Competing with millions of Craigs

As Facebook comprehensively jumps the shark with its Beacon debacle, the big threat to the latest ex-future Google is not going to be user privacy or the wilder claims of its youthful management team. The big threat is going to come from social networks that won't go all out to milk their userbase for every penny.

Dave McClure points out, quite rightly, that Facebook still looks strong in almost every important commercial KPI - users, engagement, valuation. All true, but it's chasing after a justification for that $15 billion Microsoft valuation that's going to kill Facebook. Facebook isn't the sort of old-media monopoly that can get away with milking its userbase for $300 a head. It's just a network with irritatingly high switching costs and high switching costs really aren't the same as a defensible business model. 

(In the almost ten years that I've been using one blogging / social media platform or another me and my friends have adopted a new platform more than once. Sure it's a big pain, but having done it I know it's just a big pain, not an insurmountable barrier to entry for the next site that comes along.)

So what's Facebook's big challenge? Kaioo, and things that are run like Kaioo. 

When we think about media as a business, as a way of making money, the people who should worry us aren't the next technology innovators. The sort of disruption that can be achieved in / to our industry via technology alone is (relatively) trivial. No, the people who should worry us are the business-model innovators, or more precisely the people who don't have or don't want a business model at all.

Kaioo is a German social network that is being run as a not-for-profit. Sure it plans to make some money, says PaidContent, perhaps from advertising or downloads. Servers and staff (even a staff of two) aren't free. But the profits are apparently going to charities chosen by the users. Remind you of anyone yet? It reminds me of the guy who tore up the business model for US classified advertising and told his customers to just keep their money; who by one estimate took $50-$60 million out of just San Francisco's classified market in one year with a free listings model; and who so genuinely doesn't care about making money that he told the NAA convention that "the only think I lack in my life is a humming bird feeder that actually attracts birds".

It gets cheaper and easier every day to build and run a website. We've barely begun to understand or explore the true consequences of that transformation - although Wikipedia, that apparently runs on $75,000 a month, PlentyofFish, the dating site that operates with two full-time staff, but most obviously Craigslist are perhaps the early indicators of where this might be going. Facebook is a social network that to justify its valuation somehow has to get $300 lifetime revenue out of every single user. It is increasingly going to find itself competing with social networks that  have no greater financial needs than to make payroll and hire servers; that, in other words, can afford not to make compromises and shortcuts about privacy, usability and commercial clutter.  

Comments

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Your comment "It gets cheaper and easier every day to build and run a website. We've barely begun to understand or explore the true consequences of that transformation" is very true but competition is also growing...