This morning, General Motors announced that it would no longer advertise its cars on Facebook. This announcement comes a day before the Facebook IPO, and casts a shadow on the business model of Facebook. GM said that they will continue to support their page and user community on Facebook, but that ads just weren’t effective in helping consumers to make car buying decisions. Ford jumped on this announcement to say they would continue to buy ads on Facebook and that Social Media requires a consistent commitment to innovation and community development.
Maybe. But I think GM’s decisions does illustrate a key problem for Facebook and Twitter – the revenue model. Social Media grew up without dependencies on ad-based revenue. On Facebook, you aren’t a customer. You are a product, and its your likes, dislikes, friends, photos, videos, and content that generate value. Selling products to products via advertising is hard. Members don’t use Social Media to go shopping. There’s no commerce platform there. They use it to be social. There are so many other outlets that are more effective for advertising than Social Media.
So how should Facebook and Twitter make money? My idea: make it collective. The value is in the data.
1. Make terms and conditions explicit that every member owns their own data via copyright. This does two positive things.
A. It indemnifies Facebook and Twitter for the crazy, infringing, and potentially libelous posts of their members by allowing them to claim that they are conduits of content rather than publishers or distributors.
B. Copyright establishes the rights to royalties for content created and posted on their networks, which enables the next step.
2. Allow members to opt-in to Big Data analysis by Social Media partners and intermediaries.
3. Charge Social Media for Big Data Searches by data volume.
4. Pay members royalties every time their data is used in Big Data Searches.
This simple model creates powerful incentives that transform user members from products into mutual social network content providers with an economic interest in posting content that will be used in Big Data searches. It establishes data property rights that insulate Facebook and Twitter from vouching for the content on their networks. Members will also discover that providing high quality data that companies want to search for means more royalties and so the system will produce better behaviors. And it creates a 2-tier royalty distribution model that will also pay Facebook and Twitter handsome revenue that will change online advertising and make every other content aggregater change too.
Of course, Facebook and Twitter will have to sort our who’s a person and who’s a bot, and will have to provide content creation tutorials to help users/customers create content that has value by sharing the top 100 Big Data queries and sample results.
But this Business Model has something for everyone and is a true win:win. It benefits customers by establishing data property rights and royalties for content. It benefits organizations who want to do Big Data searches by providing ever richer data streams of high quality and availability. And it benefits Facebook, Twitter, and their investors by providing an enormous profit making engine selling Data.
The Data is the Value. The more there is, the more valuable it becomes. Pay your customers to create higher quality data and charge your partners to use it. Its a simple Business Model.
Dick Costolo – @dickc – and Mark Zuckerberg – @finkd – are you listening?