[Disclaimer: It's 2:30am right now. We got home pretty late after a last minute dinner invite; The restaurant, dinner and company was awesome and about to type the following completely freestyle...]Social networks should focus less on advertising and more on transactions! Their revenue generating strategy(ies) should be more about replicating Amazon.com's model versus Google's advertising monetization methods.
In future could we be the proud owners of Facebook credit cards and/or bank accounts? Mmmmm
Transparent Real Time Transactional Enablement (TRTTE) is what social networking needs...not only ad injection in API reference streams and social graphs!
Amazon made the acquisition of goods online seamless, transparent and instantaneous... AMAZON REMOVED THE NOTION OF A SHOPPING CART BEFORE OTHERS HAD EVEN INTRODUCED PURCHASING CAPABILITIES ONTO THEIR WEBSITES. See this overview of 1-Click and the motivation Jeff Bezos and crew had (very interesting!)
Note: remember the big Barnes and Noble versus Amazon lawsuit? Amazon attacked BnN when they introduced a derivitive of 1-Click capabilities...based upon their filed patent...settlement was out of court....
The ability to transact and acquire products/services online still remains a dilemma... The notion of the abandoned shopping cart stat is one we've seen since the late nineties....
Flick back to social networks today... Not one of them are making any profits! Twitter is burning cash and people utilizing the twitter stream are making money before them! Everyone seems to be focused on advertising as the main source of revenue... Everyone seems interested in introducing the Google advertiser business model into their social walled gardens...
Note: Facebook's main revenue....and only revenue will be coming from their homepage ads...not the ads seen on the right hand side of the screen on your facebook profile or apps pages (yip, those are ads...fyi: most people don't event notice they're there. Btw, in terms of screen eyeball heatmap studies done by Google...the least clicked upon ads are the ones on the right hand side of the search resultant landing page...the most coveted positioning are those three sponsored links located just below the search field and just above the natural search resultant link listings)
Social networks are hard to advertise relevantly within... Advertising to a user is evolving into advertising for a user... Ads are becoming a part of contextual and relevant information at that moment/instant of relevance versus the shotgun billboard next to highway model or tv ad. Search is the perfect medium/platform for the delivery of this "information" in that manner...social networking is not! It is too general purpose and usually stuff finds me, not the other way around... Relevance, timing, geo location, device usage, circumstance and context are attributes extremely difficult to correlate to deliver great ad quality scores... It becomes worse when you open up the platform for 3rd party development and more general purchase data/app delivery... Relevant and effective adverts with high click through rates aren't going to happen soon... So how are these guys going to make it?
I wish to posit that sustainable social networks...no wait...I wish to posit that the online social holy grail is the transactional enablement of all content, apps, services and all else relevant throughout a social graph... Imagine the 1-Click purchase enablement of anything and all things within social networks?
Yip, that means the future of social networks may lay in being the platforms/NOS's enabling mania and innovation around individual/group social graphs...yet focusing on revenue via actually being the couriers for seamless payment/transactions/purchasing for all things above... Yes, a complete replica of Amazon...
Amazon built their business on being open...but their key component that kicked everyone's butt was that "1-Click purchase button...not just ease of use but same look and feel enabled throughout the site...whether you're buying a new book, the latest DRM free MP3, or a garden hose...just click that button and we'll take care of the rest...
I want that in my facebook account, in my orkut account...and wherever else I wish to take my social graph. Fyi: Myspace tried this within their social container but the complexity/limitations/single application is too much for the consumers to ensure broad purchase enablement... i.e. their partnerships with the big record label companies for music sales via myspace... Those are silo attempts at what I'm trying to outline here...
Why would I describe the [social graph enabled "1-Click" purchase button] as the holy grail? Well, just think of all the applications and appeal to any financial institute if a user can buy things within their walled garden, draw others into buying...imagine mass purchasing capabilities...and now with Facebook connect and the new Facebook stream api...the user would have the ability to take their entire social graphs wherever they wanted online...to peruse, comment, and finally....transact ;)
Then the question about making money via advertising is less of a focus... Give the user and their social graph the ability to leave home but buy with daddy's credit card :-) ....which would actually be their own...
