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Network World - "The best minds of my generation are thinking about how to make people click ads.That sucks." - Jeff Hammerbacher, former manager of Facebook Data Team, founder of Cloudera
A couple of weeks ago here in Backspin I wrote a column titled "Facebook and Twitter and their long, slow slide into irrelevance". In that piece I discussed the problem that the leading social networks have: How to make money.
So, consider Facebook, how big is its market? Here's a sample of Facebook's statistics from the Hitwise Blog published in May this year just prior to Facebook's IPO ...
Those figures are simply amazing. You'd think with millions of users logging in to the services every day and hanging out for astounding amounts of time it wouldn't be too hard to make bank but as I pointed out in the previous column, Facebook is struggling to be profitable and the company's closing share price, today at $20.32 down just under 38% from its IPO price of $38 reflects this.
Back in July The New York Times summarized Facebook's financial performance thusly:
"The company said its revenue for the quarter climbed to $1.18 billion, from $895 million; most of it came from advertising. The company reported a net loss of $157 million, or 8 cents a share, compared with net income of $240 million, or 11 cents a share for the same quarter last year. Much of that was because of stock compensation, and on an adjusted basis, the company posted a profit of 12 cents a share, or $295 million, meeting analysts' expectations."
Facebook's response to the market's demand that they "up" their game has been to focus on mobile as the driver for advertising growth which makes sense. As Marc Poirier, co-founder and CMO of Acquisio, a leading media platform for some of the world's largest marketing and advertising agencies, points out, on mobile "the clickthrough rates are ten times better than the desktop" but he feels that what we're seeing is "Yahoo all over again."
Marc's problem with Facebook's advertising strategy is that he contends they have failed to listen to what advertisers want and ignored the Internet Advertising Board's standards for ad specifications making it hard for advertisers to use the opportunity that Facebook should provide.
When it comes to the question of whether Facebook can find the unicorn -- the killer revenue generator I discussed in the previous column -- Marc is far more optimistic than I am: He rates the probability of unicorn finding at 40% compared to my 1% (Marc, did we make a bet on this? I'll put 50 bones on no unicorn in the next 12 months ... we on?)