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August 21, 2007
How JP Rangaswami could help Facebook
I like quite a lot of what I read at Confused of Calcutta, a blog written by JP Rangaswami, who works as CIO of BT Global Services to keep the bills paid while he’s not blogging.
Today JP skilfully dissects a muddle-headed assessment of the economics of Facebook, run by the Wall Street Journal. This follows the news that TripAdvisor.com (a tentacle of online travel agency Expedia) has made free with real money (reportedly $3m, but I’ve not seen it confirmed) to own a minor add-on to the Facebook social networking site.
JP argues that questions explicitly raised in the article - such as “What’s in all this for Facebook?” - are obsolete and irrelevant queries, “questions that are typical of Web 1.0”.
“We have to move away from the mindset in the article, which represents the economics of scarcity, to one which represents the economics of abundance,” JP argues. “We have to move, more particularly, away from models which create artificial scarcities in order to support economics-of-scarcity structures.”
In other words what’s in it for Facebook is the prospect of a rich and growing community from which it makes money in other ways. From paid-for services it creates itself, or from (with dreadful inevitability) targeted advertising.
I was bang in agreement with JP right up until this point. But then came this oddly ill-fitting paragraph:
“From what I’ve seen, the guys at Facebook understand all this, so I do not expect to see artificial scarcities created. Instead, I will expect to see advertising-driven revenues. I will expect to see transaction fees, but more on an all-you-can-eat basis rather than a dish-at-a-time basis. I may even see vanilla-for-free and sophisticated-at-a-premium models. Or maybe a combination of these.”
I’m not quite sure how JP comes to these conclusions. Perhaps he hasn’t seen Facebook Gifts, the stupid, dollar-a-pop, limited-edition pictures of things that you can send to Facebook buddies. Let’s see: artificially scarce? Check. Dish-at-a-time pricing? Check. Completely lame-brained? Check.
Maybe the guys at Facebook should swing by JP’s blog and see what they ought to be doing.
Lem, I was aware of the $1 gift "business". Maybe it's a blind spot for me, my initial reaction to that market was "wow, Barnum was right, there's definitely one born every minute". Then, as was the case with paid-for ringtones, I succumbed to telling myself "well, it's another generation, a generation I have to try and understand".
The gifts seem to come out in 100,000 or 1,000,000 editions, I have rarely seen the 10,000, and I've seen nothing lower.
Overall, point taken, I was aware, but I dismissed it as the vagaries of a new generation.
Posted by :JP | August 21, 2007 4:37 PM
Thanks to Lem for pointing out this article and to JP for yet more thought-provoking debate on the growing 'abundance' as something that enterprises are looking to get back from - not just react to.
Today another friend from a fairly large organisation told me they've had Facebook blocked, and another two peers have started thinking about how a system like Facebook could streamline efficient enterprise communication where email has kind of snuffed it out.
Posted by :Drew B | August 21, 2007 5:20 PM