook at Harvard, and four years since
Microsoft plowed $240 million into the company.

Comments

9 Oct 2008 - 9:56pm
Steve Baty
2009

Jared,

One of the interesting aspects of Facebook's business-model-in-training is
the work they're doing on targeting - highly-focused advertising based on
the individual's stated interests, as compared to Google's inferential model
based on search terms or email content. We're yet to see how successful
Facebook will be in their implementation of this functionality, particularly
with respect to intelligently mining a person's profile, but it's an
interesting and unique approach to the challenge of delivering value to
advertisers.

Steve

2008/10/10 Jared Spool <jspool at uie.com>

> What I've been praying for, to learn what Facebook's business plan is, will
> be finally answered!
>
> In 3 years, once Mark Zuckerberg figures it out.
>
> http://is.gd/3MSY
>
> Silicon Alley Insider: Zuckerberg: Facebook Will Have A Business Plan In
> Three Years
>
> If you've had a nagging suspicion that Mark Zuckerberg really doesn't know
> how he'll turn Facebook into a business, wonder no more. You're right. Here
> he is talking to German newspaper Frankfurter Allgemeine Zeitung:
>
> 'What every great internet company has done is to figure out a way to make
> money that has to match to what they are doing on the site. I don't think
> social networks can be monetized in the same way that search did. But on
> both sites people find information valuable. I'm pretty sure that we will
> find an analogous business model. But we are experimenting already. One
> group is very focused on targeting; another part is focused on social
> recommendation from your friends. In three years from now we have to figure
> out what the optimum model is. But that is not our primary focus today.'
>
> If you're counting, three years from now would be nearly 7 years since Mark
> (and others) started Facebook at Harvard, and four years since Microsoft
> plowed $240 million into the company.
>
>

10 Oct 2008 - 12:43pm
Andrei Herasimchuk
2004

On Oct 9, 2008, at 5:27 PM, Jared Spool wrote:

> What I've been praying for, to learn what Facebook's business plan
> is, will be finally answered!
> In 3 years, once Mark Zuckerberg figures it out.
>
> http://is.gd/3MSY

So... I have to wonder out loud: Why not just charge $9/month for a
Facebook account? I know that's so 1992 with an that oh-so-dated
America Online model, but hey... At some point, we'll all finally get
past the silly notion that stuff should always be free. Advertising
can only support so many businesses in this space.

Sure, they'd piss people off (too bad, I say) and lose a bunch in the
process. But if they retained only 25% of a user base of around 50M
that are willing to pay $9/month or $99/year, that's 12.5M users, and
a yearly revenue of something like $1.2B a year. The question is more
would they be able to keep 10M to 12M people paying $9 a month, I think.

Blizzard has around that for World of Warcraft paying $15 a month, and
it's just a game. I think Facebook would be able to pull it off.

If Facebook or Google started charging for accounts (Google then gets
money for its applications like Docs, Spreadsheets and such), it would
open the door for everyone in the software business to get back to
having real business models that aren't built out of straw during a
fire season waiting for it all to go up in smoke at a moment's notice.

--
Andrei Herasimchuk

Principal, Involution Studios
innovating the digital world

e. andrei at involutionstudios.com
c. +1 408 306 6422

10 Oct 2008 - 12:49pm
SemanticWill
2007

I don't disagree with you Andrei - I think some people would value it -
between $3 and $12/month. Its currently free - and I see 0 value in (hence
my page is so dead), but some - like DaveM, do value it, and might even be
willing to pay for the privilege of being super-poked.

On Fri, Oct 10, 2008 at 1:43 PM, Andrei Herasimchuk <
aherasimchuk at involutionstudios.com> wrote:

> On Oct 9, 2008, at 5:27 PM, Jared Spool wrote:
>
> What I've been praying for, to learn what Facebook's business plan is,
>> will be finally answered!
>> In 3 years, once Mark Zuckerberg figures it out.
>>
>> http://is.gd/3MSY
>>
>
> So... I have to wonder out loud: Why not just charge $9/month for a
> Facebook account? I know that's so 1992 with an that oh-so-dated America
> Online model, but hey... At some point, we'll all finally get past the
> silly notion that stuff should always be free. Advertising can only support
> so many businesses in this space.
>
> Sure, they'd piss people off (too bad, I say) and lose a bunch in the
> process. But if they retained only 25% of a user base of around 50M that are
> willing to pay $9/month or $99/year, that's 12.5M users, and a yearly
> revenue of something like $1.2B a year. The question is more would they be
> able to keep 10M to 12M people paying $9 a month, I think.
>
> Blizzard has around that for World of Warcraft paying $15 a month, and it's
> just a game. I think Facebook would be able to pull it off.
>
> If Facebook or Google started charging for accounts (Google then gets money
> for its applications like Docs, Spreadsheets and such), it would open the
> door for everyone in the software business to get back to having real
> business models that aren't built out of straw during a fire season waiting
> for it all to go up in smoke at a moment's notice.

10 Oct 2008 - 1:00pm
mtumi
2004

3 years is probably how long it will take for people to have enough
personal data and other investment in the system to consider paying $9
a month for it. plus by then they'll be sure their competitors have
given up, assuming facebook still exists. :-)

personally, I think facebook is the digital equivalent of the leisure
suit.

