Latest Awards Hurdle for The Social Network: Is Mark Zuckerberg the New Bernie Madoff?

The Social Network's ride to status as Oscar front-runner has been a fairly smooth one -- not even the charges that Aaron Sorkin's script too sexist and/or too fabricated has been able to knock the film off the tracks. But perhaps this will do the trick: Is Mark "Time Magazine Person of the Year" Zuckerberg running his billion dollar company like Bernie Madoff?

Maybe? At least that's basically the theory that blogger Joseph Perla puts forth. He asserts that Facebook is nothing more than a Ponzi Scheme because its ads -- where the company generates much revenue -- are worthless. Writes Perla (via NYO):

Have you ever bought a Facebook ad? I have. I have talked to many, many people who have. We have spent hundreds, many have spent thousands or even more, experimenting with Facebook ads. They are worthless. Nobody ever looks at them, and nobody ever clicks on them. I just talked to someone who was trying to promote a book. He found it cost him over $100 in ads to sell one book. Moreover, as you increase your ad spending, people get used to the ads and just ignore them. So, your already low click-through rate plummets even further.

People go to Facebook to interact with their friends. It is fundamentally different from the ad platform that is Google. People go to Google to find something they need, possibly ready to buy, which a good percentage of the time can in fact be solved by someone's ad. Facebook ads, on the other hand, annoy users. They yield no real value, and thus no profits.

And so:

Almost everyone I've talked to who has actually bought Facebook ads knows this. But, not everyone has bought Facebook ads yet. There are still more and more new businesses finding out about Facebook ads. As they grow, even more businesses give their money to experiment in destined failure.

Eventually, though, and this might take a long time, but it is finite, everyone will have tried Facebook ads and know that they are useless. Eventually, after 10 million businesses have invested $1000 each, and Facebook has earned $10 billion in revenue in total, then they will have run out of new customers and their revenue will dry up. A useless product is never sustainable. I wish I could short Facebook.

Interesting argument. The real question, though, is how this will affect The Social Network's award chances! Will Oscar voters want to reward a movie that has possibly inadvertently not really wound up in the same breath as Public Enemy No. 1 Bernie Madoff? It's not like The King's Speech has been attached to a public figure so reviled and hated. Oh, wait. Carry on!

· Facebook is a Ponzi Scheme [Joseph Perla via NYO]


  • CiscoMan says:

    Internet banner ads have a low return on investment? This guy is either new to the Internet, or to advertising, or both. He also links the phrase "Facebook is a Ponzi scheme" to Wikipedia's metaphor page. Because, sure.
    But on the idea of Oscar chances, isn't better for the film if Zuckerberg plays into the asshole role he is accused of in the film? The guy gave a kajillion dollars to New Jersey schools the same month the film came out - he needs an ulterior motive! Look what he did to Spiderman!

  • SunnydaZe says:

    Even better, when you check the mobile version of Facebook (or any website) the ads aren't there! And if you have a smart phone with the power to view a standard site the content you are interested in seeing autofits on your screen and the ads are shoved off into the void. So, in short, ads don't work on mobile. That being said, I can't wait to see Spartacus: Gods of the Arena tonight at 10pm on Starz!

  • zooeyglass1999 says:

    So news day, eh?

  • Christopher Rosen says:

    Slow, even. Nyuck, nyuck. I'm here all week! (Read: Until later tonight.)

  • zooeyglass1999 says:

    Haha! Serves me right for not learning how to type!

  • mortimer sanderson says:

    The author is a dishonest sensationalist. As Ciscoman rightly pointed out, Zuckerberg was not glorified in the film - far from it, he came off as a petty jerk. The fact is 500 million people use facebook today, whether it becomes profitable or not, whether it even lasts another few years, means that it's a social phenomenon worthy of some attention from cultural historians and/or screenwriters. But, more importantly, the film stands on its own merits, not those of its anti-hero. Doesn't this Rosen guy know that?

  • Jokes, learn to take one.

  • Brian says:

    The blogger probably has a point. Facebook isn't the place people go if they are in the mood to buy something. Whenever I read about the latest wildly inflated Facebook valuation, I think of the original bubble, tulips. Do some research on the tulip bubble and you'll see the same kind of idiocy that leads people to think that Facebook is worth $50 billion, it's latest valuation. Having 500 million members doesn't mean shit unless you can prove that the ads they see actually generate sales. Time will tell, but my guess is that this is Tech Bubble 2.0. The nice thing is that when the bubble bursts, 99% of the people who go down with it will be assholes.

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