Facebook’s Contradictory Business Model

Chris Dixon writes that Facebook is mostly a place to socialize with friends.

You can put billboards all over a park, and maybe sometimes you’ll happen to convert people from non-purchasing to purchasing intents. But you end up with a cluttered park, and not very effective advertising. 

People don’t use Facebook with the intention to shop but most people don’t watch TV with shopping intention either.  Yet, one commercial can get us to buy just as one Facebook ad in the corner of our eye may grab our attention and make us reach for our wallets.

Facebook’s DNA is purely social.  Still, Zuckerberg had no choice to monetize it through advertising.  For the most part Facebook does a decent job in making the ads non-invasive.  There’s no pop-ups, no pre-rolls, just display ads.

Nevertheless, keeping Facebook clean without disrupting the conversation and making advertisers happy (see General Motors pull out) is its greatest challenge because Facebook can’t do both.  The users are the priority.

Wall Street expects Facebook to maximize revenue on desktop and mobile.  Whether that’s through smarter advertising, Facebook app’s store, coupons or Facebook credits remains to be seen.  Are you bullish?

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