F-Business - The balacing act for Facebook

This is a follow-up to Chris's article last August on the limitations of Facebook for advertisers.

So, Facebook is a profit seeking organisation, no news here, it employs over 700 people (news to me too), and I'm sure some of them are pretty smart. Like Free-to-air TV, Facebook's offering is effectively free for consumers, and they seek to generate revenue through alternative channels, like advertising.

Their challenge

Therefore FB's product, in effect, is people, the people that use it. How it monetises this is the key challenge, one which many Web 2.0 companies are yet to crack. They do know, as a rule of thumb, that the more people they have spending more time in their product the greater the revenues will be, when they figure it out. And they don't like being tricked or receiving spam.

Entertaining the masses

The fine print

This is where FB are extremely smart. In the terms and conditions there are cerain details which most people seem to overlook, like the fact that businesses can't setup groups, they're only for having fun and community groups.

My theory

So why are they smart? Well they're letting you break the rules, and watching what happens...  If it gets to a point where you're getting lots of value, they pull back your features, or delete your profile.

They're doing market research.

So FB needs to make money and they're figuring out what will work by letting businesses trial applications for free... Events, groups, pages, polls, photos and analytics to name a few. Once they think you're getting value out of anything, they see they've got a product to sell.

It's in the best interests for everyone.

1. FB need to make money to survive

2. FB need to keep their user base happy (keep spammers out)

Without either of those being fullfilled FB will no longer exist, everyone losses.

Should they care about businesses?

Well not really unless you're paying them lots of money. And how much would you be willing to pay to manage your 2000 strong member base on your group? Probably not enough to keep them afloat.

I believe they're realising all kinds of value that they could be charging for and are weighing up the potential profitability of all of them.

But all the while keeping their massive user base happy.

Advertising features, based on cost and benefit:

1. Polls (now called Lexicon)
   They were free, but they changed how it works and you have to pay. (As reported by SMH)
   
2. Advertising
   It's always been a paid service, however, advertising your page will give you added benefits, like telling your audience which of their friends is in the page.
3. Groups
   Businesses aren't 'allowed' to setup groups, if you reach 1,000 users sending emails becomes more difficult. If a single profile users sends too many emails their profile gets deleted.
4. Pages
   Considered an advertising product, although it's free, FB pages provide comprehensive stats on your user base, and works well with advertising. One major weakness is that it's difficult to reach out to your members, emails aren't allowed.
5. Events
   Still a free application anyone seems to be able to create an event. Like all aspects of FB it goes viral through the news feed. The added benefit is you can send emails to people attending the event. Only two limitations I can find are, you can only invite 100 people at a time, and have 300 pending invitations at any point in time. But keep any eye on the terms page, things may change.
6. Photos
   It's one of the main reasons people come to FB. By tagging photos you'll get exposure to the people you tag, and their friends.
7. Search Engine Ranking
   Until recently nothing inside FB would appear outside FB, which in the most part is why people use the site. Now it appears groups, pages & profile summaries now appear on Google. If you're not logged in to FB and visit the link from Google you will see a highly limited version.
8. Application Platform
   A massive part of FB which, with photos and status updates, makes up the balance of the majority of user's acivity. There are currently 140 applications created daily, it's potentially a great way to reach your audience, but you've gotta be better than the 52,000 applications that exist. It's currently free to build an application on the FB platform.

If you don't want to pay Facebook to help you market your offering, creating engaging & entertaining content, it will spread like wildfire if it's worthwhile for someone to forward on, and everything I've discussed above doesn't matter. The problem for most of us is that we're not  professional entertainers, we're good at spending money to reach eyeballs.