Comment by johnchristopher | Hacker News Reader

Comment by johnchristopher | Hacker News Reader

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johnchristopher

> I remember reading in some Brian Acton interview that Facebook leadership believes that ads would bring in more money than charging businesses for access, integrations and premium features.

Verbatim: it wouldn't scale.

Acton said he tried to push Facebook towards an alternative, less privacy hostile business model for WhatsApp — suggesting a metered-user model such as by charging a tenth of a penny after a certain large number of free messages were used up.

But that “very simple business” idea was rejected outright by Facebook COO Sheryl Sandberg, who he said told him “it won’t scale”.

“I called her out one time,” Acton also told Forbes. “I was like, ‘No, you don’t mean that it won’t scale. You mean it won’t make as much money as…,’ and she kind of hemmed and hawed a little.

It looks like to me that the multi-billion dollar company that Facebook is, with all the very intelligent people working there, is a one pony trick that only knows how to make money by putting ads everywhere.

The problem with charging (any amount) is network effects. When the value of a service depends on other users using it, anything that limits user numbers is a no-go.

The reason the business rationale for WhatsApp (and lots of other digital services) is so wired is because the normal dynamics is supply and demand don't apply.

In a "normal" market, the cost of providing a service and revenue tend to be similar... because companies compete on price.

The revenue potential of WhatsApp is completely unrelated to the cost of inventing or running WhatsApp. The revenue potential has nothing to do with the value to customers. Weird inputs, weird outputs.

You make it sound like Facebook doesn't know how. Of course they do.

It's just that ads is significantly more profitable than having to run sales teams in the 200 odd countries around the world. Especially since ads is largely self service even down to ML models monitoring abuse.

Bingo.

Sales teams all over the world is expensive, self service ads supported by a small team are a lot cheaper.

The B2C and B2B parts won't need sales teams all over the world.

E.g. A certain telecom api provider doesn't need sales teams all over the world. In fact I've never seen any ads or anything about them locally, but guess who's on top of my mind when I need to send or receive sms in some other country?

Pretty sure you don't need an international sales team to offer an Android/iPhone in-app purchase costing a few bucks.

And charging for service is easily quantifiable.

Advertising is charging for the fantasy of more business. Oddly enough, the production facilities for fantasy scale with the customer count. ;)

Also, fb already have an ad business. They don't have a b2b software business. If Salesforce had bought WhatsApp, they might be interested in the b2b idea. They probably wouldn't be into the advertising idea.

Keep in mind that Facebook's existing ad business is 100% B2B as well and they don't use an is school Oracle/IBM/Yellowpages sales org for that. Selling API access to WhatsApp would not necessarily have to be different.

Facebook already having an ad business can also be used as a counter-argument: cannibalization. Some of the ad-spending going to WhatsApp would definitely be spent on Facebook instead if WhatsApp remained ad-free. But I can't imagine that they are not fully aware of this (even Hanlon's razer must have limits somewhere), so what remains is that they consider the expansion of addressable ad audience more valuable than other monetization strategies plus the massive hit the WhatsApp brand will take from ad introduction. And because those ads would be almost worthless without the targeting ad customers expect from the Facebook brand, the whole thing is like an indirect confession about the existence and quality of shadow profiles describing those who are not registered with the mothership. Well, that group is about to shrink...

Facebook Workplace is a big B2B software business.

You are right, that was a bit harsh and ignored the profitability angle. However I think this shows that FB isn't an innovative company (à la spaceX, MS, biotech, etch.) and yet are perceived that way.

Are they perceived that way? That's sad.

Does that MS stand for MicroSoft?

"It won't scale" means they would have to hire sales people to go after businesses.

I think the only thing they’d have to do is tell all existing business users to pay.

That’s more an engineering problem than a sales one.

That's exactly it, Facebook is an advertising business and they struggle to think that they would be better and other ways to monetize a product, especially on WhatsApp where you have entire countries using it.

I think the real reason FB went public even though zuck “didn’t really want to” is so they could hide behind shareholder value as their excuse for everything. Public companies don’t go public to innovate, they go public to make everyone money. This is the model currently destroying America.

More likely for the same reason Google went public; when above some size, US companies have essentially all the reporting and disclosure requirements of a public company.

When companies reach that stage, the rational thing to do is .. go public, so you’d also get the benefits (share liquidity and ability to raise money publicly)

I wasn’t aware of that, good point. I’m sure either way the “shareholder value” gimmick is still a viable excuse for FB making these kinds of decisions.

Is this true? Google LLC appears to be completely opaque. Its owner, XXVI is likewise opaque. Only their owner, Alphabet, is a public company.

If Google was above this magic size before it became an LLC, why didn't the LLC also count? I'm not saying you're wrong, but something didn't add up

This is a new restructuring from 2015 IIRC. It was Google inc that went public, and originally all the projects (including self driving car) were under google.

Alphabet was created later, together with splitting Wayne and a few others.

I don’t remember all the different triggers, and each triggers a different reporting requirement - more than 500 shareholders, more than $X billion paid to suppliers, stuff like that. Google, and later Facebook met all of them.

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