Facebook currently derives 82 percent of its revenue from advertising. Most of that is the desultory ticky-tacky kind that litters the right side of people’s Facebook profiles. Some is the kind of sponsorship that promises users further social relationships with companies: a kind of marketing that General Motors just announced it would no longer buy.

Facebook’s answer to its critics is: pay no attention to the carping. Sure, grunt-like advertising produces the overwhelming portion of our $4 billion in revenues; and, yes, on a per-user basis, these revenues are in pretty constant decline, but this stuff is really not what we have in mind. Just wait.

It’s quite a juxtaposition of realities. On the one hand, Facebook is mired in the same relentless downward pressure of falling per-user revenues as the rest of Web-based media. The company makes a pitiful and shrinking $5 per customer per year, which puts it somewhat ahead of the Huffington Post and somewhat behind the New York Times’ digital business. (Here’s the heartbreaking truth about the difference between new media and old: even in the New York Times’ declining traditional business, a subscriber is still worth more than $1,000 a year.) Facebook’s business only grows on the unsustainable basis that it can add new customers at a faster rate than the value of individual customers declines. It is peddling as fast as it can. And the present scenario gets much worse as its users increasingly interact with the social service on mobile devices, because it is vastly harder, on a small screen, to sell ads and profitably monetize users.

Well expressed, but nothing we’ve not seen elsewhere. However, Wolff moves from this to consider the effect on the rest of the online advertising market that pays for so much of our browsing:

From a revenue perspective, it’s an ad-sales business, not a technology company. To meet expectations—the expectations that took it public at $100 billion, the ever-more-vigilant expectations needed to sustain it at that price—it has to sell at near hyperspeed.

The growth of its user base and its ever-expanding  page views means an almost infinite inventory to sell. But the expanding supply, together with an equivocal demand, means ever-lowering costs. The math is sickeningly inevitable. Absent an earth-shaking idea, Facebook will look forward to slowing or declining growth in a tapped-out market, and ever-falling ad rates, both on the Web and (especially) in mobile. Facebook isn’t Google; it’s Yahoo or AOL.

Oh, yes … In its Herculean efforts to maintain its overall growth, Facebook will continue to lower its per-user revenues, which, given its vast inventory, will force the rest of the ad-driven Web to lower its costs. The low-level panic the owners of every mass-traffic website feel about the ever-downward movement of the cost of a thousand ad impressions (or CPM) is turning to dread, as some big sites observed as much as a 25 percent decrease in the last quarter, following Facebook’s own attempt to book more revenue.

You see where this is going. As Facebook gluts an already glutted market, the fallacy of the Web as a profitable ad medium can no longer be overlooked. The crash will come. And Facebook—that putative transformer of worlds, which is, in reality, only an ad-driven site—will fall with everybody else.

via The Facebook Fallacy – Technology Review.

The iPhone was, in effect, two inventions. The first was a smartphone that was easy to use – a revolution in itself, as all previous smartphones had been very user-hostile. Real ease of use was made possible by the capacitive touchscreen, a sheet of glass with an electrostatic field that is distorted by the touch of a finger. By fine-tuning this distortion, each touch becomes a fantastically precise control mechanism. There are only four mechanical controls on the iPhone. The machine is the screen.

The second invention was much more revolutionary. It was the “app”, short for application. When it was first launched, the iPhone was locked – it could not do any more than Apple intended. But, on 10 July 2008, Apple opened the App Store, which allowed users to download approved apps to their phones. To date there have been over 25 billion downloads of more than 700,000 apps.

The deflationary effect on software prices has been spectacular. When apps were known as applications, they were expensive and came on discs in boxes with fat and incomprehensible instruction manuals. Now they are either free or ludicrously cheap and they don’t need manuals. A wave of geek creativity has been unleashed and, largely thanks to the iPhone, people now expect their machines to do pretty much anything they want.

New Statesman – Love rectangle via We Study Media

The world’s hottest digital markets: a music map — paidContent.

