I realize the potential Facebook has with it's member base, given the inherent nature of Metcalfe's Law but I use Facebook to keep in touch with my friends who aren't savvy or willing enough to use Twitter; a networking site that doesn't expect it's users to sit by idly while companies poll and query us to sell products otherwise we wouldn't even blink at.
They're not a charity as far as I know.
Even if you 'resign', they still have your data.
Before you leave, poison your data.
Gartner, one of the largest marketing research companies in the world, had an operating income of 133 million US$ in 2007 according to their annual report. 56% of their turnover comes from market research, the rest from consulting and events. Assuming that all divisions have a similar operating income per 1000$ this puts the operating income of the market research division at $75 million.
Assuming a P/E ratio of 10 this values the marketing research division of facebook at $750 million.
In other words: If facebook marketing research executes perfectly and becomes the world leader in this field, which is very crowded with a lot of large players that have been around for many years, it will be able to account for 5% of their current valuation of $15 billion.
Even if they did pull this off, which is unlikely, it would still be a drop in the ocean.
I'm not sure any of Facebook's competitors have the number of users, or the kind of brand loyalty, that Facebook can offer. It's also easier for Facebook to be a social network that does market research (and more..?) than for Gartner to be a market research company that does social networks. Social networks are just a great foundation for a lot of other businesses.
Also, I think that in reality there isn't as much brand loyalty as people think. Three years ago pundits said the same thing about myspace.
My position is that facebook is vastly overvalued - Gartner was just an example to show that even if they become the biggest in the field the income would still not justify their evaluation.
In fact Gartner has a market capitalization of 1.3 billion US$, meaning that facebook should be worth more than 12 times gartner. And Gartner has 4000 employees, 60.000 clients, and offices worldwide.
The thing is that maybe, it isn't huge enough precisely because current tools aren't that good. Setting up a focus group is a PITA.
Letting any business make questions to a big audience is awesome. If FB restricts this kind of polling only to big companies, it will fail (for varying degrees of fail, specially expectations on FB making lots of cash). Because it's the big companies that have the money to gather this kind of data currently.
Now, if any business could tap into the Facebook audience, that would be cool. Google has proved that < $1 dollars transactions, in internet scale, can make billions. Now if the mom and pop pizzeria on the corner of a NY street could do their market research on FB... or if anyone looking to expand their business can reasearch what's the average income on neighboor town, what kind of sauce they prefer, what they drink...
Also, there's a huge PR opportunity there. This data could be free to the government (and ngos). A few press releases here and there saying how you helped to determine what citizens want would generate good karma for FB.
Do you remember when everyone was afraid of MS? If this FB stuff gets any kind of traction, Google will release its own thing. You can't be better than Google at data mining. Granted, there's not much personal data with Google than FB has. But why do you think FB doesn't like the idea of cooperating with Google on OpenSocial?
Google is not god.
People spend money in social contexts, why not try to take a cut? Let event planners set a price for events, and take a small cut. A group of friends wants to go to a movie or a concert? Make it trivially easy to set up the time and place and take a cut of the ticket sales. Someone's birthday coming up? Let groups of their friends make a group purchase from their Amazon wish list and take the sales commission (then gradually phase out Amazon). Where's Facebook's version of Paypal, OpenTable, etc?
The problem for advertisers is getting someone to pay for a service they found while browsing a social networking site.
zuckerberg has said it many times that he thinks of facebook as a utility. despite my reluctance for many years to use facebook all that much, more and more it's becoming ad much a part of life as IM or email fot me. with so many users a few dollars from a small percentage goes a long way.
If it currently takes two weeks to do a focus group, and it takes 30 seconds on Facebook, then not only does it become reasonable to ask questions that you need only five minutes to digest the results of --- but you'll be willing to pay 4000 times as much, say, per question. Or, more likely, ask questions that are 4000 times less valuable, and pay the same amount.
That's not plausible --- there's probably some other limiting factor. But it could easily be bigger than Gartner.
Doing a poll on this thing could have the same relationship to traditional polling and focus groups that Google has to library research. I do maybe 100 Google searches a day, maybe 100× as many as I ever did card-catalog searches in a library. Can you imagine marketing guys and politicians doing 100 opinion polls a day?
In my own work, we do a dozen or more experiments every day, and our typical value is p=0.0000001% -- one in a billion or so. Sometimes we get a p of one in a trillion. And even then we agonize over whether we should believe the results of the experiment.
Don't you wish you could do a dozen or more experiments on human subjects each day, with a p of one in a billion?
I thought about returning to Facebook, as many friends are on it. But reading this article has confirmed I was right to leave. Thanks :)
It seems like it'd be self-policing because it was local. It'd be a somewhat efficient market. Just a thought
Besides that, using facebook as a 'panel' seriously degrades the value of the company as a whole, panels are commodities and are definitely not valued in the 10's of billions, even the very large ones.
There are lots of players in that segment and most of them were put together with the express purpose of being used as panels, it's quite easy to get access to panels with large numbers of respondents in a given target demographic.
That's especially hard when your demographic is working single moms from Nebraska or something equally arcane, if your database isn't set up to record such information right from day 1 then you're not going to add it afterwards in an easy way.
And those respondents are usually paid for their work, fb will do the opposite, nag you and charge you to opt-out.
Of course facebook will have to turn a buck but I highly doubt this is the way to make it happen.
