Facebook Is Dead

Putting advertising on social network websites like Facebook or News Corp (NWS) MySpace has never made sense. They claim to have tens of millions of "members", "users", "friends". Some of those people are doing dark and deeply disturbing things online. Others are looking for a date or communicating with other agoraphobics.

The whole idea of building a social network is a bit of a fraud. The sites actually "suggest" new friends for you, people like Jim Cramer and the recently deceased pin-up girl turned crazy old woman Betty Page. For a lot of the visitors who have no friends, it may actually be a useful service.

Typical Facebook user posts pictures of themselves in their underwear, their kids, their pets–especially exotic birds. The site has become a rabbit warren of the perverse, the sociopaths, and the lonely–all people who would rather communicate in a semi-anonymous online world instead of face-to-face.

The New York Times recently ran an article suggesting that social networks were not fertile ground for major marketers to advertise their products or services. It pointed out that big-time tech research firm IDC was asked to have a look at this marketing problem. The report described social advertising as “stillborn.”

Barack Obama has a Facebook page, but so do most inmates in state prisons. Obama’s page shows he has 3,412,179 supporters. By contrast, it is easy to imagine that there are millions of abandoned Facebook pages which people built once and never visited again.

Anyone coming to Facebook and putting Obama’s name in gets a list of sites, with his campaign’s being at the top of the list. Off to the right is a text ad which is supposed to be appropriately placed to get maximum exposure. It reads "Barack Obama’s IQ = 136, Can you Beat his Score? Take our 2 minute IQ test." In other words, there is nothing appropriate or relevant about the ad. It is a come on to sell a $9.99 subscription to a service called ":Amazing Facts", which sends information to the customer’s cell phone.

Any real national advertiser would look at the way the Obama search data is being used and take the Facebook ad salesman’s phone number off of his speed dial. Procter & Gamble (PG) has been testing Facebook to see if it is a good medium for brand advertising. No one ever talks about results. The typical Facebook member either can’t afford an expensive P&G Gillette razor or finds the ad so annoying that he will shoplift one the next time he is out to get back at P&G for disturbing his tranquility the last time he went online to visit one of his pathetic Facebook "friends."

Looking at Facebook through its dark side shows how inappropriate the site is for any real advertising. Search for the homepage of former genocidal dictator Idi Amin Dadi and the adjacent ads include one of a Gifts.com holiday gift card. It can be used at Gap (GPS), Barnes & Noble (BKS), or H&M. That certainly burnishes the gifts.com image.

The Google advertising model works because the user is "in on it". He visits Google and puts in a keyword because he wants access to highly organized and useful information. If there are a few relevant or irrelevant advertisements on the page, it is a part of doing the business of getting information. Since many of the messages are actually closely related to the search results, marketers get a solid return.

The last time Facebook raised money, the valuation was $15 billion. Yahoo!’s is $18 billion and it has some assets in Asia that are probably worth $5 billion. The portal also has annual revenue of $7 billion and makes money. By most accounts Facebook had revenue of $150 million in 2007 and founder Mark Zuckerberg  said that number would hit over $300 million this year. Between the recession and Facebook’s general failure as a way for marketers to reach customers, that number is a mirage.

Whatever Facebook was worth a year ago, it is worth a small fraction of that now. The dirty little secret is that social networks are the playgrounds of people who do not want to be disturbed as they wander a self-centered universe. For them, having someone put an advertisement on a page they visit is as bad as bringing atheist to a church.

Douglas A. McIntyre