Is Facebook Desperately Seeking Monetization?

Do we need a new business model for monetizing on the Internet?

Barry Diller, while being interviewed by the WSJ on the break up of IAC, pointed out that social-networking advertising is currently a big headache and methods are yet to be found to make it effective –

will that get figured out? I absolutely believe it will. What form will it take? Absolutely unknown.

It seems Facebook is still grappling with the right algorithm as well. The company’s COO and ex-Googler, Sheryl Sandberg stated at the American Magazine Conference in San Francisco yesterday –

“The monetization question on the web is a very big and open one.”

The holy grail, according to her, is “demand generation” and she’s calling for a new model and metrics.

John Furrier believes Sheryl needs to focus more on being a product leader and landing key business development deals – both things that MySpace has excelled at – rather than worrying now about monetizing.

I’m not quite with John yet. I believe that Facebook, and others in the industry, should be starting to think very seriously about what business model they follow.

We are definitely entering a phase when advertising growth slows. I’ve had this view corroborated by a number of very smart people on Sand Hill Road, including folks like Jeremy Liew at Lightspeed Venture Partners, and companies who totally rely on advertising for revenue are going to do it tougher for a while.

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