My advice to Facebook

Posted at 7:13 on Wednesday February 08, 2006 | Filed Under Miscellaneous , Personal entrepreneurship

My friend Noah Kagan is a product manager at Facebook. He just coordinated the rollout of a new Valentine's promotion, which I thought was pretty cool.

But I also had some suggestions for him, which echo my suggestions of not getting greedy and trying to monetize things too quickly (see On Greed and Speed).

Now, The Facebook has already built an incredible community, so they can monetize all they want. But there are times where going slower will, I think, actually be more profitable. Here's what I emailed to Noah:

I was thinking about your Valentines promotion today.
This is a good example of something that can be turned into a viral-marketing effort, or slowed down by barriers. First of all, I really like the idea. But my guess is that adoption will be relatively low (by percentage) because...

1. It costs money
2. A lot of money
3. And because it costs money, the most any user will send is 1

Here's what I would do for the next promotion of this kind: Make it free, but offer value-added services. For example, if I did the Valentines thing, I would:

* Let people send 5 free Valentines, and charge $ per Valentine after that
* Make paid Valentines stand out more (e.g., offer to include a picture or video, change the color, etc)
* Add a permission piece to it, by adding a checkbox saying "Join the BlahBlah group" or "Get notified about a special BlahBlah we're doing in March."

As a result, you'd get probably 100x the Valentines sent. Yes, you'd get lower immediate revenue and have some logistical problems (with 50,000 Valentines at Stanford, would any of them be seen?) but those can be worked around by targeting them and some other clever ways.

But the upside is that (1) immediate traffic would go up, making it ripe to tie that day in with your ad team, and (2) if you tied the checkbox offer to an upcoming promotion, you would more than make up for it by building a huge, opt-in permission asset.

Anyway, just a thought.

-Ramit

Comments (7)

1.: I am a facebook user. I think they are doing much better than Myspace so far, there are very few ads, and most of the ads that they do have are text only. It seems kind of like the google AdWords or AdSense or whatever its called approach. I'm not sure how much these valentines things cost, and I think valentines day sucks so I wouldnt purchase one, but the most the average college student would be willing to pay for that is probably 2 dollars. Also, if they cost money, they will probably only get about 75 people tops per school to actually use the service, I'm not sure how many schools are on there, but there are a lot more than 75 people signed up at each school.

Posted by Mike at February 8, 2006 07:39 AM

2.: I agree with you that doing it for free would definitely get people to do it, and then monetizing it would yield higher revenues. That seems to be the new model that companies online are beginning to use.

One note on myspace vs. facebook though: As a user of both, I prefer facebook, mianly because it won't freeze my computer when I go onto a page that has a ton of media on it.

But, I think myspace has been much more successful in pop culture for a few reasons:

1. Anyone can sign up
2. You can view people's profiles that you don't know
3. It's easier to find people
4. There's so much more customization

I think that unless facebook changes most, if not all of the items on this list, it will go the way of friendster, as it will become useless to college graduates.

Posted by Gualberto at February 8, 2006 08:26 AM

3.: I disagree that it will be useless to college graduates. College grads will still be able to sign on once they have graduated and track what their friends from college are doing now a days, it will also give them a way to get in contact with people from school they have lost touch with. Granted once people graduate they are probably 50% less likely to log on everyday like they do in college, but once a week is still fine.

Posted by Mike at February 8, 2006 08:53 AM

4.: My wife is an avid facebook user. I have had myspace for a while. I actually DESPISE myspace, but I have many college graduate friends on there that I can easily locate (that, and I dont know that most of them have heard of facebook).

I was VERY pleased with facebook. The simplicity, the ease of use, and clean interface. Sometimes TOO much freedom can defeat the purpose. For instance, those people on myspace loading their profiles with music and video probably have NO IDEA that its locking up other browsers. They are just doing it because they think its cool. I think facebook should stay simple and limit that so you dont have to deal with all of the junk that people think is cool to them. I hate (and will instantly click out of) a site that automatically starts playing a video or music. I listen to my own music, I dont need theirs.

Ok, so that was a rant on myspace. Personally, I think facebook is much more professional as a tool.

Oh, and I also agree with your post - hehe.

Peace,
Nate

Posted by Nate at February 8, 2006 11:37 AM

5.: Ramit,

Key challenge for websites: training people to spend money.

training people to click on ads.

If you don't do either one, you lose.

Amazon is great because they trained people to spend money. Blue Mountain Arts never did.

So, your point is well taken, but sooner or later facebook has to either do one, the other, or sell to Yahoo.

Posted by seth godin at February 8, 2006 12:34 PM

6.: I once tried advertising a consumer credit website that i own on facebook.com and the results were terrible.

I would say that out of 4 schools that i advertised in for 3 straight days, only 4 people visited my site.

I will never spend another dime on facebook advertising.

Don't get me wrong, i like facebook. It allows me to keep in touch with old friends etc, but when it comes to giving them your money for advertising, be careful..you will get burned!

Posted by Jonathan Radande at February 9, 2006 04:34 PM

7.: I agree with your line of thinking, if not the exact thinking itself. I feel like this Valentine's Day offering was poorly thought out. I use the site on a regular basis and am curious as to how they'll be growing new revenue streams.

I disagree with you on one point though: that the Facebook has all the time in the world to monetize its operations. Given the disruptive nature of rapidly growing social networks such at Facebook, MySpace, Naptster, etc. I think it's hard to make accurate predictions about the future. I say this because what's hot one day, may not be the next.

While network effects are hard for new entrants to overcome, the underlying functionality of sites like the Facebook is not at all hard to emulate. The Facebook needs to secure steady sources of revenue they can grow into the foreseeable future. And they need to do this now. The way I see it, the Facebook cannot solely sit still and rely on text ads aimed at a generation increasingly oblivious to conventional and repetitive forms of mass media advertising.

Posted by MCF at February 16, 2006 01:18 PM

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