Advertising dependency for free social media sites makes for risky business model

When was the last time you clicked on a Facebook ad? Option A: You can’t remember. Option B: You never, ever click on any of the ads. Option C: Does anyone actually click on those ads?

Apparently people do, as 85 percent of Facebook’s revenue comes from advertisements — the other 15 percent is from selling virtual goods.

There are two ways in which such statistics look good. Either a company is very good at targeting a niche market, or it is not so good but has a huge audience. Facebook is in the second category. In fact, because of the current low success rates of target advertisements, Internet businesses that provide free services have no alternative for survival but to become big enough so that their size can compensate — unless they plan to subsist through donations, as Wikipedia does.

Two questions then arise. First, since there obviously isn’t a market for a lot of big social media websites, why is it that we keep seeing new social websites popping up? After all, people have to eventually stop looking at pictures of friends or cat videos and be productive. Second, why is target advertising so difficult that Internet companies can’t afford being small?

The answer to the second question is a paradox. On one hand, everyone would be delighted to hear about a product they would enjoy having, a new band they would love to listen to or a play they would like to see. On the other hand, most people are obsessed with privacy, refraining from giving personal information to this or that company. Although privacy is certainly a right, companies can’t provide more accurate ads without more precise information. There is no way around this. Not until artificial intelligence tools are so advanced that user preferences can be inferred by interpreting jokes and comments.

The first question is more obviously answered: There are a lot of investors, with no better idea about where to put their money, who are afraid of missing the “next big thing.” That’s why we have Path, Tumblr, Pinterest and many other social media venues whose purposes intersect, and most of whom we don’t even hear about. Their business model? Advertising. Which one is going to grow enough to profit from advertising? Place your bets.

Apparently, there is no shortage of entrepreneurs who believe they have the perfect alternative to Facebook or a shortage of investors to back their startups. But we already have enough tools for connecting, liking and sharing. It is time for entrepreneurs and their funders to think of something else. According to recent reports about decline of time spent on and multi-week breaks from Facebook, some Internet users already are.

A version of this article was published in the Monday, March 25 print edition. Marcelo Cicconet is a staff columnist. Email him at [email protected]

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3 COMMENTS

  1. Ghost town social network are depressing for users, founders and investors. It’s a chicken and egg problem, relying on users to generate content for other users to consume and share.

    I believe companies that can make sense out of all this data being created on large platforms, and present it in interesting ways using APIs can solve this problem.

    As far as revenue, you’re right. Banner ads go unnoticed. The only true ads we listen to come from our friends.

    Chris Pulliam NYU ’10

  2. Greetings precious one.

    I am Mrs. Felicia Wong a Korean American. I am the wife to late Mr. David Wong a Korean American. My late husband was a businessman that deals on oil & gas and precious stones such as gold, diamonds etc ;He passed away after a brief illness that lasted for only four days January 28, 2008 Before his death we were both born again Christians and we lived happy married life for 15 years through without a child Since his death, I decided not to re-marry or get a child outside my matrimonial home which the Bible is really against it. I inherited gold dust and bars worth US$5.2 million from my late husband which was concealed in a metallic safe deposit box and deposited with a security and finance company in Dakar, Republic of Senegal.

    My late husband concealed the gold dust and bars in a metallic safe deposit Box and deposited the box under a classified arrangement which declares that the box contains family Valuables.

    Recently l Fell Sick and my Doctor diagnosed me and after conducting all the test about my total well being, he told me that, I am not going to last more than Six months due to my Lungs cancer and heart complication. Having known my condition, I decided to donate this fund to churches/Christian bodies/MOSQUE or individual that will utilize this money the way I am going to instruct.

    I want a church or MOSQUE or an individual christian or Muslim that will sell the gold dust and bars and use its proceeds to help the less- privileged such as orphans, the aged, the widows, the sick and the poor. VERY IMPORTANT I took this decision because I don’t have any child that will inherit the gold dust and bars and my husband relatives are not good people rather they are infidels. When my husband passed away, they took away many of my late husband’s funds and estates and made life unbearable for me because l couldn’t bear a Child. I don’t want my husband’s relatives to misuse the proceeds of the gold dust and bars for their own selfish interest and in an evil manner.

    I don’t need any telephone communication in this regard because of my health and because of the presence of my husband’s relatives around me sometimes. I don’t want them to know about the gold dust and bars but I know that With God all things are possible. As soon as I receive your reply in my next mail I shall give you the contact details of the Security and finance company in Dakar, Republic of Senegal and the Authorization Certificate which is the Certificate of deposit that they gave me on the day of deposit to enable you call them and give them your address for the immediate shipment of the box to you as the original- beneficiary of the box.

    If you can help me to accomplish this task, please reply me quickly and let me know because any delay might compel me to look for another person who will help me to accomplish this task which is my last will on earth please reply me with this email ( [email protected] ) i need your email immediately.

    Remain blessed.
    Yours truly,
    Mrs.Felicia Wong

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