Let’s start by recounting a brief history of video games and violent crime, told through game releases and British Crime Survey figures. Are you sitting comfortably? Then I’ll begin:

In 1993 Doom was launched, and by the 1995 release of Worms violent crime in the UK stood at over 4 million cases per year. In 1997 Carmageddon was launched, and violent crime dropped by half a million or so. In 1999 Counter-Strike was launched, and violent crime dropped to below 3.5 million cases per year. In 2001 Halo and GTA III were launched, and violent crime fell below 3 million. In 2003 Manhunt was launched, and violent crime fell to just over 2.5 million. In 2005 F.E.A.R. was launched, and violent crime fell to just under 2.5 million. In 2007 Manhunt 2 was launched, and violent crime fell to just over 2 million. Over roughly the same period, video games grew from a minority interest to more than 40% of the UK entertainment market.

I particularly liked this:

Last week, I asked my followers on Twitter to tell me what impact video games have had on their lives. I’ve collected all the responses on Storify, but here’s a taster of the most heart-breaking:

@hullodave: I used to play The Sims but now I just secretly watch and control the family next door.

@Nebula63: I played Final Fantasy X and tried to destroy false and corrupt religious institutions.

@joannastar: Thanks to final fantasy I now solve arguments by summoning mythical beasts.

@immoral_angeluk: Blinx the timesweeper made me go on a murderous rampage and jewellery heist with a hoover.

@SteveEvans77: I played pacman as a child. This clearly contributed to my munching pills while listening to repetitive music in my late teens.

@mofgimmers: Jet Set Willy made me tidy my mansion really really slowly in a top hat.

@AGBear: After a marathon Mario session, I jumped on a turtle’s back and expected it to bounce underfoot. Poor thing never stood a chance.

@outatownstrange: Minecraft has led me to build an 8 bit tunnel in my back yard.

via Could Angry Birds lead to mass murder? | Martin Robbins | Science | guardian.co.uk.

In a blog post today announcing Twitter’s new tailored suggestions system is something that has left me shocked: an overt admission by Twitter that it is transparently tracking your movements around the web. Othman Laraki, on the Twitter blog:

These tailored suggestions are based on accounts followed by other Twitter users and visits to websites in the Twitter ecosystem. We receive visit information when sites have integrated Twitter buttons or widgets, similar to what many other web companies — including LinkedIn, Facebook and YouTube — do when they’re integrated into websites. By recognizing which accounts are frequently followed by people who visit popular sites, we can recommend those accounts to others who have visited those sites within the last ten days.

Basically, every time you visit a site that has a follow button, a “tweet this” button, or a hovercard, Twitter is recording your behavior. It is transparently watching your movements and storing them somewhere for later use. Right now, that data will make better suggestions for accounts you might want to follow. But what other things can it be used for? The privacy implications of such behavior by a company so large are sweeping and absolute.

via Twitter is tracking you on the web by Dustin Curtis.

The Vagenda.

This doesn’t show all traffic to these websites, nor any other URL-shortener, but is interesting nonetheless. For example, The Independent appears wildly popular in Cornwall, The Mail in the North, The Express in Scotland and The Guardian in the South-East.

The Twitter news map of Britain | News | guardian.co.uk.

The Wall Street Journal reports that General Motors will soon stop advertising on Facebook “after the auto maker’s executives determined their paid ads had little impact on consumers’ car purchases.” GM will, however, engage in Facebook’s “pages” that allow marketers to display promotional content at no cost. The news comes just days before Facebook’s planned IPO.

via GM to end display ads on Facebook – Boing Boing.

Hollywood and the federal government have partnered to create updated and even more annoying anti-piracy warnings that will be included in new home-release DVDs and Blu-ray discs beginning this week, the government said Tuesday.

The new warnings now have three scary logos intended to deter those who might violate copyright law by making a back-up copy, ripping a movie to a tablet-friendly file, uploading it to a peer-to-peer network or make illegal copies to send to military service members in Iraq.

via Pirates Beware: DVD Anti-Piracy Warning Now Twice as Fierce | Threat Level | Wired.com.

In A2 media we’ve had a lot of discussions about how Facebook needs to find new ways of generating revenue as mobile use is increasing and ads are not featured on their apps. So much for the message on their logon page, “it’s free and always will be”.

“We’re going to see a lot more ideas like this where they are testing out different ways to try to make money,” said Ian Maude, internet analyst at Enders Analysis.

Both Facebook’s imminent stock market flotation and a recent slowdown in revenue growth were helping to concentrate its attention on ways to make money, he said.

“In the last few years their overall revenue has grown much more quickly than their audience,” he said. However, he said, that rapid growth had slowed in the last six months and had perhaps prompted it to experiment.

via BBC News – Facebook tests ‘pay to promote post’ tool.