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Sequoia’s Kvamme: Media and Ads Are Now Competely Free. Bummer.

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Scott Raynovich
Scott RaynovichMarch 18, 2010
2:24 pm MT

I am perplexed by a story going around orginating in the Gigaom universe (via Fortune, Techmeme, various blogs, e.t.c.) that Sequoia partner Mark Kvamme is  telling folks that advertising can be had completely free on social networks.

Thanks Mark!

You see, Kvamme says that the “masses make their own media” on social media sites such as Facebook, LinkedIn, Twitter, and …. ugh… Funny or Die (a Sequoia investment). I quote from the Gigaom article: “If you take what’s going on on Facebook, on LinkedIn, on Twitter, on Digg, the masses are starting to make their own media, and it’s basically free,” he noted. “So if you can figure out how to work in this world, you can get your message out very quickly.”

Great, as if the media world isn’t enough of a mess, we now have some VC partners out there telling everybody they will never have to pay a dime for advertising ever again. Only one problem with this: 1)”Free” social media marketing is not the same as a large-scale ad campaign and 2) If true, it means that 95% of the venture-backed social media companies, including the ones that Kvamme has backed, are toast, because so far the only business model they have is advertising.

I may be mistaken, but I thought Facebook and Twitter were going to use some sort of advertising model to make money. But, if Kvamme says, everybody can have social media advertising for free, then what? It means they have no viable revenue stream. That’s a little strange considering there is this company called Google which mints billions of dollars a year in an advertising model, and last I checked, that was 98% of their revenue stream.

Does Kvamme think that social media networks are going to start charging admission? BAHAHAHAHAH. The minute that Twitter of Facebook try to charge admission or subscriptions, 100 gazillion people will stampede off to the next social network that’s free. And there will be plenty of them.

So, what I think Kvamme’s saying  is that social media companies are great, because you can market for free. But if it’s free, then it means they can’t create value, so they won’t make any money and they will disappear, which means you can’t market for free anymore.

I find the concept disingenuous, especially given that a Sequoia company, AdMob, a mobile advertising companay, was recently bought by Google, another advertising company, for $750 million.

It’s a contradictory Hall of Mirrors!!

There is no such as a free lunch, Mr. Kvamme.

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Scott Raynovich

About Scott Raynovich

Raynovich is the VP of Research and Analysis at SDxCentral Previously, he was Chief Analyst and Publisher of The Rayno Report (www.raynoreport.com), which was acquired by SDxCentral in October of 2015. Considered an expert on networking and service-provider technology, he has been covering these areas as an editor, analyst, and publisher for 25 years. He was the Editor in Chief and Editorial Director for Light Reading for a decade, where he started the Heavy Reading Insider research service. Prior to joining Light Reading, Raynovich was Investment Editor at Red Herring, where he started the New York Bureau and helped build the original Redherring.com Website. He has won several industry awards, including an Editor & Publisher award for Best Business Blog and a Folio award for Best Website. His analysis has been featured on prominent media outlets including NPR, CNBC, The Wall Street Journal, Bloomberg, and the San Jose Mercury News.

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