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Originally Posted by SpartanGreen78
I see where you're coming from--and I agree that Facebook is overvaluated according to the numbers thrown around here. But I think you made my point in that in terms of advertising on facebook, less is more. Myspace is a cluster****** of crap. Facebook is clean--there's rich content and very little noise. So in which interface is advertising going to grab more attention---especially if they're using data-mining to target the ads.
And it's irrelevant whether people click-thru internet advertising--that's a secondary objective. The first is the impression--putting the image, the message, the brand recognition and identity in the mind. I don't know Facebook's impression rates, but I'd assume they're pretty good--which translates into value for the advertisers. Hell--what's the ROI on a $2.5M super bowl commercial? Does Bud Light recoup the tens of millions they spend on producing ads and buying media as a direct result of the ad? No--it's indirect. The ROI doesn't come from sales, it comes from the branding.
Yes--enterprise server systems are expensive. But I still maintain that the marginal cost of another user--the price of adding storage and computing capacity--is negligible, since each additional user adds more value for advertisers as described above.
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My prediction is that once there is an IPO or a corperate buyout for big $$$, the pressure is going to come down really hard to instantly drum up ad revenue. And then the ads are going to start. And as they do that, users will turn away for the next Facebook; some startup that has a new idea and a fresh and useful look. And I'm no ad exec, but a quick check of a few Facebook pages show exactly zero ads that are trying to get "branding" of anything. They are mostly text based: "Click Here to get $100 Hotels in NYC!" side bar ads, "Meet Local Singles" pictures with no company name on them, etc. These are not indirect advertizing methods, but rather ads that are trying to get you to click on them and visit their site.
And here is where people will get stuck up: Google makes massive loads of cash with ad revenue, so why won't Facebook have a similar patern of success? This won't happen because Google is a "portal" (the whole point of going there is to find a path to somewhere else), while Facebook is an "end-point" (you usually don't go to Facebook looking for another site). As far as hosting goes, the cost of a few users is practically zero. But when you are in the business of volume (as you need to be to get profit from ads alone) this number can climb quickly.