This post: http://www.businessinsider.com/facebook-and-twitter-will-always-be-crappy-businesses-2010-2 made the obligatory electronic rounds at Kosmix today. The high-level gist of the post is that Facebook and Twitter are uncontrolled Wild West environments that scare the bejesus out of ivory tower brand managers and – gasp! – even worse, ad agencies.
The post is also peppered with some cool history from Tripod.com, which Bo founded (Respect!) and ran in the 90s and how difficult it was to sell advertising on Tripod because of the fact that it was all user content without brand controls. This was all likely true back then, and community sites of all stripes certainly have challenges selling advertising.
But the overall argument is flaky at best and intellectually lazy at worst.
First of all, this ain’t the 90s. While brand managers and agency types continue to be “scared”, they’ve been brought to the Internet kicking and screaming. Hell, some of Facebook’s biggest advertisers are the same folks who run the biggest brands in the world (Procter and Gamble being the poster child here). Yes, FB’s *largest* advertiser might well be Zynga, which in turn derives its dollars from DR advertising types or other questionable marketers. But the larger point remains; brands and agencies are slowly getting more comfortable with social media, and the overall trend is undeniable in this direction. Brands and agencies recognize that they MUST engage with social media users; this is the whole point of Federated Media’s strategy.
Oh, and what to speak of Facebook’s rumored 700 million dollar plus topline number? You think Bo’s EverydayHealth makes 700 million topline? FAR FROM IT. Ask anyone in the industry in the know.
Secondly, yes, within certain verticals social media has an intractable problem. Word on the street is that DailyStrength, a Web 2.0 health darling, had to sell itself for a song because big pharma would never advertise on a UGC site (btw: I was formerly Product Manager for the second largest health site on the web so I’m not talking out of my a** here). An informational site like ours, or EverydayHealth in the case of Bo’s current venture, has an easier time making a brand sale.
But turning a data point like this into a blanket indictment of social media is simply naive. Social media sites have lower content production costs, more pageviews, lower CPMs but (potentially) higher total revenues.
Lastly, Bo tries to tie together – unsuccessfully – the connection between search and social media and how VCs have been fooled by the success of the first into investing heavily in the second. Again, this is irrelevant. Search and social media are simply different. Yes, social media will never sell at the CPMs as the kinds we command (at RightHealth and Kosmix, to speak nothing of what Google and Bing and are seeing) but THEY DONT NEED TO. They need to make thin margins against *their* cost of doing business at the volume of billions of impressions. A great business and one that I’d get behind any day.
The reality here is that the sites that are truly screwed are the small/medium social media sites – like DailyStrength – that can’t make the brand sale (yet) and lack the size and heft of Facebook and Twitter or even Ning. But Bo fails to make that point explicit and goes after, specifically, Facebook and Twitter.
Which, to me, makes no sense at all.