Two Days in the Facebook Gold Rush

I spent the past two days in Silicon Valley immersed in the world of Facebook Application Developers (I can’t resist the temptation to call them FADs) and Venture Capitalists. This culture shock was courtesy of being invited to speak on Metrics & Targeting at the awesome CommunityNext Platform Conference. Congrats to Noah Kagan and Andrew Chen on organizing a great event.

I met a bunch of interesting people and LOTS of entrepreneurs. Some were still in school, others not more than a few years out and the obligatory scattering of seasoned serial entrepreneurs. All of them were smart and incredibly passionate. Still, it felt to me as if I were transported back in time to the Gold Rush of 1849. What is it about Northern California?

When Facebook opened its API back in May it was the modern day equivalent to Samuel Brannan running through the streets of San Francisco shouting “Gold! Gold! Gold from the American River!” Looking back on the Gold Rush of 1849 ironically it was Brannan that made the most money from it — by selling supplies to all the new and optimistic prospectors. Most gold seekers lost money, many lost their lives and soon the large mining companies moved in and took all the gold. At the moment it’s hard to think the current Facebook application euphoria will end any differently.

Without any real “social” ad models, any real advertisers, any real metrics for success, ROI and little scalability, I cringe when advice is being given to 23 year old kids to turn down offers of $50k for an application that does little more than provide a few seconds of entertainment on a page. I roll my eyes when people throw around valuations for Slide and RockYou in the billions. I smirk when some of the young entrepreneurs tell me that they would ditch using Facebook if (when 😉 a new Google Social Network emerged… and persuade their friends to do the same.

My main takeaway from these two days was reaffirming my thinking that Social Networks like Facebook require a different way of strategizing, executing and measuring. Existing ad models, creative, content delivery and measurement will not work. New metrics needs to be developed. New creative needs to be tested. Most importantly new products need to be created by everyone in the ecosystem.

My greatest surprise was the level of interest and actual experience in testing and optimization. A good number of application developers were doing basic A/B testing on their apps. That is great. Having testing as part of their DNA is huge because these are the same developers that will be creating the marketing solutions of the future. Try as they might to create that future right now, they are trapped by thinking in existing modes of digital advertising. That brings up viral. Viral optimization is something I’ve become increasingly fascinated with and it seems there are a few companies like Popular Media that are already doing interesting work in this space. More on this in a future post.

Ultimately it is the behavior of the Facebook user base that will dictate its future as a marketing platform. However, Facebook might just succeed or fail based on what they do for marketers going forward. From the early days of Paid Search Overture and Google provided exactly the analytics and APIs marketers needed. Google especially continues to understand the value measurement and analytics provide marketers. Yelling “gold!” can certainly attract lots of attention but unless the tools for digging are provided all this euphoria may be little more than a flash in the pan.