Facebook COO Sherly Sandberg Desperately Looking For An Ad Model

Here is an AdAge story about Facebook and their need to find the revenue model.

Rob Hof Editor-in-Chief at Businessweek comments and links to his view (he was there) below that Sheryl Sandberg main point yesterday is not what AdAge was reporting. It seems that Sheryl was saying that the only thing around today is demand gen. Thanks Rob. Rob also points to Mediapost which has a followup. Apparently the real twist in this is that the Advertisers want a solution. This sounds familiar – I feel like I’m in early 2000 again. Search went through this growing pain. Whoever delivers the solution will ‘mop’ up the revenues. THANKS ROB

Over on the metarand blog there is a good post on this by Randal. I like his analysis but would disagree with Randal on the monetization focus and his reference in Jeremy Liew regarding to online advertising growth. Online advertising is a growth sector and will NOT slow down in the medium to long term. Maybe short term yes but long term massive dollars are going that way. If you look at the IAB stats from 1999-2001 there was gloom and doom. Then look at 2002-today. Massive growth. As Diller says no one has the answer yet.

Facebook’s latest attempt to finally get some real ad revenue has shown early signs of promise, Chief Operating Officer Sheryl Sandberg told an audience at the American Magazine Conference in San Francisco yesterday.

“The results were really positive,” Ms. Sandberg said. MTV not only got some attention for its awards show, it learned a little about what viewers wanted to see. It and other networks have subsequently said they want to try using the product earlier, to make the most of that feedback, she said.
“The monetization question on the web is a very big and open one,” she said. …Ms. Sandberg a former Google executive, noted. “What no one’s figured out how to do is demand generation,” she said.
“We need to find a new model and new metrics,” she added.
“Walled gardens don’t work,” she explained.
“People are using our product to protest our product,” she said, noting that a protest group is now the fifth largest on Facebook.

These quotes speak volumes about Facebook’s lack of awareness to how online advertising works. Pesonally I don’t think that they have to produce the monetization answer right now but instead just focus on the product leadership and key business development deals. I have no idea why Sandberg even entertains the monetization question at all.

Here is my favorite line from the Barry Diller interview on online advertising..
On Internet advertising: “You really want to get a headache? Try to understand Internet advertising. Social-networking advertising is being discounted because there is so much inventory [of available ad spots], and because methods have not yet been found to make it very effective. Will that get figured out? I absolutely believe it will. What form will it take? Absolutely unknown.”

Sheryl you have nothing on the ad side yet just admit it and work with advertisers to get the right solution in place.

Author: John

Entrepreneur living in Palo Alto California and the Founder of SiliconANGLE Media

5 thoughts on “Facebook COO Sherly Sandberg Desperately Looking For An Ad Model”

  1. John, this wasn’t in the story or my blog post yesterday (http://www.businessweek.com/the_thread/techbeat/archives/2008/10/facebooks_shery.html), but in Sandberg’s defense, she did say the company’s key focus remains user growth, not monetization. She was responding to questions from ad-oriented folks in the audience, so that’s why she talked about that. Her main point on monetization was that whatever Facebook does will involve demand generation–in other words, it’s not a searchlike, demand fulfillment opportunity, it’s branding in whatever new forms that happens, such as branded digital goods. And, of course, targeting–and I think user sensitivity on targeting is why effectively targeted ads could take awhile.

  2. If Facebook doesn’t know what their business model is they are in trouble. They are in the advertising and ecommerce business (sales and transcation) – translation anything around the notion of “conversion”.

    If Sheryl can grok that then she can lead the team over there but if she can’t she will blow it for them. The key to success is in the platform side of their business. They should focus all their energy there and stop chasing a online ad model ghost. Get the users base up to 200m+ with a robust scalable platform then the rev model will show up at their proverbial doorstep.

    With the platform being so important I’m concerned around the exit of such prominent engineering talent..Major red flag

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