MT

On Oct 10, 2008, at 1:43 PM, Andrei Herasimchuk wrote:

> On Oct 9, 2008, at 5:27 PM, Jared Spool wrote:
>
>> What I've been praying for, to learn what Facebook's business plan
>> is, will be finally answered!
>> In 3 years, once Mark Zuckerberg figures it out.
>>
>> http://is.gd/3MSY
>
> So... I have to wonder out loud: Why not just charge $9/month for a
> Facebook account? I know that's so 1992 with an that oh-so-dated
> America Online model, but hey... At some point, we'll all finally
> get past the silly notion that stuff should always be free.
> Advertising can only support so many businesses in this space.
>
> Sure, they'd piss people off (too bad, I say) and lose a bunch in
> the process. But if they retained only 25% of a user base of around
> 50M that are willing to pay $9/month or $99/year, that's 12.5M
> users, and a yearly revenue of something like $1.2B a year. The
> question is more would they be able to keep 10M to 12M people paying
> $9 a month, I think.
>
> Blizzard has around that for World of Warcraft paying $15 a month,
> and it's just a game. I think Facebook would be able to pull it off.
>
> If Facebook or Google started charging for accounts (Google then
> gets money for its applications like Docs, Spreadsheets and such),
> it would open the door for everyone in the software business to get
> back to having real business models that aren't built out of straw
> during a fire season waiting for it all to go up in smoke at a
> moment's notice.
>
> --
> Andrei Herasimchuk
>
> Principal, Involution Studios
> innovating the digital world
>
> e. andrei at involutionstudios.com
> c. +1 408 306 6422
> ________________________________________________________________
> Welcome to the Interaction Design Association (IxDA)!
> To post to this list ....... discuss at ixda.org
> Unsubscribe ................ http://www.ixda.org/unsubscribe
> List Guidelines ............ http://www.ixda.org/guidelines
> List Help .................. http://www.ixda.org/help

10 Oct 2008 - 1:04pm
SemanticWill
2007

to echo/amplify MTs point - in three years facebook could be friendster or
yahoo 360 - in which case it won't matter - a dead mule needs no business
plan.

On Fri, Oct 10, 2008 at 2:00 PM, Michael Tuminello <mt at motiontek.com> wrote:

> 3 years is probably how long it will take for people to have enough
> personal data and other investment in the system to consider paying $9 a
> month for it. plus by then they'll be sure their competitors have given up,
> assuming facebook still exists. :-)
>
> personally, I think facebook is the digital equivalent of the leisure suit.
>
> MT
>
>
>
>
> On Oct 10, 2008, at 1:43 PM, Andrei Herasimchuk wrote:
>
> On Oct 9, 2008, at 5:27 PM, Jared Spool wrote:
>>
>> What I've been praying for, to learn what Facebook's business plan is,
>>> will be finally answered!
>>> In 3 years, once Mark Zuckerberg figures it out.
>>>
>>> http://is.gd/3MSY
>>>
>>
>> So... I have to wonder out loud: Why not just charge $9/month for a
>> Facebook account? I know that's so 1992 with an that oh-so-dated America
>> Online model, but hey... At some point, we'll all finally get past the
>> silly notion that stuff should always be free. Advertising can only support
>> so many businesses in this space.
>>
>> Sure, they'd piss people off (too bad, I say) and lose a bunch in the
>> process. But if they retained only 25% of a user base of around 50M that are
>> willing to pay $9/month or $99/year, that's 12.5M users, and a yearly
>> revenue of something like $1.2B a year. The question is more would they be
>> able to keep 10M to 12M people paying $9 a month, I think.
>>
>> Blizzard has around that for World of Warcraft paying $15 a month, and
>> it's just a game. I think Facebook would be able to pull it off.
>>
>> If Facebook or Google started charging for accounts (Google then gets
>> money for its applications like Docs, Spreadsheets and such), it would open
>> the door for everyone in the software business to get back to having real
>> business models that aren't built out of straw during a fire season waiting
>> for it all to go up in smoke at a moment's notice.
>>
>> --
>> Andrei Herasimchuk
>>
>> Principal, Involution Studios
>> innovating the digital world
>>
>> e. andrei at involutionstudios.com
>> c. +1 408 306 6422
>> ________________________________________________________________
>> Welcome to the Interaction Design Association (IxDA)!
>> To post to this list ....... discuss at ixda.org
>> Unsubscribe ................ http://www.ixda.org/unsubscribe
>> List Guidelines ............ http://www.ixda.org/guidelines
>> List Help .................. http://www.ixda.org/help
>>
>
> ________________________________________________________________
> Welcome to the Interaction Design Association (IxDA)!
> To post to this list ....... discuss at ixda.org
> Unsubscribe ................ http://www.ixda.org/unsubscribe
> List Guidelines ............ http://www.ixda.org/guidelines
> List Help .................. http://www.ixda.org/help
>

--
~ will

"Where you innovate, how you innovate,
and what you innovate are design problems"

---------------------------------------------------------------------------------------------
Will Evans | User Experience Architect
tel: +1.617.281.1281 | will at semanticfoundry.com
aim: semanticwill | gtalk: wkevans4
twitter: semanticwill | skype: semanticwill
---------------------------------------------------------------------------------------------

10 Oct 2008 - 1:08pm
Mark Schraad
2006

It's to late for the pay for service model. If that was the direction
they wanted to go in, it should have been implemented in mid growth
stage prior to maturity, when the delta was steep. Instead, they were
betting (I am assuming) on some magic pie-in-the-sky startup
evaluation that never materialized (well, except for MS). Monetizing
early caps your potential worth to logical and realistic measures.
Wouldn't want that in the silicon magic venture valley.

Now that most of the features have been realized and are available for
free, and the growth delta is decreasing, and people are unlikely to
pony up. They gambled and they lost that round. That does not mean
they will walk away with nothing... but it won't likely break any
records. Timing is critical and bankable fortune telling is rare.

