Here’s one thing that’s clearer than ever after Facebook’s IPO mess: Google has a magic money making machine, and it’s possible no other internet company will ever have the same sort of (relatively) easy success.
The number one comparison point for Facebook as it headed towards an IPO was Google. Facebook, like Google, was a giant web company that had hundreds of millions of users. Facebook, like Google, was working on highly-targeted ads that could hit hundreds of millions of consumers.
But a funny thing happened on Facebook’s path to becoming Google 2.0 (from a business perspective). Everyone suddenly realized Facebook’s ads aren’t that good. And everyone realized that Facebook’s ads, while very good at targeting, aren’t nearly as powerful or effective as Google’s.
And then everyone realized Facebook isn’t going to have its own magic money making machine. If it’s going to make lots of money, it’s going to be more of a grind to figure it out.
In our newsroom, someone threw out a good analogy for Facebook’s ad business*: It’s like you’re at a party, standing around, talking to your friends, and someone made the posters on the wall advertisements. Maybe you’ll look at them, but they’re not really what you’re there to do.
Google, on the other hand, is like you’re walking through a grocery store looking for whatever you need and the advertiser gets to jump in at the last second and offer you what you’re looking for.
Google’s entire business is based on people asking commercial questions and giving advertisers an opportunity to provide the top 2-3 answers to the question.
That’s an amazing business. And it’s one Facebook doesn’t have.
That’s not say Facebook isn’t going to figure out a way to make gobs and gobs of money. It has 900 million users. It has a team of super smart people looking to solve a hard problem. It can figure something out.
It’s just not likely to be a magical money making machine like what Google has.
*We apologize if this analogy was from somewhere else and we didn’t realize. Credit to whoever came up with it.