FaceBook's Hotmail problem
Real old-timers remember Hotmail. They came out of nowhere to become a massive ideavirus. growing exponentially and then selling to Microsoft for more than $400 million (in cash).
And yet Microsoft has never ever come close to making a profit on this. Why?
Because Hotmail trained users not to click on the ads. The last thing you want to do while checking your email is to stop doing that and read some ads, or to click away to another site.
The mistake Hotmail made? Not building a permission asset. What if registration gave you a choice of 5 or 10 or 1,000 different newsletters you could get for free every week. (Pick one for your free membership, or pick as many as you want). And what if every newsletter was filled with actual news and plenty of free samples, gift certificates and big time savings directly related to your topic?
Most people would look forward to the newsletter. The ads would be a bonus, not a penalty.
When someone goes to FaceBook, they're not looking for stuff. They're looking for people. But people don't buy ads, stuff does.
That's a problem.
Any platform that makes ads a distraction or a cost is always going to fail compared to a site where the ads are a welcome part of the deal.
[Many readers have pointed out that Hotmail has added newsletters. My point is that if the newsletters are the core of the offering, they work. If they're just hype or a waste, there's not so much point.]