Hot Dogs & Caviar
Imagine that there is a hot new restaurant in San Francisco. The restaurant is currently selling hot dogs. However, they insist that there are some brilliant engineers from MIT, Caltech & Stanford in the back room working on a machine that can turn hot dogs into caviar.
This sounds a little bit far-fetched, given that various other restaurants have been trying to build a hot dog-to-caviar converter for the past decade, and it doesn't seem to have worked yet. But this new restaurant insists that there is another restaurant in Mountain View that figured out how to convert hamburgers into caviar, and that their restaurants have a lot in common. In fact, they even hired some of the same hamburger scientists from Mountain View to work on the hot dog converter in San Francisco.
However, the fact remains that this mythical hot dog technology doesn't exist yet, and the way the restaurant makes money today is selling hot dogs. Also, the restaurant is under intense financial pressure to get the machine working, and is valued by investors and employees in a way that assumes the hot dog-to-caviar machine already works. They have roughly 12 months to get the machine working or Bad Things will happen.
New social advertising units
The advertising units Twitter and Facebook are selling today are “hot dogs”: poorly targeted, poorly performing. Surrounded by offensive user-generated content that is bad for brands. These are low-end, volume businesses.
Remember all of the ridiculous statements MySpace used to make about “HyperTargeting”? That was their version of a hot dog-to-caviar machine. How did that work out for them?
One of the following statements must be true:
A new “social ad unit” will be created at Facebook or Twitter in the next 12 months that will manage to be far more profitable than current ad units, not piss off users, and immediately be embraced by advertisers.
A new social ad unit will be invented in the next 12 months, will be attractive to advertisers, but will be something that makes end-users run away in droves. Remember Facebook Beacon?
A new social ad unit won't be invented, and the Facebook/Twitter monetization path will be to cram their current low-value ad units down the throats of users at a far higher volume than they do today, in order to hit revenue targets.
I hope you like hot dogs!
p.s. I am trying to start my own restaurant that transparently sells good food to people that are interested in buying it. No magical machines.