Hacker News Reader

Comment by patio11 | Hacker News Reader

The core feedback loop that would make that analogy mostly coherent doesn't exist. Facebook ads do not convince people to buy Facebook ads.

A better argument would be that Facebook's valuations are being driven by large amounts of investor money injected into the Zynga symbiote, who throws nine figures a year at Facebook to continue identifying new pieces of brain matter to feed to their mad cows. I don't think that is a great argument, both because Ponzi schemes are not the kind of racketeering one should be worried about if one is worried about there, and because I think that Zynga is probably sustainable. They may be the only business on Facebook whose advertising is sustainable... but that would, by itself, justify a gigantic valuation for Facebook. (Perhaps not any particular valuation.)

View on HN

Hey patio11, thanks for the thoughtful analysis of my article.

Your logic makes sense, assuming in fact Zynga does have sustainable profits, which might be true (although I guestion whether simple web games are a defensible business, competition easily cuts it).

But, assuming that is true and you are right, does that still justify Facebook's valuation if it is entirely dependent on one company, Zynga? I would conclude that Zynga would be worth quite a lot, but that would make Facebook's position quite a bit weaker, do you agree?

Also, the feedback loop is that Facebook's valuation and success spurs people and investors to start companies and then advertise them on FB. This has been my experience talking to many (not all!) would-be entrepreneurs and investors in new york and the valley. I'm interested in learning about different experiences you may have had.

"(eMarketer estimates Facebook took in) $740 million coming from major marketers like Coke, P&G or Match.com... Interestingly, Google itself was the fifth-biggest advertiser for the same period, as it was looking to market its Chrome web browser. " http://adage.com/digital/article?article_id=148236

It's very hard for me to look at a company doing $740 million in revenue from the likes of Coke and Proctor & Gamble and say that it's not sustainable. I'll admit it's possible they are all just blowing their money away, but that seems less and less likely.

Right, I think the article misses one of the purposes of advertising. Coke doesn't target ads at people googling "soft drink". Facebook seems like as good a place as any for the kinds of subliminal advertising that Coke does.

Groupon and its ilk also do VERY well on Facebook. If you buy that they can maintain the margins that they currently have, I'd wager they can contribute quite a bit to Facebook's bottom line.

Definitely NOT a ponzi scheme... Many companies with amazing revenue (and PROFIT) come back to Facebook ads again and again.

I'm certain I've the this same exact claim posted here on HN before, from another blogger I assume, I'm a bit surprised to see it again.

As before the author offers only anecdotal reasoning. I appreciate that FB ads don't work out well for everyone, but not everyone advertising on FB is selling something that should make a profit, or using the FB ads intelligently.

Edit: And I was right as someone already linked in the comments. In fact, same author he just changed the date of his post (http://news.ycombinator.com/item?id=1293119). Blog spam?

Reply on news.ycombinator.com