Hey, maybe step one is the introduction of a social networking virtual currency standard...? ie paypal for all social networks? Similar to the SecondLife Linden Dollar? Nah, don't think so :-)
Anyway, I do believe If a social network cracked this one they would become one of the largest financial institutes in the world...providing all facilities necessary for transactions... Imagine the facebook credit card...pretty cool me thinks... Imagine browsing through stocktwits.com and when you like what people are tweating about re CSCO, you just simply select purchase 1000 Cisco shares and then clicking on the "1-Click" purchase button which is connected with your facebook account? The various applications, evolutions and derivitives of this can be opined about all day...
The architecture of this model is simple... Focus and wrap the same open standards and interoperability frameworks (eg opensocial for transactions/payment) around "buy now with 1-Click"...
Social networks may become the authoratative stores for our identities, bank accounts and manner of ecommerce...apart from ensuring non-repudiation and all the security/governance/compliance "stuff"....
So, what do you think? Is it really as simple as just social network enabling of Amazon's "1-Click" purchase button? Can social networks evolve to become our social wallets? Will we in future have facebook, myspace, orkut or twitter bank accounts? Or the facebook dollar?
I'm not sure...but...I do believe that the holy grail is commerce enablement of social graphs...not adverts injected into every aspect of online social innovation!
Gudnite!
Transparent Real Time Transactional Enablement (TRTTE) is what social networking needs...not only ad injection in API reference streams and social graphs!
Why do I refer to Amazon.com? Well, remember the "1-Click" purchase patent?
I remember arguing Amazon's business model with Dave Nelson in the Novell cafeteria on a snowy day in Utah, Provo! (Dave was all on about Yahoo!...blah blah) The premise was that the business you're in is not necessarily the business you will be in tomorrow....the bases of this rationale is today modularizing re-usable components of your business... Reusable by all and not just you...
Refer back to Amazon; When they started they were an online bookstore...but that merely became a service executing upon a commerce engine...they enabled other distinct and variable services to execute upon this engine in a similar manner (aka Z-Shops)...
Why did I keep going back to Amazon? Barnes and Noble also launched their website and they had the offline ability in addition...ie buy the book online and get it at your local BAM BnN store... Why did Amazon win?? They won because of their "1-Click" purchase button...
I remember arguing Amazon's business model with Dave Nelson in the Novell cafeteria on a snowy day in Utah, Provo! (Dave was all on about Yahoo!...blah blah) The premise was that the business you're in is not necessarily the business you will be in tomorrow....the bases of this rationale is today modularizing re-usable components of your business... Reusable by all and not just you...
Refer back to Amazon; When they started they were an online bookstore...but that merely became a service executing upon a commerce engine...they enabled other distinct and variable services to execute upon this engine in a similar manner (aka Z-Shops)...
Why did I keep going back to Amazon? Barnes and Noble also launched their website and they had the offline ability in addition...ie buy the book online and get it at your local BAM BnN store... Why did Amazon win?? They won because of their "1-Click" purchase button...
Amazon made the acquisition of goods online seamless, transparent and instantaneous... AMAZON REMOVED THE NOTION OF A SHOPPING CART BEFORE OTHERS HAD EVEN INTRODUCED PURCHASING CAPABILITIES ONTO THEIR WEBSITES. See this overview of 1-Click and the motivation Jeff Bezos and crew had (very interesting!)
Note: remember the big Barnes and Noble versus Amazon lawsuit? Amazon attacked BnN when they introduced a derivitive of 1-Click capabilities...based upon their filed patent...settlement was out of court....
FYI: Amazon licenses 1-Click to Apple for usage in their iTunes store - happened back in 2000
The ability to transact and acquire products/services online still remains a dilemma... The notion of the abandoned shopping cart stat is one we've seen since the late nineties....
Flick back to social networks today... Not one of them are making any profits! Twitter is burning cash and people utilizing the twitter stream are making money before them! Everyone seems to be focused on advertising as the main source of revenue... Everyone seems interested in introducing the Google advertiser business model into their social walled gardens...
