Matt just pinged me to add my insight into this. Sadly, it would take forever for me to outlay my thoughts textually. I will however try to summarize it and will probably get sniped from all sides as I am skimming the surface on my insights on the subject.
However, here goes before I head back into the editing suite tonight to work on my latest podcast video.
1) Ad Revenue – there is actually quite a lot of money that changes hands here. However, most of that advertising revenue is one sided. In that Facebook is making money on them, but it truly doesn’t generate much sales to those posting the ads. We simply have gotten to a point where banner ads are being ignored and the click through rates are not indicative of actual hard money being exchanged between the consumers and vendors. So point for FB and Google for generating a cash inflow via the model, but not a real value proposition for a company doing a simply ad placement. What drives engagement and sales is a great story based campaign and the link needs to draw people to take vs. a me, me, me, buy, buy, buy page.
2) Semantic Data – this is an overly complex topic and honestly I am too tired right now to go into details. But simply stated, the Social Graph and the Semantic Data that goes with it is the basis for sooooo much down the road decision making from product development to statistical research to consumer insight to fundamentally all aspects of an economic model. As I told Matt, the easiest way to state this is look at what 6,000 people in Canada provide towards mapping out the viewing and listening patterns for radio and tv in Canada. Simply put, 6,000 people are statiscally expressed to represent 36 million Canadians and this drives the entire Radio and TV Economy that drives a Billion with a capital B industry. In addition, take something as simple as the census and what it drives from a governmental economy. Now FB has a population of 600 million right now. That is larger than 90% of the countries out there. So when you think about all of the economical, research and political implications involved with running a country, companies are heavily interested in that insight to drive similar economical models. This is were the real value of Google and FB lies.
3) Bubble – YES ’nuff said. Not because of the economical and statistical value of the database but because a bubble is driven by the ignorant and greedy…
K gotta get back to work.
On a side note, here are some elements that might be useful to gain a sense of all of this from a blog entry from today. Highly recommend listening to the podcast I was a guest on last week as well as watching the video on Three Gears of Social Media.
Rob / @RLavigne42