Jun 03, 2009, 10:32AM

Help Facebook Make Money

And be more like eBay.

I would like you to tell me if you know what this means:
“The long-rumored payments system, which is in its early stages, will allow users to purchase Facebook ‘credits,’ then use those credits to buy virtual goods from the third-party applications that run on the site, or from Facebook itself.”
This, according to the Financial Times, is one of the ways Facebook plans to make money. It may be that this quagmire of language came about because they have bad writers at the Financial Times, but more likely it is because Facebook itself is in the swamp of a sinking business model.
Anyway, as far as I can tell, what Facebook would like to happen is for software developers to sell digital stuff with Facebook and allow Facebook to act as a digital credit card, taking a few pennies off every purchase. 
Digital stuff means mostly games and music—though maybe, somehow, other stuff, too, making Facebook, from the FT’s mouth to God’s ear, “a significant e-commerce player.” 
“Over time, this will be very significant,” one Ray Valdes, an analyst with Gartner Research, told the FT. “Social networking sites have suffered with monetizing [their services], but this leverages [the fact that] users are there on Facebook.” 
This too means nothing—or it means that if Facebook can turn the idea of social networking into the idea of eBay it could perhaps make money.
“Potentially you’re looking at Facebook as a shopping portal and a source for music downloads,” one consultant, reaching for a ray of optimism, assures the FT. (What usually happens in these instances is the reporter calls up the analyst who, because he desperately wants his name in the paper, strives to say something that the reporter will quote, even if the analyst has no idea what to say.) Yes, well, so this means that Facebook will be competing not just against eBay, but against iTunes. That’s a business plan: Go up against entrenched market leaders.
The FT story also notes that Facebook recently agreed to a $200 million investment from something called Digital Sky Technologies, identified as a “private Russian Internet investment group.” The FT did not point this out with any apparent intonation or raised eyebrows. But it should have. “A private Russian Internet investment group,” indeed. Not only was Facebook obviously and desperately searching far and wide—and coming up with nobody better—before it took dough from the Russians, but the investment values the company at $10 billion, a dramatic fall from the last time Facebook was in the market for investors.
The Financial Times story was written as though this is all good news for Facebook. But let me tell you what it means: It’s all bad news.
  • I'm a semi-regular user of Facebook, and count me as one of those who will drop it if I have to pay. There are other ways to keep in contact with friends.

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