Summary
That a few retailers like 1-800-Flowers, Threadless and Sears use Facebook applications to create "Facebook storefronts" is not any "new phase for Facebook". Facebook's engine runs on advertising revenue, not on sales commissions. Facebook's business model will not change any time soon -- nor should it. Facebook works because it is Facebook, not because it is Amazon or eBay. Trying to morph it into an Amazon or eBay would just diffuse its focus and muddle its message. It ain't gonna happen!
Analysis
Notwithstanding the recent flurry of media and industry buzz around Twitter, Facebook is the real king-of-the-hill in public-facing social networking. It has surged ahead of the pack broadly and is even overtaking LinkedIn in the more specialized (but also much smaller) area of business social networking (Plaxo trails far behind). MySpace remains a place for kids. But Facebook long ago broke out of its college kid origins.
Facebook today is not only the premier site for technically savvy adult executives and professionals. It is rapidly being adopted by Baby Boomers generally. Facebook is one of the most successful examples of the Web 2.0's "build it and they will come -- and when they get here we will find a way to make money with them" business model in action. And advertising is the easiest, most straightforward, and highest margin way for Facebook to make that money (to "monetize" the site in Web 2.0-speak). It works for Google. It works for Facebook. It will work for Microsoft and Yahoo as well.
This is a very different type of business, however, from the commission sales driven sites like Amazon, eBay, and Craig's List. It requires a very different underlying server software infrastructure as well as a different business model. Obviously, there is a connection between advertising and selling and yes, of course, any site doing one can add a bit of the other. Most do, to some extent. But for Facebook, with its well-developed core competence in social networking, monetized through advertising, to try also to become an Amazon would only be a distraction. Were Facebook in need of more revenue, a premium class of membership would make much more sense than becoming a retail shopping mall. Facebook is not, however, immediately desperate for lots more revenue, mini-depression notwithstanding. Facebook is doing very well. So the matter is moot.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