Mark

On Fri, Oct 10, 2008 at 1:49 PM, Will Evans <will at semanticfoundry.com> wrote:
> I don't disagree with you Andrei - I think some people would value it -
> between $3 and $12/month. Its currently free - and I see 0 value in (hence
> my page is so dead), but some - like DaveM, do value it, and might even be
> willing to pay for the privilege of being super-poked.
>
> On Fri, Oct 10, 2008 at 1:43 PM, Andrei Herasimchuk <
> aherasimchuk at involutionstudios.com> wrote:
>
>> On Oct 9, 2008, at 5:27 PM, Jared Spool wrote:
>>
>> What I've been praying for, to learn what Facebook's business plan is,
>>> will be finally answered!
>>> In 3 years, once Mark Zuckerberg figures it out.
>>>
>>> http://is.gd/3MSY
>>>
>>
>> So... I have to wonder out loud: Why not just charge $9/month for a
>> Facebook account? I know that's so 1992 with an that oh-so-dated America
>> Online model, but hey... At some point, we'll all finally get past the
>> silly notion that stuff should always be free. Advertising can only support
>> so many businesses in this space.
>>
>> Sure, they'd piss people off (too bad, I say) and lose a bunch in the
>> process. But if they retained only 25% of a user base of around 50M that are
>> willing to pay $9/month or $99/year, that's 12.5M users, and a yearly
>> revenue of something like $1.2B a year. The question is more would they be
>> able to keep 10M to 12M people paying $9 a month, I think.
>>
>> Blizzard has around that for World of Warcraft paying $15 a month, and it's
>> just a game. I think Facebook would be able to pull it off.
>>
>> If Facebook or Google started charging for accounts (Google then gets money
>> for its applications like Docs, Spreadsheets and such), it would open the
>> door for everyone in the software business to get back to having real
>> business models that aren't built out of straw during a fire season waiting
>> for it all to go up in smoke at a moment's notice.
> ________________________________________________________________
> Welcome to the Interaction Design Association (IxDA)!
> To post to this list ....... discuss at ixda.org
> Unsubscribe ................ http://www.ixda.org/unsubscribe
> List Guidelines ............ http://www.ixda.org/guidelines
> List Help .................. http://www.ixda.org/help
>

10 Oct 2008 - 1:15pm
jabbett
2008

The major draw of Facebook is ubquity -- everyone you know from high
school, college, maybe even the office has a profile. Charging for
Facebook would drive away large swaths of users, and I predict that
would have a negative snowballing effect: what's the use if only a
small (and decreasing) portion of the people I know use it?

Compare with Classmates.com -- you have to pay for their useful
features, and hardly anyone I know uses it beyond a curious/casual
initial sign-up.

-Jonathan

On Fri, Oct 10, 2008 at 2:08 PM, mark schraad <mschraad at gmail.com> wrote:
> It's to late for the pay for service model. If that was the direction
> they wanted to go in, it should have been implemented in mid growth
> stage prior to maturity, when the delta was steep. Instead, they were
> betting (I am assuming) on some magic pie-in-the-sky startup
> evaluation that never materialized (well, except for MS). Monetizing
> early caps your potential worth to logical and realistic measures.
> Wouldn't want that in the silicon magic venture valley.
>
> Now that most of the features have been realized and are available for
> free, and the growth delta is decreasing, and people are unlikely to
> pony up. They gambled and they lost that round. That does not mean
> they will walk away with nothing... but it won't likely break any
> records. Timing is critical and bankable fortune telling is rare.
>
> Mark
>
>
>
>
>
> On Fri, Oct 10, 2008 at 1:49 PM, Will Evans <will at semanticfoundry.com> wrote:
>> I don't disagree with you Andrei - I think some people would value it -
>> between $3 and $12/month. Its currently free - and I see 0 value in (hence
>> my page is so dead), but some - like DaveM, do value it, and might even be
>> willing to pay for the privilege of being super-poked.
>>
>> On Fri, Oct 10, 2008 at 1:43 PM, Andrei Herasimchuk <
>> aherasimchuk at involutionstudios.com> wrote:
>>
>>> On Oct 9, 2008, at 5:27 PM, Jared Spool wrote:
>>>
>>> What I've been praying for, to learn what Facebook's business plan is,
>>>> will be finally answered!
>>>> In 3 years, once Mark Zuckerberg figures it out.
>>>>
>>>> http://is.gd/3MSY
>>>>
>>>
>>> So... I have to wonder out loud: Why not just charge $9/month for a
>>> Facebook account? I know that's so 1992 with an that oh-so-dated America
>>> Online model, but hey... At some point, we'll all finally get past the
>>> silly notion that stuff should always be free. Advertising can only support
>>> so many businesses in this space.
>>>
>>> Sure, they'd piss people off (too bad, I say) and lose a bunch in the
>>> process. But if they retained only 25% of a user base of around 50M that are
>>> willing to pay $9/month or $99/year, that's 12.5M users, and a yearly
>>> revenue of something like $1.2B a year. The question is more would they be
>>> able to keep 10M to 12M people paying $9 a month, I think.
>>>
>>> Blizzard has around that for World of Warcraft paying $15 a month, and it's
>>> just a game. I think Facebook would be able to pull it off.
>>>
>>> If Facebook or Google started charging for accounts (Google then gets money
>>> for its applications like Docs, Spreadsheets and such), it would open the
>>> door for everyone in the software business to get back to having real
>>> business models that aren't built out of straw during a fire season waiting
>>> for it all to go up in smoke at a moment's notice.
>> ________________________________________________________________
>> Welcome to the Interaction Design Association (IxDA)!
>> To post to this list ....... discuss at ixda.org
>> Unsubscribe ................ http://www.ixda.org/unsubscribe
>> List Guidelines ............ http://www.ixda.org/guidelines
>> List Help .................. http://www.ixda.org/help
>>
> ________________________________________________________________
> Welcome to the Interaction Design Association (IxDA)!
> To post to this list ....... discuss at ixda.org
> Unsubscribe ................ http://www.ixda.org/unsubscribe
> List Guidelines ............ http://www.ixda.org/guidelines
> List Help .................. http://www.ixda.org/help
>

10 Oct 2008 - 1:16pm
bminihan
2007

It might be interesting to see some innovation in the subscription
model for web sites, as (maybe it's just me) folks can only take so
many $10-$20 hits to their wallet every month. I have a tough enough
time shelling out $60 for a cell phone...

On the other hand, cloud computing is making a lot of headway with
"pay only for what you use" pricing at VERY easy-to-swallow rates.
Who can argue 15 cents a GB and a penny for a thousand hits on Amazon
S3 (don't remember the exact #s, but that's not far off).

