So there’s something the average user probably doesn’t understand about Facebook.
With all the drama surrounding the Facebook platform, you’d think Facebook would be like a money vaccuum, happily raking in anyone’s cash.
But here’s a key thing to understand:
Facebook’s #1 metric is NOT to revenue.
Facebook’s #1 metric is engaged users.
What you measure in your business is incredibly important.
The metric you select as a stand in for success & failure is what guides your decision making.
It can be the difference between short-term profits but long-term ruin…
Or less short-term profits but a legacy business that lasts.
Facebook knows that their platform’s strength is ultimately based on the number of engaged monthly users, and how engaged those users are.
Their business model is basically to create and keep boatloads of attention (supply), and then sell that attention to advertisers (demand).
Because the value on the user side is that it’s interesting and addictive to use its platform.
The value for advertisers is that 34% of the entire world’s population is on the platform and have the potential see their ads.
But at the end of the day, the most important side of Facebook’s business is the supply side. If they control the supply of a valuable resource (attention), the demand will always be there.
So the thing a lot of people don’t know about Facebook is that you can’t simply spend your way to the top.
There are two key things to understand:
#1: Facebook has strict advertising policies and they police community standards
If you’re found in violation, your ads will never even see the light of day and (as a lot of advertisers have discovered) Facebook will quickly shut down your ad account – or even your entire business account.
#2: Assuming your ad is even approved, Facebook (and Google) have what’s called a “Quality Score”.
This is what gives small advertisers a chance in the ad game.
Facebook cares that your ads are relevant and welcome. The more engaging your ads and the more receptive its users are to your ad, the more they reward you with higher placement and lower costs.
Plenty of scammy companies out there would throw boatloads of cash at Facebook to plaster its feed with their obnoxious ads.
And while that would be ultra profitable in the short-term…
It would absolutely destroy the user experience.
And in turn, destroy Facebook.
Think about all those spammy sites with flashing banner ads squeezed into every corner of the page. The kind of sites you stumble onto and immediately click away back to safety.
There’s plenty of money to be made in the dark underbelly of the internet. And they’d be happy to pay Zuckerberg by the truckful.
But thankfully, Facebook keeps the main thing the main thing. And ensures its users never have to experience that kind of junk. So that in the long run they keep the attention that advertisers are so eager to pay a premium for.
That’s how it stays on top.
The lesson for you is to understand what your most important metric is.
What drives success in your business? Then figure out the most important metric to measure.
I can almost guarantee revenue is not the most important metric. Revenue is virtually always a byproduct of focusing on the fundamentals of your business model.
Once you know your metric, make sure you keep the main thing the main thing.
Carol J. Dunlop
Great article and so true. If there is no demand, there is no business. I do agree with you about their metrics and what’s important to their brand. We can all learn from this post and apply it to our own businesses.