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.
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.