Taking a lead from iTunes, they might consider small incremental
'fees' for important things that their power users do - contacting
more than 10 friends at once, pushing/pulling data via their API,
vendor profiles, etc.

There are more than 2 ways to make money...could be they just
haven't thought hard enough about it.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Posted from the new ixda.org
http://www.ixda.org/discuss?post=34117

10 Oct 2008 - 1:37pm
mtumi
2004

If you wanted to figure out the size of the actual market for facebook
(as it is today), I'd say find out what percentage of the population
keeps their high school yearbooks, and looks through them periodically.

The similar problem with facebook to yearbooks is that it encourages
people to put in data they are not going to want to see later on. I
predict it will go away, but be very nostalgic, like the atari 2600.
tshirts featuring facebookisms will be hysterical for 6 months in 2023.

what would be awesomely ironic would be if an ailing latter-day
facebook made the last of its money issuing yearbook-like printed
books of users' old accounts.

On Oct 10, 2008, at 2:15 PM, Jonathan Abbett wrote:

> The major draw of Facebook is ubquity -- everyone you know from high
> school, college, maybe even the office has a profile. Charging for
> Facebook would drive away large swaths of users, and I predict that
> would have a negative snowballing effect: what's the use if only a
> small (and decreasing) portion of the people I know use it?
>
> Compare with Classmates.com -- you have to pay for their useful
> features, and hardly anyone I know uses it beyond a curious/casual
> initial sign-up.
>
> -Jonathan
>

10 Oct 2008 - 3:04pm
Oleh Kovalchuke
2006

Jonathan Abbett wrote:

> The major draw of Facebook is ubquity -- everyone you know from high
> school, college, maybe even the office has a profile. Charging for
> Facebook would drive away large swaths of users...

Hmmm...
Napster. --> [iTunes+iPod] + bittorrent + [Napster+fee]

--
Oleh Kovalchuke
Interaction Design is design of time
http://www.tangospring.com/IxDtopicWhatIsInteractionDesign.htm

10 Oct 2008 - 4:02pm
Steve Baty
2009

Andrei

2008/10/11 Andrei Herasimchuk <aherasimchuk at involutionstudios.com>

>
> Blizzard has around that for World of Warcraft paying $15 a month, and it's
> just a game. I think Facebook would be able to pull it off.
>

In the context of this discussion WoW is more that 'just a game'. There is a
very deep and extensive social dimension to most of the massively
multi-player online role-playing games (MMORPG) and that forms a very large
part of their draw. Those millions ponying up $15/month to play WoW aren't
doing it just so they can swing a sword or ride a griffon (i.e. the 'game'
part); the social computing element is enormously important.

Steve

9 Oct 2008 - 8:36pm
Kontra
2007

> If you're counting, three years from now would be nearly 7 years since Mark
> (and others) started Facebook at Harvard, and four years since Microsoft
> plowed $240 million into the company.

So what?

Google made its first $100MM profit 5 years after and went public 6 years
after its incorporation in 1998. Its meteoric rise really started in
mid-'05, nearly 8 years after they cashed Andy Bechtolsheim's check for
$100K that started it all. AdSense, for example, came in company's 5th year.
(And Google happens to be an exceptional case of a web company with such a
rapid rate of growth and subsequent ability to persist. Most others fare
much worse.)

Whether it's worth as low as $3 billion or as high as $15 billion, now or in
three years, what Zuckerberg has achieved in wealth creation would be
immensely higher than anybody else's record on this list, including you,
wouldn't you say?

--
Kontra
http://counternotions.com

10 Oct 2008 - 2:10pm
Will Callaghan
2008

I managed to send my reply just to Andrei - sorry Andrei - not this
list. Newbie alert!

I agree that paying for content and services is one way out of this.
But how likely is it that Facebook will start charging when there's
countless other social networks that are willing to offer as much for
free?

In the UK Friends Reunited used to rule the roost, but its
subscription model caused uniques to go through the floor when
MySpace and Facebook turned up. OK, their downfall was partly to do
with the quality of the offering, but the couple of quid a month
played a big part. Friends Reunited recently switched to an ad funded
model and traffic is on the rise again.

I managed to prove at a previous site that paid for content could
work. We were a respected brand, the service was pretty much unique
(some imitators but nowhere near as good) and the products were easy
to buy via microcharging on mobiles, PayPal, credit cards etc. I'm
surprised so few content providers have tried this.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Posted from the new ixda.org
http://www.ixda.org/discuss?post=34117

10 Oct 2008 - 10:09pm
Mark Schraad
2006

Yes Kontra, we all get that you are totally impressed that they
generated some funding. But in the real world we look for proof that
they can make money. We call this revenue and accountants (and share
holders) are interested in extrapolating from that revenue some
indication of profit. Further, that they generated funding
'indicates' the potential worth of the remaining stock, but until
someone actually 'pays' for that stock... it is merely speculative
worth. Understanding the difference in these concepts will serve you
well as both a designer and a business person.

On Oct 9, 2008, at 9:36 PM, Kontra wrote:

>> If you're counting, three years from now would be nearly 7 years
>> since Mark
>> (and others) started Facebook at Harvard, and four years since
>> Microsoft
>> plowed $240 million into the company.
>
>
> So what?
>
> Google made its first $100MM profit 5 years after and went public 6
> years
> after its incorporation in 1998. Its meteoric rise really started in
> mid-'05, nearly 8 years after they cashed Andy Bechtolsheim's check
> for
> $100K that started it all. AdSense, for example, came in company's
> 5th year.
> (And Google happens to be an exceptional case of a web company with
> such a
> rapid rate of growth and subsequent ability to persist. Most others
> fare
> much worse.)
>
> Whether it's worth as low as $3 billion or as high as $15 billion,
> now or in
> three years, what Zuckerberg has achieved in wealth creation would be
> immensely higher than anybody else's record on this list, including
> you,
> wouldn't you say?
>
> --
> Kontra
> http://counternotions.com
> ________________________________________________________________
> Welcome to the Interaction Design Association (IxDA)!
> To post to this list ....... discuss at ixda.org
> Unsubscribe ................ http://www.ixda.org/unsubscribe
> List Guidelines ............ http://www.ixda.org/guidelines
> List Help .................. http://www.ixda.org/help

10 Oct 2008 - 10:49pm
Jared M. Spool
2003

On Oct 9, 2008, at 9:36 PM, Kontra wrote:

>> If you're counting, three years from now would be nearly 7 years
>> since Mark
>> (and others) started Facebook at Harvard, and four years since
>> Microsoft
>> plowed $240 million into the company.
>
>
> So what?
>
> Google made its first $100MM profit 5 years after and went public 6
> years
> after its incorporation in 1998. Its meteoric rise really started in
> mid-'05, nearly 8 years after they cashed Andy Bechtolsheim's check
> for
> $100K that started it all.

