There’s a great article by Ryan Holiday in Forbes about Facebook being a Ponzi scheme.
You can read it for yourself but the main argument is that its advertising platform is inferior – in other words, it sucks.
The revenue reported by Facebook ($3.7 billion last year), Holiday argues, is simply money paid by new businesses testing Facebook advertising and then abandoning it.
Of course, there is not an infinite supply of new businesses.
Most of these ‘suckers‘ find out very quickly that Facebook advertising doesn’t work anywhere near as effectively as Google and other search-based advertising.
Once they discover this, they jump ship, he asserts.
Once most advertisers have tried out Facebook and left, the revenue stream will dry up and Facebook will be exposed, Holiday continues.
As an illustration, Ford Motors recently pulled $10 million worth of advertising from Facebook, citing its ineffectiveness.
The thing is, my personal experience with Google advertising and Facebook advertising absolutely corroborates Holiday’s assertions. I tried Facebook advertising because of the “buzz” and compared it over a couple of weeks to Google search advertising.
Guess which was much more effective? Actually, 10 times more effective? Google of course. I abandoned Facebook advertising and never returned.
As Holiday writes, people go to Facebook to hang out with their friends, not to search for products. They ignore Facebook advertising as inconvenient distractions.
That is perhaps the most important reason why Google search-based advertising will always trounce Facebook advertising.
It is also the main reason that Facebook revenues will eventually dry up, even if they dramatically increase over the next couple of years. If you’re found holding Facebook stock after that, it’ll be a rough ride.