Why I hate Facebook

The social networking wunderkind may be cool. But enough already! How's it ever going to make money...especially in a recession?

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By Paul R. La Monica, CNNMoney.com editor at large

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NEW YORK (CNNMoney.com) -- I need to take a break from all the gloom in the markets and economy for an Andy Rooney-esque rant. Indulge me.

I don't know about you. But I'm sick of all the Facebook hype.

For the record, I am not on Facebook, and the recent fuss about privacy doesn't affect me -- I'm not a disgruntled user with an axe to grind.

What I don't get is how Facebook has become such a phenomenon. Our sister publication Fortune even recently published a story about the company called "How Facebook is taking over our lives." It's a great story...even though Facebook hasn't taken over my life.

Don't get me wrong. I realize some people swear by Facebook. I understand its addictive charms. My wife is a recent convert and she loves it.

Also, I am by no means a Luddite. I break out into cold sweats if I haven't checked my BlackBerry for more than 10 minutes. I believe that the invention of the DVR is proof that some supreme deity exists. And I even sometimes use my BlackBerry to program my DVR.

But I honestly don't have the time to commit to Facebook. My job, especially since the implosion of Lehman Brothers in September, keeps me insanely busy. And after sitting at a computer typing all day, the last thing I want to do when I get home is sit in front of another computer so I can upload photos to my Wall and read 25 random things about a high school classmate I haven't spoken to in 18 years.

I also don't feel the need to constantly update an entire network of friends about the daily minutiae of my life. My brother recently harassed me over the phone about why I wasn't on Facebook. My response was, "You want my status update? I'm about to hang up on you."

I may be in the minority. The Facebook universe is now 175 million users strong. But how is this company ever going to generate meaningful revenue and post profits from this massive user base?

Popularity's nice, but profits are cooler

In the Fortune story, there is a chart showing how quickly Facebook got to 150 million users compared to other technologies such as the iPod, cellphone and television.

While it's impressive that it took Facebook only 5 years compared with 7 years for Apple to "sell" 150 million iPods, who has the better business model?

Facebook merely signed up people to use their service...for free. Apple sold a product...and a pretty pricey one at that. What's more, Apple (AAPL, Fortune 500) makes money when people buy music from iTunes for their iPod.

Facebook board member and Netscape founder Marc Andreessen said on an appearance on PBS' "Charlie Rose" show this week that if it wanted to, Facebook could start monetizing its user base immediately by selling more ads.

But how much money would it really make? The site already has some advertising. But are they effective? I argue that Facebook or any social network can never truly be a major generator of ad revenue. Users of Facebook like the site because it allows them to easily connect and communicate with friends. It's the 21st century version of Ma Bell.

By that very token, how happy would you be if you had to listen to an ad when you picked up the phone before you were able to get a dial tone? Even if users tolerate ads on Facebook, I'm not sure they'd actually click on them.

Why Facebook isn't Google

Facebook is a completely different animal than the other Web wunderkind it is often compared to: Google. The beauty of Google (GOOG, Fortune 500) is that, despite all its efforts to diversify, it really is all about searching for information. If I go to Google to find the best airline fares to Buenos Aires, a sponsored search result may actually be helpful as opposed to being obtrusive.

If I go to Facebook to try and top my friends' best score in Scramble, I'm there to freaking play Scramble. Even a "contextually relevant" ad for Boggle is going to irritate me. Yeah, Facebook may be "stickier" than Google. But I'm not hanging around waiting for an ad.

I'm also skeptical about Facebook's plan, unveiled earlier this month, to offer user information to companies so they can target specific users for online polls. For one, it sounds like another privacy backlash waiting to happen...similar to the Beacon service Facebook launched in 2007.

With Beacon, Facebook partnered with online retailers that would track a users' credit card use. So if you bought something online, friends in your network could see that. Problem was that when Facebook set it up, all users were automatically enrolled in Beacon. Not a smart move. After an unsurprising uproar, Facebook changed it so users had to opt-in.

Also, don't most people hate consumer research polls? When is the last time you decided it was a good idea to waste 15 minutes of your life happily chatting with a telemarketer?

To me, Facebook seems to be growing for growth's sake without a plan for making money. And that's really risky in a recession as bad as this one. Not only is Facebook faced with the prospect of ad spending declining this year; it also has to likely deal with the rising costs to manage the increased amount of data as it signs on more and more users.

So while I applaud Facebook for its ability to attract a loyal base of users, I just don't get how it will ever be a financial success.

The Fortune story closed by saying that Facebook CEO Mark Zuckerberg doesn't want to sell to Microsoft (MSFT, Fortune 500) because he wants to build the next Microsoft. But Bill Gates didn't become one of the wealthiest men on the planet by giving away operating systems for free now did he? To top of page

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