Of course you didn't read the rest of the article. That would be too
much to ask.

Had you done so, you would've seen the next paragraph:

> We know the retort here: What about Google? They didn't figure out
> money for years, and look at them now! And we think that's a
> reasonable answer -- if you really think Facebook will end up as a
> Google-sized business. But if Facebook ends up being something less
> than that -- say, a big and popular Website, but not a world-
> changing business that throws off billions a dollars a year and
> disrupts multiple industries -- then Mark's backers may end up
> wondering why they didn't push him to figure that sooner than later.

You continued with this little bit of silliness:

> Whether it's worth as low as $3 billion or as high as $15 billion,
> now or in
> three years, what Zuckerberg has achieved in wealth creation would be
> immensely higher than anybody else's record on this list, including
> you,
> wouldn't you say?

Gary Dahl (http://tinyurl.com/4jatmh) made more money than me too.
That doesn't make me envious of the pet rock industry.

Jared

11 Oct 2008 - 12:01am
Eric Scheid
2006

On 11/10/08 4:43 AM, "Andrei Herasimchuk"
<aherasimchuk at involutionstudios.com> wrote:

> Blizzard has around that for World of Warcraft paying $15 a month, and
> it's just a game. I think Facebook would be able to pull it off.

Firstly, about 6 million of that 10 million are in asia/china, where they
pay on an hourly basis at a much reduced rate.

Secondly, the game is one huge skinner box, designed to be incredibly
addictive.

e.

10 Oct 2008 - 11:05pm
Kontra
2007

> But if Facebook ends up being something less than that -- say, a big and
>> popular Website, but not a world-changing business that throws off billions
>> a dollars a year and disrupts multiple industries -- then Mark's backers may
>> end up wondering why they didn't push him to figure that sooner than later.
>
>
Now, the success of a company is measured against Google? What kind of
nonsense is that?

Gary Dahl (http://tinyurl.com/4jatmh) made more money than me too. That
> doesn't make me envious of the pet rock industry.

Why does anybody else have to care about what industries you happen to like
or not? As long as Gary Dahl and his shareholders are happy, who are you to
complain?

We don't live in a theocracy where *you* get to judge whether legally
accrued profits are to your liking or if a buyer of a company is allowed to
see value in it that you can't.

Stick to the facts: profits =! valuation.

--
Kontra
http://counternotions.com

11 Oct 2008 - 12:32am
Eric Scheid
2006

On 11/10/08 3:05 PM, "Kontra" <counternotions at gmail.com> wrote:

> We don't live in a theocracy where *you* get to judge whether legally
> accrued profits are to your liking or if a buyer of a company is allowed to
> see value in it that you can't.

that would be a meritocracy, not a theocracy, I'm sure.

e.

11 Oct 2008 - 1:55am
Jared M. Spool
2003

On Oct 11, 2008, at 12:05 AM, Kontra wrote:

> We don't live in a theocracy where *you* get to judge whether legally
> accrued profits are to your liking or if a buyer of a company is
> allowed to
> see value in it that you can't.

*I* believe *I* do.

(And Eric's right. You probably meant meritocracy.)

11 Oct 2008 - 9:20am
Cwodtke
2004

I hope everyone has read this article
http://www.wired.com/techbiz/it/magazine/16-03/ff_free?currentPage=all
it has a great list of potential ways a free service can generate revenue.
Or for the digest version, Armano's visualization
http://darmano.typepad.com/logic_emotion/2008/10/the-4-kinds-of.html

It's perfectly reasonable for a startup to consider getting usage first
before having a solid business model. As Andreensen says, distribution is
your biggest challenge. Then again, Reid Hoffman emphasizes funding
strategy. If you have a good funding strategy, you have time to solve both
the distribution and revenue challenges.

It depends (to quote circa 1997 Jared Spool) also on the market you are in.
In an enterprise market (B2B) its useful to take a Four Steps to the
Epiphany approach, where you test your business strategy with your potnetial
customers from day one. But in the consumer internet businesss, especially
advertising based, overempahsis on business model will often result in
making decisions that limit usage and growth in exchange for early
profitability.

Morover, in new categories, like social networks, there is no accepted model
for profitability so it's difficult to know what will succeed. You could
easily argue that while search existed for many years, it only found its
business model when overture invented the auction-based keyword bidding
approach.

If I were Zuckerberg, I wouldn't put a timetable on finding a business
model. There are a number of them that might work and I assume they'll try
them all. They've got enough money they have bought themselves time to
tune. Smart.

But it's hard to say if they'll find a breakout approach in three months or
three years. It's like saying I'm sure I'll have a cure for baldness in
three years... we didn't think there was a real viable solution to that one
until suddenly there was. I think it quite likely Facebook won't find a
business model that will make them massively profitable google-style, and
they'll keep bebopping along with minor profits. Unless, of course, they
do. And if they do trip over the right approach, they are poised to maximize
it because they have the userbase in place.

