Monday, November 3, 2008

Is Farhad Manjoo working for News Corp. on the sly?

That's the only explanation GWS can come up with after reading this garbage in Slate.

Manjoo argues that since times are getting tough, internet companies like Facebook should revert to a "neighborhood Italian restaurant" business model, which is sort of a weird recommendation, because have you ever tried the breadsticks they serve at Facebook? Neither have I, and that's part of why this is among the dumbest ideas I've ever heard.

Let me get this straight: Manjoo and I are both working from the assumption that our current economic tailspin and the death of free credit mean that there's going to be a shakeout in just about every industry. Manjoo recommendation for keeping Facebook afloat, then, is to charge people for what they've always expected was free. Tell me, John Q. Consumer, do you typically enjoy paying for things that you'd come to expect as free? What if those now-charged-for items weren't, say, food, water, or shelter? That is, if your landlord changed the terms of your lease and made you start paying for heat and hot water, would you pony up the extra cash? Probably, yeah. Now, what if your landlord started charging your $5 a month to look at your friends' drunken party photos? Would you still be willing to pay?

Two larger thoughts before GWS is done with this rant.

1. GWS used to work for a market research firm, one that's struggling to keep its head above water. During the downturn earlier this year, a company-wide "suggestion box" was sent around, and the results were later sent to all employees. Most employees, particularly those in sales and the firm's more proftiable researchers, argued that the company's price points should be lowered to encourage a greater number of transactions. The lone voice of dissent on this opinion came from our PR rep, who argued that increasing what each client paid by only a little bit would really help the company's bottom line. In Microeconomics 101, this works beautifully---just move the lines so that the price point is higher and poof!, profits. In reality, counterparties see a move like that and say, "Hmmm, I wonder what more I'm getting in return for this extra money." When they see that the answer is "Nothing," they become displeased. Then they take their money elsewhere.

GWS didn't expect his PR rep to understand this; from her position in the company, she had no good reason to understand that most clients were already saying our services were overpriced. But GWS can't cut Manjoo the same slack. Ignorance can't be considered an excuse here.

2. At Mobile Internet World in Boston last year, GWS had the opportunity to listen to Tim Berners-Lee, the guy who basically invented teh t00bz while working at CERN in the 1980s and 90s. Among Berners-Lee's more memorable points was his emphasis that the internet was never intended to generate wealth; it's intended to share information, not make money, and that's just that. To Berners-Lee, the fact that some people have found a way to make money from internet-based businesses is admirable, but it flies in the face of the purpose of the system. Here's to hoping Zuckerberg & Co. heed Berners-Lee's advice.

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