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A Couple of Areas Where Facebook Is Completely Dropping the Ball
Posted by: Canadian Value (IP Logged)
Date: July 24, 2013 04:36PM

I’m a Facebook (FB) user, and my wife is a borderline addict. When we were first married and without kids my wife and I took the opportunity to work overseas. The experience was richly rewarding and we were lucky enough to make lots of friends from all kinds of different countries.

Once we decided to start having kids my wife and I moved back home. That meant saying goodbye to our new friends many of whom also were moving back to their countries of origin.

Facebook has been a huge blessing for us in that it makes keeping in touch with our diverse group of friends extremely easy and inexpensive. However, as users and as a potential investor I think there are some areas where Facebook is lacking.

A Facebook Limitation Users Would Like Addressed

While we are certainly glad to be able to use Facebook to keep in touch with our overseas friends, as users of Facebook we do have a recurring frustration. That frustration is that it is extremely difficult to communicate with users of other languages.

When we worked abroad I was in the accounting industry and my wife worked at a restaurant. Some of the friends we met were from India, Pakistan, Thailand and France. While they could all speak English relatively well in person, communicating in writing is another story entirely.

For us, the Facebook experience would be much more rewarding if it was easier to communicate with our friends who use other languages.

We have tried using Google (GOOG)'s translate product, but found that it is clunky at best. It can translate word for word what is written, but without an understanding the intricacies of grammar, much of the meaning is lost.

More importantly though the translation through Google isn’t instantaneous.

Come to think of it, it isn’t just Facebook with this translation problem. It is also a limitation faced by LinkedIn and Google+ users.

While looking into how we could get past this language barrier I came across at least one technology which apparently allows users to combine all of their instant message accounts into a single platform and enables real-time conversational translation.

I haven’t used that specific product personally so I don’t know how well it works, but that is the sort of translator that Facebook needs to have integrated directly into its user experience.

I don’t understand how this sort of technology exists and Facebook doesn’t offer it to users. I’m sure my wife and I aren’t the only ones who would like to interact across languages.

Facebook Is Missing Out on an Opportunity to Partner with Its Billion Users

I remember vividly when Google first became a publicly traded company. I thought to myself that there was no way that I would ever touch such a richly valued technology company.

Now, 10 years later, the Google share price has increased tenfold and the current valuation actually doesn’t look crazy.

Facebook was really the most anticipated technology company to come public subsequent to Google. Missing out on the Google ten bagger has been has resulted in me looking at Facebook from an investment perspective regularly and with more interest than I otherwise would.

So far I’ve taken a pass on Facebook because I don’t believe the company is doing a good job of monetizing its platform.

Both Google and Facebook are hugely dependent on advertising revenue. Where Google succeeds with its customers Facebook seems to fall woefully short.

Facebook’s advertisers (customers) just aren’t happy. Facebook ranks dead last among social media sites when it comes to customer satisfaction.

In fact Facebook set a record low for social media customer satisfaction in 2012. And that is a shame because with Facebook’s more than 1 billion users the company has unmatched potential.

Where Google’s customers are searching for something and easy to target, Facebook relies too much on display advertising and is failing miserably at it.

Worse still, while Facebook is disappointing its customers, other companies are generating advertising revenue and successfully satisfying customers using the Facebook platform.

I regularly see posts on Facebook that are designed to promote a product to a target audience. Someone is making advertising revenue off of these posts and it isn’t Facebook. Carefully selected bloggers get paid to promote a product relevant to their audience and a middle man makes a profit connecting that blogger to the company who wants the advertising.

This business is called social media sponsorship and Facebook is missing the boat on it.

Social media sponsorship is a word-of-mouth marketing segment in which brands provide material compensation, such as cash, products, points, or trips to online social media content creators to promote and/or review their products and services through text or status updates, often with accompanying visuals.

Maybe how many Facebook friends you have really does matter!

Social media sponsorships are defined as having the following characteristics:

- Sponsored content is placed directly into the conversational stream of social media by the site owner or social media account holder;

- Sites and accounts are influential with or connected to key target audiences;

- Content specifically mentions the brand’s products and promotions, although sites and accounts can reference other brands in non-sponsored postings;

- Sites and accounts remain independent of the brands;

- Material compensation is provided for an opinion or promotion.

Of course the more followers a person has, the more they can earn for sponsoring a product. If you are a follower of the Kim Kardashians of the world, chances are you have read a Facebook post of hers for which she was compensated.

Kim Kardashian is making money telling you that she just bought a certain brand of clothing.

Also making money from such a Facebook post by Kim Kardashian would be some middle man which made money connecting her to the advertising company in the first place.

Facebook needs to be that middle man for all of its users. In fact, Facebook should have had that market cornered years ago.

Social Media Sponsorship is something that Facebook has to capitalize on and do it quickly. Think of the possibilities that Facebook’s platform offers for generating revenue.

Every single post, blog and comment that appears on Facebook every day offers the opportunity for the promotion of a product or service. Rather than simply relying passive display advertising Facebook needs to tap into this user activity where sponsored messages can be widely spread.

I think this Social Media Sponsorship has enormous potential and is where Facebook should be working hard to become the dominant player.

How do they do that? Perhaps by acquiring the much smaller “middle men” that are currently blazing the trail in social media sponsorship. Or perhaps by using Facebook’s much deeper pockets and pricing all of these “middle men” out of the market by being the partner of choice for all Facebook sponsors.

The sooner Facebook moves on this the better. Otherwise, small hungry and entrepreneurial companies are going to reap all the rewards.

Stocks Discussed: FB, GOOG,
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