On Fri, Oct 10, 2008 at 11:55 PM, Jared Spool <jspool at uie.com> wrote:

>
> On Oct 11, 2008, at 12:05 AM, Kontra wrote:
>
> We don't live in a theocracy where *you* get to judge whether legally
>> accrued profits are to your liking or if a buyer of a company is allowed
>> to
>> see value in it that you can't.
>>
>
> *I* believe *I* do.
>
> (And Eric's right. You probably meant meritocracy.)
>
> ________________________________________________________________
> Welcome to the Interaction Design Association (IxDA)!
> To post to this list ....... discuss at ixda.org
> Unsubscribe ................ http://www.ixda.org/unsubscribe
> List Guidelines ............ http://www.ixda.org/guidelines
> List Help .................. http://www.ixda.org/help
>

11 Oct 2008 - 11:15am
Jared M. Spool
2003

On Oct 11, 2008, at 10:20 AM, Christina Wodtke wrote:

> If I were Zuckerberg, I wouldn't put a timetable on finding a business
> model. There are a number of them that might work and I assume
> they'll try
> them all. They've got enough money they have bought themselves time to
> tune. Smart.

The timetable puzzled me too. If you don't know what your business
plan is, how can you know how long it will take to figure out what it
will be?

They *do* have enough money, but that money came at a price.
Zuckerberg, et al aren't running a charity. Those investors are
expecting a return. Many of those investors have shareholders
themselves, who are also expecting a return.

What did Zuckerberg promise them in terms of value and schedule?
That's the really puzzling thing. Did they buy in on pure hope?

> I think it quite likely Facebook won't find a
> business model that will make them massively profitable google-
> style, and
> they'll keep bebopping along with minor profits. Unless, of course,
> they
> do. And if they do trip over the right approach, they are poised to
> maximize
> it because they have the userbase in place.

Do you think that's how they pitched it to their investors? "We think
it's quite likely we'll never have a business model that gives you the
10x returns you're looking for, but if luck has it, we just might
stumble across one. Then, boy, won't *you* look really smart?!!?"

And here's my take. It's not like Facebook is flying under the radar
here. EVERYBODY is focused on every little thing they do. The smartest
business people in the world are thinking and talking about them.

And none of them have come up with a viable business plan yet. If they
can't come up with one, why do people think that folks within the
Zuckerberg empire can? That's the gamble that I'm just not getting.

I'm probably wrong (or, as some have pointed out, living in my own
theocracy). In 2 years and 10 months, the Zuckerberg team will
announce to the world a new strategy that will make them all
trillionnaires. And I'll be here, running my little business as I have
for 20 years, wondering how come I'm not cashing in on the big bucks.

Who wants to bet on that?

Jared

p.s. The original point to this entire conversation on this list is,
in the meantime, what do the newly-hired UX people at Facebook do to
ensure that every design decision supports the wont-exit-for-three-
years business model? http://is.gd/3djk

11 Oct 2008 - 11:24am
Jared M. Spool
2003

On Oct 10, 2008, at 1:43 PM, Andrei Herasimchuk wrote:

> So... I have to wonder out loud: Why not just charge $9/month for a
> Facebook account? I know that's so 1992 with an that oh-so-dated
> America Online model, but hey... At some point, we'll all finally
> get past the silly notion that stuff should always be free.
> Advertising can only support so many businesses in this space.

I think it's because they haven't built anything that gives them
protection against someone else just duplicating it and putting it
back up for less.

In business, there's only two long-term ways to generate higher
profits than your competitors:

1) either you keep your internal costs lower than all your
competitors, so that your margins are always naturally higher, or

2) you keep your quality high enough that you can charge premium
prices to keep your margins higher than your competitor.

Most of Facebook's costs to date have been in R&D. However, they are
almost 100% transparent in how they work. So, that means that a
competitor can produce an equivalent product without the same R&D
effort, but just copying what FB has done.

Facebook has "locked up" the market now because social networks
require that you're connected to everyone you want to be connected to.
Moving to a new social network has a high cost.

However, that high cost may be worth it if staying has a higher cost,
like having to make a monthly payment to keep the connections
available. Then, the motivation to move to a free network becomes
substantially higher. What can FB offer for the monthly fee that would
prevent that?

That's how I see FB is locked into free service and has to now invest
in originating a business model that (a) produces the 10x returns on
the $500m investments they've received and (b) isn't easily copied by
competitors who can build it out at 1/100th the cost FB has invested.

Jared

11 Oct 2008 - 11:52am
Cwodtke
2004

On Sat, Oct 11, 2008 at 9:15 AM, Jared Spool <jspool at uie.com> wrote:

> Do you think that's how they pitched it to their investors? "We think it's
> quite likely we'll never have a business model that gives you the 10x
> returns you're looking for, but if luck has it, we just might stumble across
> one. Then, boy, won't *you* look really smart?!!?"
>
>
I don't know about facebook, but I know metaweb said "We know this is big.
We know someone will do it successfully. We don't know if we can do it. We
don't know how it'll make money. We suspect if it is big, we'll figure out a
way to make lots of money" and they got a lot of dough to start trying. Of
course, they had made it big with Tellme, so had "proven" they were good at
doing ridiculously hard things.

Venture capital is not like other kinds of money. They bet on a lot of
different highly unlikely things. All their bets are on weird and unknown
aproaches. They bet smart people will figure things out. They bet that if
even one of their 50+ investments makes it big, they will make crazy piles
of money. They don't work like the businesses you work with. They work like
professional gamblers. Innovation and optimization require very different
approaches.

>
> p.s. The original point to this entire conversation on this list is, in the
> meantime, what do the newly-hired UX people at Facebook do to ensure that
> every design decision supports the wont-exit-for-three-years business model?
> http://is.gd/3djk

If the folks at Facebook are smart, the newly hired people are working on
the company's goals, which may not include making money. They are working on
increasing visits, working on improving lock-in, working on broading the
usage base....

A great designers knows what the company's goals are, and works on designs
that move toward that goal (which may or may not be reflected in the press.)
Great leadership in a business makes sure everyone knows what the comapany's
goals are.

