A while back I heard an interesting perspective on the fax machine which I feel relates to facebook and it's crazy valuation.
So if you think about the first fax machine being created, it cost around $2K to buy, but it effectively had zero value since having no other machines to send to it had no purpose. The creation and sale of the second ever fax machine effectively increased the value of the first machine. The third, fourth, and so on all did their part to increase the overall value of the fax machine. What is interesting about this is normal market theory dictates a product is worth more the higher the demand it has and the scarcer it is. The invention of the fax machine effectively worked in the opposite direction which makes it an interesting thing to study.
If you look at nearly all of our mass communication methods they have followed a similar trend to the fax machine. The more people have access to it the more value it has to the user. However they have all eventually met a saturation point where the the value of marketing in the medium decreases considerably.
Phones - most people can spot a telemarketer from a mile away and have no patience for them
Fax - people no longer take much interest in an incoming fax, and only use the machines for things like contracts these days
Email - at one point there was little to no spam, and if you got an email it was generally from someone you know and wanted to hear from. Any old school email marketer will tell you of the days when they made insane bank off the smallest of lists
TV - the first ads would have been highly effective, but now people tune out or get netflix
Snail mail - we all have pretty good instincts whether it's worth opening any mail, advertising is obvious, however it wasn't always that way
So how does this relate to facebook? Well it's a huge communication medium, with it's huge market share it's starting to become the next email. Sites are requiring it to sign up just like they used to use email verification. As more people jump on this new medium the value of facebook will increase. Facebook has done what they can to keep messages on the medium from originating from spammy sources, and if they don't keep it up their audience will become desensitized to it just like they are to every other medium out there.
A lot of you can remember when fb flyers was first introduced. We were doubling to quadrupling our spend within minutes with almost no effort put into ad copy. Now the exact same ad copy barely makes a 10th of what it used to and the users are much more aware of the same old offers.
If facebook can keep it's market share up it will be no different than if you had of owned the patent to all fax machines back when they were first introduced. Can they stop themselves from becoming a desensitized medium? If they can, they are worth a shitload of money. If not, they are doomed and it'll be time to jump onto the next medium that comes along.
So if you think about the first fax machine being created, it cost around $2K to buy, but it effectively had zero value since having no other machines to send to it had no purpose. The creation and sale of the second ever fax machine effectively increased the value of the first machine. The third, fourth, and so on all did their part to increase the overall value of the fax machine. What is interesting about this is normal market theory dictates a product is worth more the higher the demand it has and the scarcer it is. The invention of the fax machine effectively worked in the opposite direction which makes it an interesting thing to study.
If you look at nearly all of our mass communication methods they have followed a similar trend to the fax machine. The more people have access to it the more value it has to the user. However they have all eventually met a saturation point where the the value of marketing in the medium decreases considerably.
Phones - most people can spot a telemarketer from a mile away and have no patience for them
Fax - people no longer take much interest in an incoming fax, and only use the machines for things like contracts these days
Email - at one point there was little to no spam, and if you got an email it was generally from someone you know and wanted to hear from. Any old school email marketer will tell you of the days when they made insane bank off the smallest of lists
TV - the first ads would have been highly effective, but now people tune out or get netflix
Snail mail - we all have pretty good instincts whether it's worth opening any mail, advertising is obvious, however it wasn't always that way
So how does this relate to facebook? Well it's a huge communication medium, with it's huge market share it's starting to become the next email. Sites are requiring it to sign up just like they used to use email verification. As more people jump on this new medium the value of facebook will increase. Facebook has done what they can to keep messages on the medium from originating from spammy sources, and if they don't keep it up their audience will become desensitized to it just like they are to every other medium out there.
A lot of you can remember when fb flyers was first introduced. We were doubling to quadrupling our spend within minutes with almost no effort put into ad copy. Now the exact same ad copy barely makes a 10th of what it used to and the users are much more aware of the same old offers.
If facebook can keep it's market share up it will be no different than if you had of owned the patent to all fax machines back when they were first introduced. Can they stop themselves from becoming a desensitized medium? If they can, they are worth a shitload of money. If not, they are doomed and it'll be time to jump onto the next medium that comes along.
