is facebook’s monetization killing off customers?

Now that Facebook actually has to make a reasonable attempt at being a profitable company to shareholders rather than just living off of private investment, it was inevitable that Facebook would eventually begin steps to monetize its Internet product and attraction. However, the way CEO Zuckerberg and company are going about the issue is really getting a number of bigger client players upset, enough that they are stepping away from Facebook altogether as any kind of a viable business marketing model.

The problem has to do with Facebook’s new “algorithm” approach to messaging in the Facebook world. In doing so, businesses and company clients continuing to use old, free methods are seeing their reach cut in half. To return to maximum impact Facebook is offering access again, but at a price. Actually, the company offers a menu of prices, but each message triggers a charge of thousands of dollars. The day of Facebook pricing and selling its database of users has finally arrived.

In fairness, the social media giant positions itself in the argument that it has spent a lot of effort and time making its messaging system work far better, hitting readers who are interested in specific items rather than just anybody. With the use of Edgerank, the actual model applied, Facebook tracks the activity and posting as well as the reading of every Facebook user and then leverages that information into marketing reach products, i.e. targeted access. The extensive tracking is described under the altruistic goal of elimination spam. Not many believe that.

In reality, Facebook’s changes are far more in line with maximizing company revenue as much as possible. Unfortunately, doing so is exposing the company’s management as amateurish in how it goes about monetizing tasks and tools that were once free. The blundering in turn is causing big brands and business to rethink their use of Facebook, especially with how aggressive the revenue push is.

Many affected companies are not dumb. While Facebook does dominate the social media environment simply because it’s so easy to use, the format is not the only social media option available for marketing. Twitter plays a close second place and a number of other platforms are starting to gain in popularity. Client companies are simply rejecting the high-pricing level outright, especially for a resources they’ve been using for years for free. The idea of being charged to maintain and increase social media “likes” and “friends” is offensive.

Social media has for the last five years been pushed as the next great frontier of marketing. However, all of that activity has been based on a model that never charged a fee for using its environment. As a result, reach was viral and powerful because everyone likes something that comes free and works. Now that a fee is being charged, an expensive one at that, the basic business question comes into play: is the return on investment worth the up-front price? So far, Facebook’s algorithm model is not considered worthy. Gain ambiguous friend statuses and likes are one thing if free, but paying for them when the model still hasn’t shown a proven model of creating new customers is quite another.

(image:flickr)

6 thoughts on “is facebook’s monetization killing off customers?

  1. Randy, great post. I think many of us are baffled (or unhappy) about the chain of events that has unfolded since Facebook’s IPO.
    If I may, I’d like to play Devil’s Advocate (risky – but I’m ready for the backlash). I don’t think in most situations people would bash a company for making BILLIONS of dollars on their IPO – especially if it wasn’t worth quite that much. What many people would say is, “WOW. Great job. Now tell me how you did that so I can emulate you.”
    I also think that the “big wigs” who are complaining (think Mark Cuban) are a bunch of whiners. I only guess how much money Cuban and his Mavericks have made of of their (mostly free) Facebook marketing tactics. And now he wants to complain that he has to pay a few thousand dollars to reach more of his Fans?? Phooey. I think (if I stop playing Devil’s Advocate) the people this really hurts are the SMBs or NPOs who are utilizing the Facebook platform to gain much-needed exposure and business.

    All that said … I’m on the fence with the EdgeRank algorithm. As a marketer, I appreciate the fact that it “weeds out” some of the lazy marketers (if only the algoritm would start penalizing marketers for those ding dang cat memes). Part of me also realizes that even those Fans who’ve ‘Liked’ the B2 Page just might not be that into me.
    And being that Facebook has been pretty much free (mostly – we’ve run a couple of ads and have done one promoted post), it’s hard for me to get my britches in a wad.

    Again – all my opinions and definitely “playing the other side” for the sake of intelligent conversation. :) In any case, you’ve presented a wonderful topic. Thank you!

    • No backlash from me Brooke and I thank you for the discussion. As they say “Don’t take it personally, it’s only business.” It may be hard for many who have invested so much time and themselves into thinking it would always be there and not only would it be there, it would be there for them as they want (demand) it! Someone else did the R&D, engineering, manufacturing, etc. and we all got a very luxurious “test drive.” A nice shinny model with a bunch of horsepower does not come cheap, a struggle all of us SMB’s have always had to deal with, right?

      As for your take on major players attack of the platform and the business shift, just a cheap promotional trick. Discussion and debate yes, who would develop a “golden egg” and not want to gain at least a little profit?

      • Agreed. I suppose “business is business” in many regards. I’m NOT saying I haven’t been exasperated or called Facebook and total piece of #$@^, but I think overall Zuck is just trying to make that paper. He has to learn how to be a public Zuck/Facebook/company now, and that CAN’T be easy!

        • Zuck just needs a business guide, hopefully he has that now. But the idealistic (awesome) dream turned to reality! I do not think fb is at all evil, in fact, genius! I think of the potential that exist, it is exciting to see the evolution of it and the SM sphere, I see many more changes to come! …and ain’t nothing for free!!!

  2. Well said and nicely balanced. I totally agree that the people who have lost the most so far are SMBs or NPOs.This in itself causes ripples and issues throughout the Facebook user base.

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