This is one of the biggest issue needing to be solved for the current and future crop of social media companies. As I had ran down in the previous post on user intent, Social Intent is lacking a direct monetization system. I believe that it can be solved and will be; this is my run-down of the issues and a few points of focus that maximize potential. Throughout the post, I’ll try to keep the points mostly agnostic, but still make specific points in the case of Facebook.

As is well known by now, Facebook recently had it’s financial potential put into question. The question came in two rather bold points, the faltering of the IPO and GM’s decision to pull it’s ads from Facebook. In my mind, both are wrong-headed if you look at it from a long-term perspective, believing Facebook can solve the Social Intent problem.

The first step in fixing the model is understanding what type of associations and products lend themselves to socializing in the real world where the money is. One area sticks out instantly here, communications and mobile, which I’ll come back to momentarily. The other areas to focus on are where we’re already doing in-person socialization and real sharing: sharing food(at restaurants), sharing music(albums and concerts), watching movies(at home or in the theater), other forms of in-person entertainment, and even things like sharing tools at work.

I have just listed a few different areas where advertising still makes sense on the platform, and enhances it. The next step is figuring out where and how to do the advertising. A few things that I think will work in the environment is promoting deals to groups of friends, using a focused approach to kick-off a word of mouth campaign, or promoting tools that extend or even compete with the platform.

Promoting deals to groups of friends is focused on experiences, and sharing them. Offering small group-buy discounts on services that bring people together would be a good sell. Also things that people would want to share with their friends after buying. The biggest thing though is where this should be, it needs to be mobile. Mobile means you can promote live deals on location data, this will be key for Facebook.

Facebook provides one of the most detailed systems for focusing on specific user for promotion. Using this to promote to a specific market that will love and share it with others will be gold. If you can find a product that is shareable enough, and can get some enthusiasts hyped about it, it makes sense to try this approach to reach a broad base cheaply. Not all products have a broad capacity though. Take GM for instance, vehicles aren’t one of the products that individually have broad capacity. GM’s ads weren’t fit for the market and eyeballs still don’t mean much ever after a decade.

This one is a bit questionable, considering I mention helping to promote competition. Of course, if they’re paying you, you get to see some metrics on how they’re doing, and you the sub-graphs may still be maintained or tightened by them. Promoting extension and competition make sense for a platform as it keeps the network tight, while allowing a form of escapism. In many ways, Facebook has huge advantages over most other companies in that they have both a large network that has hit critical mass and have a successful platform for extension.

This is a market or two and it’s currently anyone’s game to solve. I don’t know who’s going to get to the fruit first, but it’s there and I see it. Time to figure out if and how to sneak past the giant and grab it.

Ok, now mostly FB. There have been rumors and talk about Facebook phones or advanced cameras to compliment their service and photo-based extension of that service. I think, as I pointed out reason above, this is a no-brainer. You want to maximize the sharing on the site, but also promote real world interaction for the substance to share. If you can provide the tools to make this seamless in setting up and sharing experiences, from beginning to end, you’re in control. I’m not saying they need their own device, but it would make it more simple to do.

Facebook as it stands is profitable. They have the time and resources to solve this problem, and most of the secondary and sub-problems that I have missed and would surely arise during the process. If they figure this out they won’t have to worry about the doubt. It’s also why I feel long on Facebook, though I still believe it will come down further.

I’ve been thinking about it, usage caps make sense, but the implementations that providers are offering don’t, with these arbitrary usage caps, that are mostly hidden. There is already a theoretical cap, that for all current intents and purposes seems invisible. That theoretical cap exists do to the maximum bandwidth that the provider supplies you with.

Let us look at some of those numbers. I’ll start with a simple example for a 1Mb/s connection and assume that this contains both up/down streams.

1Mb/s connection = 1/8th of a MB/s ;

MB/30 day month = 60s*60m*(24h/8)*30d = 324000 MB/month = ~325GB/month.

That’s the invisible bound on a 1Mb/s connection for 30 days, you can’t achieve greater than ~325GB/month. Then you have to factor in decay caused by latency and dropped packets on the line and assume maybe 90% capacity is possible, which brings you further down to ~290GB, realistically.

Taking that information, I think I would start people off with a percentage based amount of their bandwidth. I’d start off with a provision of a 40% utilization(~130GB/month), and allow it to be increased/decreased. It’s entirely possible that this is too high of a utilization offering to start with; for example,  when you get to 5Mb/s lines that same 40% is ~650GB/month. On the other hand, some companies want to cap it at 250GB/month which is less than 20% utilization of a 5Mb/s connection. It is my belief that they need to scale their utilization cap with their speed offering; to me, it doesn’t make any sense, otherwise.

If I can do this math, I’m sure they can and have done it as well. They already know what they are theoretically being asked to provide at peak times, and also what they’re capable of handling. How hard would it be for them to optimize this, and increase their efficiency?

Maybe offer a 10% utilization at 1Mb/s(~32GB) as a baseline, for those like RMS who don’t use the web with the exception of email? Then they can automatically roll you into the next 10% for the month, if you go over that limit. You automatically get rolled up 5 or 10%, at some percentage of cost. Once you have the roll over and initial utilization provisions determined, you can go about extrapolating and targeting different areas of what you provide.

Lets assume that you start with a base fee of maybe $10 + taxes and then a rate for bandwidth/speed similar to this:

For a 1Mb/s  plan: 32GB(10%) @ $10, 64GB(20%) @ $12, 96GB(30%) @ $14, and 128GB(40%) @ $16.

For a 2Mb/s plan: 64GB(10%) @ $15, 128GB(20%) @ $18, 192GB(30%) @ $21, and 256GB(40%) @ $24.

For a 4Mb/s plan: 128GB(10%) @ $25, 256GB(20%) @ $30, 372GB(30%) @ $35, and 512GB(40%) @ $40.

You can extrapolate further.

Maybe my scaling is a little off, a little too linear, as I’m not really accounting too much for trying to limit peak loads. Also I’m starting each tier at roughly the cost of the tier below at 35% utilization. There are lots of inefficiency in my model, but that’s because I don’t have the actual data required to see if this is feasible. I think it is still better than their blind caps that they try to hide.

If you have any thoughts or suggestions on how this could be done, or if it’s feasible, leave a comment.