For Sale: YOU.

For-Profit business operate because people will pay them money for something that they can provide. So ask yourself: when a company provides you something for free, how do they continue to turn a profit? The answer is pretty simple: when a company's business is based on something they give you for free, the product that they are actually selling is YOU.

There must necessarily be a thrid-party to that business model to provide the funding that makes possible the services rendered to you "for free," and that third-party rationally expects to get something out of it. Most cot-coms over the course of dot-com-dom have been based on this sort of business model, where online services are provided to the public at little or no cost, and where commerce depends on income from a third party - almost always described as "advertisers." Since most dot-coms have ended up as investment disasters, one can safely assume that, almost always, this business model sucks. The fact of the matter is that it's tough to provide the clients (meaning: the ones who pay money to the service provider, IN NO WAY TO BE CONFUSED WITH YOU) which a role in the process that the clients are willing to shell out long-term big-bucks to enjoy.

 This is not to say that it can't be done. Take the halcyon (and in many way, the only) great success story among the dot-coms, Google. Their business model provides its clients (again, this does not mean you) with something they will pay shit-bags for. To put it concisely, Google has become a 21st century oracle. The single greatest middle-management enterprise in the digital age. It's a fixer. Comes at you with a big smile, steers you towards whatever it is that you're looking for, all for free. Thanks anyway man, but you don't need to tip for the service; it's just what I do.

 Google makes billions on kick-backs from the businesses it directs you towards.

 I know what you're thinking, but you're wrong. Google is in NO WAY like a cabbie who collects a Ben from the strip-club door-man for every car-load of asian businessmen. Nope. All the payments from the clients to Google are legitimate business transactions, drawn from dedicated "advertising" budgets, and are fully acknowledged and taxed.

 But the end result is the same: money changes hands when the service provider (Google) steers business (you) towards the client (not you). Those client pay so Google will send you their way. Any they pay a lot, because if Google is not directing the product (you) towards them, its directing the product to the competition. When a Google user types in "best pickup," how much would GM pay for the top spot on the list generated in response? How about Ford. Let the bidding begin.

 Keeping this in mind, consider that everyone’s good friends at Facebook just made a shitbag of money. Facebook (hereinafter ‘FB’) went public in a big way, marking a big step along the way to world-domination. Of course, a lot of the commentary that surrounded the IPO involved either the company’s founder, or were about FB's models for profitability. Articles, almost without fail, comment on Mark Zuckerberg’s propensities for hoodies, and compare FB’s IPO with that of Google. Sometimes in the same paragraph. As for the hoodie thing, I don’t see why it gets so much play. Hell of a lot less pretentious (and a hell of a lot more comfortable) than a black turtleneck. Add in that most of Zuckerberg’s detractors – all the way back to the dipshit twins from Harvard – were dress-shirt and khakis types. If you were set up so that you needed NOTHING from ANYBODY, tell me you wouldn’t be dressing comfortably. As a guy who has to wear suits – even occasionally – let me assure you that they fucking suck.

Turning to actual business models for Facebook, there’s the never-ending comparison to Google. Most dot-coms (meaning: pretty much everybody except Google) boomed at the IPO, and then crashed pretty sharply. As middle-managers almost by definition, most dot-coms don’t produce anything except some form of service (mostly providing access to you for a paying client). Add in that the services they provide are typically driven by discretionary trendiness, and almost always lack the stability of a long term business plan. Take Zynga, for example. Raise your hand if you really thought that Zynga games was going to fly as a long term business entity, much less as a decent investment? Their only customers are the grass-root public, and each transaction nets them a grand-total of a few bucks. More importantly, their business model is utterly dependent on two things: the tastes of the fickle public, and that publics’ supply of disposable income. If either or both wane, business plummets.

 With such an unsteady business model, there’s almost never any guarantee of long-term income. The company can almost never afford to pay out a decent dividend when they can’t even project sales for the following quarter, much less the following fiscal year. At that point, the only way the stocks of those companies have any attractiveness to major investors (meaning: mutual funds and banking houses that buy thousands of shares at a time) is if the stock has some value as a commodity in and of itself. This value as a commodity is why dot-com IPOs have an initial boom. It's trendy, and people want to own it because its cool, regardless of whether it's worth anything.

But eventually, the day-traders get over how shiny and cutting-edge the business’ name is. Dropping the fact of their ownership of that stock stops impressing people at the wine-and-cheese mixers. At that point, even the day-traders realize what the major investors knew from the get go: no matter how much they personally love whatever service the dot-com provides, their portfolios are better served by investing in companies that do more than push ones and zeroes.

 Facebook has followed this trend, opening at about 38, and quickly loosing substantial value. It's currently at about 31, and people who know what they're talking about say that it should stabilize somewhere around that price. Alas, it turns out that Facebook is only worth about $80-billion, rather than $100-billion.

 The big question is what the future holds for FB. The financial success of FB depends on FB allowing paying third-parties to participate in your interaction with your friends, in such a way that the third-parties will pay for the participation. The question is: is Facebook going to develop a business model to sell its product (you and your friends) to paying clients. Unlike Google, it can't provide its clients (still once again: not you) with an ongoing stream of product (you). FB is simply not in the business of facilitating commerce, through which it might win some sort of financial kick-back. Facebook provides - at best - a way for their clients (not you) to either chime in or to listen in on your various (mostly social) FB endeavors.

Under current advertising models and trends, FB can't prove a form of interaction that people will pay a whole lot for.  Banner ads, for example, generate almost no commerce, and so do not garner FB substantial income. If FB started bombarding users (even moreso than currently) with those sorts of ads, users would start to sour. Any more direct involvement in your interactions with your friends would probably just outrage people.

"Hi, this is Jeff at Hyundai USA. I couldn't help but overhear your online chat session with your sister, when you mentioned that you needed a new car. Have you considered the new Ultima? It has the best warranty in the business, you know."

NO FUCKING WAY.

Absent a decent profit stream from banners and other foot-note advertising, and absent a viable model of more effective advertising to push, FB will have to look into other ways to profit.  In the end, businesses are not going to shell-out big bucks for the ability to stand in the online crowd and hold up signs while you post about the amazing cheeseburger you just had (#killedit!).

This leads to the possibility of selling a product alternative to the ability to chime in. If clients won't pay for the ability to CHIME in, maybe they'll pay for the ability to LISTEN in. Facebook knows every bit of information you've posted on it. It knows every bit of information you've EVER posted on it. How much do you think that information might be worth, to someone, somewhere?

 But don't worry. I'm sure FB won't get greedy. Those are personal details. Private, and FB knows it. I don't think anyone will object to Facebook selling information on broad demographic, and that sort of over-arching analysis. Tracking of trends and fads, market analysis, but certainly not access to and analysis of individual persons. Or races. Or political groups. Facebook will keep those details sacred. Certainly, Mark Zuckerberg would NEVER consider the value that might be realized by selling access to all the things we put up on his servers. Never. He's way too nice a guy to ever do anything like that.