Facebook vs. Google

TechCrunch – How Facebook Can Become Bigger In Five Years Than Google Is Today

Remember three years ago, when Microsoft paid a quarter-billion dollars  for 1.6% of Facebook and the exclusive right to run banner ads across Facebook.com? I’m ready to declare in public my belief that Facebook will be bigger in five years than Google is right now.

  • Without needing to cut into Google’s core business of text ads, which are still 99% of Google’s profits
  • Facebook already has more page views than Google – People already spend more time on Facebook than Google
  • Facebook’s alleged revenue has grown from $275 million in 2008 to $635 million in 2009 to a rumored $2 billion this year
  • How does Facebook ride Advertising and Commerce into a future of more revenues than Google? By creating a virtuous cycle of cross-promotion: targeted lead-generations and subsequent transactions feed into the next series of even-better-targeted lead-generations and subsequent transactions
  • Facebook is siphoning from Madison Avenue TV ad spend dollars
  • Davide Grasso, Nike’s chief marketing officer, says Facebook “is the equivalent for us to what TV was for marketers back in the 1960s.”
  • Facebook was the better bet to win in brand advertising, which accounts for 90 percent of the $600 billion ad market
  • Facebook Ads employ demographic characteristics (Age/ Sex / Location and Interests) – Google AdWords target on the intent revealed by search queries
  • Yahoo just paid $1 per like, and buying fans is only going to get more expensive as the lifetime value of a “fan” is better understood
  • TV vs. Facebook is more targeted, has better analytics, and engages its audience directly and interactively through conversations—aka chat and photos
  • Once they [Facebook] set their mind on adding algorithmic search and/or an AdWords or AdSense competitor, I’m sure some of the over 100 ex-Google engineers who are now at Facebook will volunteer for the job
  • Facebook Credits: if you give Facebook users a few free Credits with the block of Credits they buy (at Target, online, and soon anywhere), they will spend all of those Credits and then want to purchase more
  • Five potential billion-dollar revenue streams that dovetail into Facebook Credits—Games, Groupon/Pages & Places, Amazon/Commerce, Inbox, and Photos (and Banking)
  • Games. Facebook is running the real mafia wars, taking 30% while letting the game developers do the heavy lifting
  • Worldwide virtual goods and other in-game payments represent $10 billion annually floating through Facebook in 5 years
  • Groupon / Pages and Places: millions of Facebook Pages and Facebook Places offering regular but expiring deals to their fans every single day
  • Amazon / Commerce: make malls-with-walls and consequently make real shopping money
  • Email: all charge $20/year for premium features, bonus points for throwing in an Address Book and Skype-slaying social phone features like Social Voice for free
  • Photos: represent big money now that Facebook is by far the world’s largest photo site

Facebook’s TV ad siphoning ($10 billion) + Games ($3 billion) + Places & Pages deals ($10 billion) + Credits & PayPal ($12 billion) + Photos ($1 billion) + Inbox ($1 billion) + Some of Bret Taylor’s other ten applications (???) = over $30 billion (actually, closer to $40 billion)  in annual revenues five years from now. Which is more than Google has in annual revenues today.

This is not about the revenue streams Facebook has; it’s about the revenue streams they’re about to have. Take to heart the hockey lesson from Wayne Gretszky’s father: “skate where the puck’s going, not where it’s been.“

Mark Zuckerberg told Michael Arrington that to make insanely great social products, “you have to design [social into products] from the ground up.”

  • Google is developing an abstract social layer
  • Twitter calls itself an information and content network
  • LinkedIn is a professional network with sprinkles of social pixie dust
  • MySpace is a discovery channel
  • Yahoo is a mumble mumble
  • Apple Ping, is a faux-ial network, unwittingly proving Zuckerberg’s main point to Arrington with how much it blows:
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