11 Oct 2008 - 12:33pm
Jared M. Spool
2003

On Oct 11, 2008, at 12:52 PM, Christina Wodtke wrote:

> Venture capital is not like other kinds of money. They bet on a lot of
> different highly unlikely things. All their bets are on weird and
> unknown
> aproaches. They bet smart people will figure things out. They bet
> that if
> even one of their 50+ investments makes it big, they will make crazy
> piles
> of money. They don't work like the businesses you work with. They
> work like
> professional gamblers. Innovation and optimization require very
> different
> approaches.

Ok. that makes sense on some level.

I can't say I've ever understood VCs that well. They are from a
different world than the one I hang around it. (We tend not to have VC
funded companies as clients. Our folks are more meat-and-potatoes it's-
always-clear-what-the-biz-model-is types.)

So, I'll take it on faith that they somehow know how this will play
out (or are betting that someone will in time).

Jared

11 Oct 2008 - 12:56pm
Cwodtke
2004

> So, I'll take it on faith that they somehow know how this will play out (or
> are betting that someone will in time).
>
>
Yep. you got it.

I live on the other side of the looking glass. it's nice here, if you like
oysters and turtle soup.

Now let's discuss eyetracking... ;)

11 Oct 2008 - 2:23pm
Jared M. Spool
2003

On Oct 11, 2008, at 1:56 PM, Christina Wodtke wrote:

>> So, I'll take it on faith that they somehow know how this will play
>> out (or
>> are betting that someone will in time).
>>
>>
> Yep. you got it.
>
> I live on the other side of the looking glass. it's nice here, if
> you like
> oysters and turtle soup.
>
> Now let's discuss eyetracking... ;)

Sure. Right after I finish this episode of Ghost Hunters.

Jared

11 Oct 2008 - 3:06pm
Scott McDaniel
2007

I'm somewhat more on the side of seeing the value in Facebook,
but you just said people can't judge if something is to their own liking?

You're beautiful.

Scott

On Sat, Oct 11, 2008 at 12:05 AM, Kontra <counternotions at gmail.com> wrote:
>
> We don't live in a theocracy where *you* get to judge whether legally
> accrued profits are to your liking or if a buyer of a company is allowed to
> see value in it that you can't.
>
> Stick to the facts: profits =! valuation.

--
"The future is unwritten." - Joe Strummer

11 Oct 2008 - 4:05pm
Josh Seiden
2003

Hey folks,

Just a reminder here to please refrain from personal attacks in our
discussions. This is a fascinating topic, and there is plenty of room
to discuss it--and to disagree--without having to diminish one
another.

Thanks,
JS

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Posted from the new ixda.org
http://www.ixda.org/discuss?post=34117

13 Oct 2008 - 12:00pm
SemanticWill
2007

Jared - Maybe if Facebook folks weren't hammered in Cyprus - they might have
a business plan already :-)

http://www.techcrunch.com/2008/10/10/team-cyprus-move-to-undo-the-video/

On Sat, Oct 11, 2008 at 5:05 PM, Josh Seiden <josh.seiden at ixda.org> wrote:

> Hey folks,
>
> Just a reminder here to please refrain from personal attacks in our
> discussions. This is a fascinating topic, and there is plenty of room
> to discuss it--and to disagree--without having to diminish one
> another.
>
> Thanks,
> JS
>
>
> . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> Posted from the new ixda.org
> http://www.ixda.org/discuss?post=34117
>
>
> ________________________________________________________________
> Welcome to the Interaction Design Association (IxDA)!
> To post to this list ....... discuss at ixda.org
> Unsubscribe ................ http://www.ixda.org/unsubscribe
> List Guidelines ............ http://www.ixda.org/guidelines
> List Help .................. http://www.ixda.org/help
>

--
~ will

"Where you innovate, how you innovate,
and what you innovate are design problems"

---------------------------------------------------------------------------------------------
Will Evans | User Experience Architect
tel: +1.617.281.1281 | will at semanticfoundry.com
aim: semanticwill | gtalk: wkevans4
twitter: semanticwill | skype: semanticwill
---------------------------------------------------------------------------------------------

14 Oct 2008 - 9:06am
jrrogan
2005

This is an interesting discussion on a "pure play internet" company, and it
smells a lot like 2000 in San Francisco.

Facebook, as an offering, is imminently repeatable by competitors, with
their strongest advantages being a virtuous circle of:

1. They have critical mass

2. They have "0" cost barriers to entry, (don't charge anything).

Changing advantage #2.- "charging users in a way that would generate
reasonable P/E ratios for a multi-billion dollar company", would almost
instantly remove advantage #1.

Maybe Facebook needs to "get real", and admit its best business model most
probably is as an advertising based site worth a respectable $100 to 500
million, (of course they can spend 100% of investor's cash to come to this
conclusion, when did we last see that happen? ...).

Internet companies are young in concept and inception, but not "that" young
any more. It's good for us and Internet Companies to have grownup business
models, with respectable valuations based on real profits.

Our field offers real value, we don't need the "Facebook hype" of a "5 to 20
billion dollar co.", and in fact I think it lowers our value as a whole.

We're in a down swinging market, (factorially larger then the "dot com"
crash). As in all bubbles it was based in faith of the ever growing pie.

Capital markets are changing in a generational fashion right now. I'll bet
money that realism, and the display of real value, is going to be a very
strong message for a very long time. Conversely gambling will probably be
more of a sideshow.