Note: Facebook's main revenue....and only revenue will be coming from their homepage ads...not the ads seen on the right hand side of the screen on your facebook profile or apps pages (yip, those are ads...fyi: most people don't event notice they're there. Btw, in terms of screen eyeball heatmap studies done by Google...the least clicked upon ads are the ones on the right hand side of the search resultant landing page...the most coveted positioning are those three sponsored links located just below the search field and just above the natural search resultant link listings)
Social networks are hard to advertise relevantly within... Advertising to a user is evolving into advertising for a user... Ads are becoming a part of contextual and relevant information at that moment/instant of relevance versus the shotgun billboard next to highway model or tv ad. Search is the perfect medium/platform for the delivery of this "information" in that manner...social networking is not! It is too general purpose and usually stuff finds me, not the other way around... Relevance, timing, geo location, device usage, circumstance and context are attributes extremely difficult to correlate to deliver great ad quality scores... It becomes worse when you open up the platform for 3rd party development and more general purchase data/app delivery... Relevant and effective adverts with high click through rates aren't going to happen soon... So how are these guys going to make it?
I wish to posit that sustainable social networks...no wait...I wish to posit that the online social holy grail is the transactional enablement of all content, apps, services and all else relevant throughout a social graph... Imagine the 1-Click purchase enablement of anything and all things within social networks?
Yip, that means the future of social networks may lay in being the platforms/NOS's enabling mania and innovation around individual/group social graphs...yet focusing on revenue via actually being the couriers for seamless payment/transactions/
Amazon built their business on being open...but their key component that kicked everyone's butt was that "1-Click purchase button...not just ease of use but same look and feel enabled throughout the site...whether you're buying a new book, the latest DRM free MP3, or a garden hose...just click that button and we'll take care of the rest...
I want that in my facebook account, in my orkut account...and wherever else I wish to take my social graph. Fyi: Myspace tried this within their social container but the complexity/limitations/single application is too much for the consumers to ensure broad purchase enablement... i.e. their partnerships with the big record label companies for music sales via myspace... Those are silo attempts at what I'm trying to outline here...
Why would I describe the [social graph enabled "1-Click" purchase button] as the holy grail? Well, just think of all the applications and appeal to any financial institute if a user can buy things within their walled garden, draw others into buying...imagine mass purchasing capabilities...and now with Facebook connect and the new Facebook stream api...the user would have the ability to take their entire social graphs wherever they wanted online...to peruse, comment, and finally....transact ;)
Then the question about making money via advertising is less of a focus... Give the user and their social graph the ability to leave home but buy with daddy's credit card :-) ....which would actually be their own...
Hey, maybe step one is the introduction of a social networking virtual currency standard...? ie paypal for all social networks? Similar to the SecondLife Linden Dollar? Nah, don't think so :-)
Anyway, I do believe If a social network cracked this one they would become one of the largest financial institutes in the world...providing all facilities necessary for transactions... Imagine the facebook credit card...pretty cool me thinks... Imagine browsing through stocktwits.com and when you like what people are tweating about re CSCO, you just simply select purchase 1000 Cisco shares and then clicking on the "1-Click" purchase button which is connected with your facebook account? The various applications, evolutions and derivitives of this can be opined about all day...
The architecture of this model is simple... Focus and wrap the same open standards and interoperability frameworks (eg opensocial for transactions/payment) around "buy now with 1-Click"...
Social networks may become the authoratative stores for our identities, bank accounts and manner of ecommerce...apart from ensuring non-repudiation and all the security/governance/compliance "stuff"....
So, what do you think? Is it really as simple as just social network enabling of Amazon's "1-Click" purchase button? Can social networks evolve to become our social wallets? Will we in future have facebook, myspace, orkut or twitter bank accounts? Or the facebook dollar?
I'm not sure...but...I do believe that the holy grail is commerce enablement of social graphs...not adverts injected into every aspect of online social innovation!
Gudnite!
Posts
2 comments:
Some great points, though I don't necessary agree with all your points (Amazon's defining moment wasn't really the 1-click-purchase-button but more overall great usability and logistical reliability)
Your main point strikes it though.
It won't be advertising that makes Facebook profitable. It won't be advertising that makes Facebook profitable. It won't be advertising that makes Facebook profitable.
But what will it be? Transactional fees from using 'Facepay'? Not really. Google screwed around with their Wallet without having real success against Paypal in the market. Facebook may try this approach, but their final success will be paired to the deep access to user data and trust they own. It will involve transactions, but not the 3% payment fee that are currently owned by the creditcard companies and Paypal. Think of it more like an affiliate program / social shopping experience maybe? There are 5-50% margins in that...
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