Problems And Predictions

Even companies that make billions of ad dollars have problems. The question is how much these problems will impede future growth.

Here are the problems the biggest names in online publishing not named Google face, and what their futures could look like.

1.  Facebook

Problem:  User’s time and self-esteem are plummeting.

Prediction:  Facebook wins and wins big.

The problem is a big one: a mass movement off Facebook’s grid.  People are tired of wasting time and feeling bad each time they visit the site and see how inferior their lives are in comparison to their narcissistic “friends.”

Young people bailed years ago, the Boomers will be next, and eventually so will Grandma, but no one is willing to get rid of their Facebook account.  So while total unique visitors will remain ridiculously large, visits per unique and page views per visit (or time spent) will greatly diminish.  So Facebook is in trouble, right?  Wrong.



Facebook is more like Google than anything else.  People go there in search of “something emotional” -- and somewhere on those pages are highly targeted ads, predominantly from “local merchants.”

Google’s biggest advantage has always been its sheer number of active advertisers, which is estimated north of 2.5 million (as a comparison, Time magazine in a good year may have 300 advertisers). Facebook now has over a million advertisers.  The majority are these small “merchants” who love to tell customers, as well as their friends and family that they are “running ads on Facebook.”  It legitimizes their small business, drives some clicks to their site, and feeds their own egos.  So these ad dollars will continue to grow even as site usage decreases.

2.  Twitter

Problem:    No one can remember anything they read on Twitter.

Prediction:  Twitter won’t remain a stand-alone company. 

Try this.  Read tweets for two minutes straight, then walk away for two minutes and then try to recall what you read. 

Twitter is the best app ever created, but can’t charge users to use it.  So Twitter relies on advertisers to buy sponsored tweets (ads).  There is a lot of hype and spending for these ads now, but over time these ads will suffer from awful recall and won’t generate nearly as many clicks as search or Facebook ads.  So those million-plus merchants won’t pour their dollars into Twitter the way they do into Google and Facebook.

At some point Twitter will be forced to sell out to the company they hate the least.  Let’s just hope their new owners don’t rename it Twiggle.

3.  The Portals

Problem: They’re not Facebook or Google.

Prediction: Yahoo buys AOL and introduces a Co-CEO title to the C suite.

All three portals collect data galore and a few billion ad dollars a year, so life is pretty good, but each has its “problems.” 

AOL can’t shake the shame of an email address, but has become a prominent ad tech solution provider.  It’s now selling pipes and plumbing along with the advertising water that flows through it, and that’s a great pivot.

Yahoo continues to battle a lifelong identify crisis. Despite a string of mobile-centric acquisitions, it also bought Geocities a second time with Tumblr.  Yahoo is also leading the way in exposing its audience to cheap-looking ads, digging ditches instead of building value.  The issue is that media buyers see those toe fungus ads, too, which gives them leverage to negotiate lower CPMs for “premium direct deals” -- so price erosion will continue for Yahoo’s foreseeable future.

As for MSN, it appears content with coasting.

A Yahoo merger with AOL is a viable way to grab share from Google and Facebook.   Yahoo has more money, so it gets to be the acquirer, but the acquired in this case is more adept at navigating the ad sales business.  Look for this merged entity to introduce Co-CEOs and make it work (for a while, anyway).

As for MSN, Facebook will buy it outright from Microsoft and fold hotmail into its user interface.  Facebook will also integrate one of the big music sites into its site navigation. My guess is Pandora would look good in Facebook blue.

Call them what you want, but we sell ads. I always joke that this is a business made up of C students, so when you strip away the complexities the A students have layered in, it’s easy to spot which companies do this better than others.

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