Will Facebook Collapse and Take the Ad-Supported Web Down with It?

  • MIT’s Technology Review offers a provocative analysis of Facebook’s future and its potential influence on the industry.
  • “For all its valuation, the social network is just another ad-supported site. Without an earth-changing idea, it will collapse and take down the Web,” suggests the article.
  • Online ads are increasingly ineffective. Offline ad rates of $10 have now become $1 online and sites are trying to make up the difference by rapidly acquiring more viewers.
  • Facebook, which gets 82 percent of its revenue from advertising, has convinced everyone that it will be able to use social data and invent a new kind of advertising. Yet its social advertising is something that General Motors, for example, has said is just not effective. And the more users migrate to mobile, the more difficult advertising becomes on such small screens.
  • Google has become a facilitator between users searching for things and companies trying to sell those things. Facebook — which has the scale, platform and brand — also wants to become a facilitator. But it lacks the big idea to do so. It claims to know what people are thinking even before they do, but it does not have a way to take advantage of that fact.
  • “Absent an earth-shaking idea, Facebook will look forward to slowing or declining growth in a tapped-out market, and ever-falling ad rates, both on the Web and (especially) in mobile,” suggests Technology Review. “Facebook isn’t Google; it’s Yahoo or AOL.”
  • Eventually, Facebook will lower its per-user revenues — thus forcing others to do the same, putting all ad-supported sites into a downward spiral.

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