On Sat, Oct 11, 2008 at 12:24 PM, Jared Spool <jspool at uie.com> wrote:

>
>
> 1) either you keep your internal costs lower than all your competitors, so
> that your margins are always naturally higher, or
>
> 2) you keep your quality high enough that you can charge premium prices to
> keep your margins higher than your competitor.
>
>

--
Joseph Rich Rogan
President UX/UI Inc.
http://www.jrrogan.com

14 Oct 2008 - 9:17am
SemanticWill
2007

I do respect the left coasts Caligula-like ability to party like there is no
tomorrow! Ms. Wodke made a comment 2 weeks ago about SF/BayArea being ground
zero for the internet - and for VC's and their cash - it seems true that
investor money vaporizes faster than asphalt after an a-bomb blast :-) God
bless u guys for keepin it real - we on the right coast haven't had that
kind of fun since Razorfish days of '99

On Tue, Oct 14, 2008 at 10:06 AM, Rich Rogan <jrrogan at gmail.com> wrote:

> This is an interesting discussion on a "pure play internet" company, and it
> smells a lot like 2000 in San Francisco.
>
>
> Facebook, as an offering, is imminently repeatable by competitors, with
> their strongest advantages being a virtuous circle of:
>
>
>
> 1. They have critical mass
>
> 2. They have "0" cost barriers to entry, (don't charge anything).
>
>
>
> Changing advantage #2.- "charging users in a way that would generate
> reasonable P/E ratios for a multi-billion dollar company", would almost
> instantly remove advantage #1.
>
>
>
> Maybe Facebook needs to "get real", and admit its best business model most
> probably is as an advertising based site worth a respectable $100 to 500
> million, (of course they can spend 100% of investor's cash to come to this
> conclusion, when did we last see that happen? ...).
>
>
>
> Internet companies are young in concept and inception, but not "that" young
> any more. It's good for us and Internet Companies to have grownup business
> models, with respectable valuations based on real profits.
>
>
>
> Our field offers real value, we don't need the "Facebook hype" of a "5 to
> 20
> billion dollar co.", and in fact I think it lowers our value as a whole.
>
> We're in a down swinging market, (factorially larger then the "dot com"
> crash). As in all bubbles it was based in faith of the ever growing pie.
>
>
> Capital markets are changing in a generational fashion right now. I'll bet
> money that realism, and the display of real value, is going to be a very
> strong message for a very long time. Conversely gambling will probably be
> more of a sideshow.
>
>
> On Sat, Oct 11, 2008 at 12:24 PM, Jared Spool <jspool at uie.com> wrote:
>
> >
> >
> > 1) either you keep your internal costs lower than all your competitors,
> so
> > that your margins are always naturally higher, or
> >
> > 2) you keep your quality high enough that you can charge premium prices
> to
> > keep your margins higher than your competitor.
> >
> >
>
>
> --
> Joseph Rich Rogan
> President UX/UI Inc.
> http://www.jrrogan.com
> ________________________________________________________________
> Welcome to the Interaction Design Association (IxDA)!
> To post to this list ....... discuss at ixda.org
> Unsubscribe ................ http://www.ixda.org/unsubscribe
> List Guidelines ............ http://www.ixda.org/guidelines
> List Help .................. http://www.ixda.org/help
>

--
~ will

"Where you innovate, how you innovate,
and what you innovate are design problems"

---------------------------------------------------------------------------------------------
Will Evans | User Experience Architect
tel: +1.617.281.1281 | will at semanticfoundry.com
aim: semanticwill | gtalk: wkevans4
twitter: semanticwill | skype: semanticwill
---------------------------------------------------------------------------------------------

15 Oct 2008 - 9:06am
Cwodtke
2004

What a peculiar post.

On Tue, Oct 14, 2008 at 7:17 AM, Will Evans <will at semanticfoundry.com>wrote:

> I do respect the left coasts Caligula-like ability to party like there is
> no
> tomorrow! Ms. Wodke made a comment 2 weeks ago about SF/BayArea being
> ground
> zero for the internet - and for VC's and their cash - it seems true that
> investor money vaporizes faster than asphalt after an a-bomb blast :-) God
> bless u guys for keepin it real - we on the right coast haven't had that
> kind of fun since Razorfish days of '99

If you hire young people, they will act like young people sometimes. I think
that's alright.

The silicon valley is ground zero (or patient zero, depending on what
apocalypsian metaphor you prefer) for internet and technology innovation in
general. It requires a completely different approach than building a solid
business in a known space. For example, restaurants are such an old business
the TV show "Kitchen Nightmares" is formulaic in its approach to making them
successful. Fresh ingredients+small menu+execution+interior
decoration+marketing=success.

New markets without clear formulas require expiramentation, including
borrowing from proven successes that may or may not apply to the new field.
No one knows what will succeeed until it does. Some bets are long bets, some
bets are short bets (sorry to refer to this over and over again, but the
gambling metaphor is a decent approximation for the VC approach) and right
now it looks like short bets are a better selection. The advice given out as
sequoia et al is good: raising money is going to be hard for the next five
years. Try not to spend all you've got. Stretch it (which includes trying to
make a bit as well as slowing hiring). Hunker down.

As designers, we can help by being contributors to the conversation. What
models haven't been tried? What do we know about user behavior in digital
spaces that could be leveraged to produce more effective results? Is your
company in growth mode, usage mode, revenue mode, a combo? When a customer
arrives on your site, what do they have to accomplish to make both them and
the business successful?

Business goals (and sometimes models) are as important as user goals, yet
many designer seem to think meeting those goals is someone else's problem to
solve. That results in bizarre arguments with business, marketing and
product where each side is convinced the other is clueless. But with
understanding comes insight, better design and more effective communication.

I'm pained by conversations that dismiss approaches without trying to
understand them, as it perpetuates the self-imposed ignorance that way too
many designers seem to enjoy.

First seek to understand, then to improve. Perhaps, with luck, to even
innovate.

15 Oct 2008 - 3:05pm
.pauric
2006

At a very simple level, we should perceive ourselves as investors of
our own time & energy. If you value your craftworthyness would you
invest that in something you dont understand?
Having a business model will come back in to fashion with a
resounding bump. Designers should treat their careers like a
retirement fund. Understand what you're investing in, understand
and manage the risk/ROI.

"Business goals (and sometimes models) are as important as user
goals, yet many designer seem to think meeting those goals is someone
else's problem to solve."

Well said Christina.

Unrelated: what are the odds on Twitter surviving this?

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Posted from the new ixda.org
http://www.ixda.org/discuss?post=34117

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