Will Facebook Ever Make Money?

An interview with Chamath Palihapitaya, Facebook’s VP of product marketing and operations.

Last month, I spent about an hour with Chamath Palihapitaya, Mark Zuckerberg’s latest hire and something of a guru of targeted ads. Though we spoke before the Microsoft deal was finalized, his comments offer some insight into Facebook’s plans and how online advertising is evolving. By the way, you don’t want to play poker with him. Word on the street is that he’s lethal.


Here are some of his comments:

Facebook’s audience is in fact much more monetizable, because they’re much more engaged and their experience is productized in a natural way.

What we’ve done is not build a specific revenue model per se but allowed multiple revenue models to emerge. You do that by lifting constraints. You do that by setting some very broad guard rails and then letting developers innovate around how they think they can monetize their audience. So it’s not like our users are getting bombarded with advertising, but the ads that they do see are relevant to them and germane to them.

Television used to do a very good job with generating demand. Think of the 1950s. You’d see P&G sponsor a soap opera just so they could merchandise their detergent. They were generating demand for their product. And in the 1980s, you had infomercials and QVC, and you’d generate demand all over the place and then you’d fulfill demand through 800 numbers. When you look at the Internet, it didn’t start out as demand generation, it started out as demand fulfillment — I need a low-cost ticket to Hawaii. It fulfills that demand.

So what we’re thinking about is, how do you create a system that will algorithmically give advertisers the ability to generate demand in a powerful way — but also in a very subtle way. It doesn’t have to be gratuitous. It doesn’t have to be popups or popunders. Because if you do it [the right] way, it gives good value for us and for the advertiser — and great values for the consumer.

The more traditional Internet advertisers, they sort of look at you with a quizzical look. But when you talk to one of those big brands, a big smile comes over their faces because we’ve actually come to a place where they’ve been for 30 years. Nike understands what it means to be an aspirational marketer. That’s what we’re going to be solving for people.