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kleinbl00  ·  3653 days ago  ·  link  ·    ·  parent  ·  post: Whatever goes up, that’s what we do

There are two choices here: you can focus on long-term value of your customers or you can focus on short-term value of your customers. Let's look at two businesses.

NADIA'S NOTIONS is a convenience store at JFK International Airport. The overwhelming majority of its business comes from international travelers who forgot something or people on a layover hungry enough for a bag of peanuts but not so hungry as to go to Chili's.

QUINCY'S QUICKMART is a convenience store just off the 520 ramp in Bellevue, WA. The overwhelming majority of its business comes from commuters who forgot something on their way to work or neighborhood folx who don't want to drive all the way to Fred Meyer for a half gallon of milk.

Nadia is all about short-term. She can gouge all she wants because the odds of her ever seeing a customer twice are slim. There are TSA guys who will grudgingly buy from her sometimes, but even the airline pilots will hold off until the next airport because her prices are inflammatory.

Quincy is all about long-term. He wants to be the nice cozy place where people are willing to spend a little extra for the convenience of an easy purchase. It's in his best interests to learn people's names, what cigarettes they buy, etc.

If Nadia lowers her prices and focuses on her demeanor, everyone will like her store better... but her revenue won't increase. She has a pinch point. If Quincy raises his prices he will make a little more money in the short term... but the number of customers he gets in a month is likely to drop.

Facebook has a lot more in common with Quincy than they do with Nadia. Facebook exists because of habitual users - people who are there a lot. They're like Time Warner Cable, in a way - they have a monopoly service that mostly exists to provide people with someone else's content.

And this is where things go to shit: TWC does not judge revenue by how much time people spend on TimeWarnerCable.com. Stupid and short-sighted as they are, they recognize that their best move is transparency - don't get between the people and what they want.

Facebook, on the other hand, doesn't understand that interacting with people is a value-added proposition over interacting with the interface and if their current model makes them more money with the worse design, then their long-term success is dependent on revamping their revenue model instead of their UI.

Time Warner Cable decided last year to start charging people for the cable modems they'd provided for years. Why? It would make them more money. They did it by sending one of those meaningless, pointless letters full of how great they are and then, in small print at the bottom, added "andwearenowgoingtochargeyoufourdollarsamonthforamotorolasurfboardCOUGHCOUH.

Were they in their rights to do so? Probably. They still got hit with five class action lawsuits. And they pissed off a customer base that will jump from them the minute they have an option - even a bad one.

Really - that's Facebook's business model. Con Edison. Time Warner. Puget Sound Energy. A monopoly service with no options, no customer-facing wing, and exactly one product. What they don't seem to understand is that stringing cable is a lot more expensive than porting a friends list.

And that's why this matters.