Visa and the why the Facebook Business Model Will Fail

Big news this week. Visa jumps into the LBS world for deals. See article from Media Post:
I blogged back in May that if Facebook charged $3/month, got just 200mil to pony up they would instantly have $7.2bil in revenues, rank 314 on the Fortune 500, could shut out all marketing efforts, forget Brands, forget Advertising, make the network 100% private and focus just on reinvesting in a killer Communications Platform that could compete with anyone. Now this failure is GLARING!
Visa has something Facebook doesn’t. Everyone has Visa Credit and Debit Cards. In fact I am sure this far surpasses how many people use Facebook more than once per week (my guess is Facebook has about 300mil users who log in more than once per week). They also have something Facebook and FourSquare and everyone else lacks….CUSTOMERS!
Facebook, Foursquare, etc basically have to cold call and pitch their LBS services. I bet the GAP Deals effort for Facebook took 2-3 months of effort, and I still suspect Facebook paid for the cost of the promotion. Visa just has to include a sales pitch for their LBS services in their monthly bills to its customers. Imagine in every credit card statement a flier on how their LBS works shows up? That every bill sent to a business that uses Visa for Transactions gets the same?
Now lets look at the ammo! Visa Ranks 326 on the Fortune 500 with almost $7bil in revenues. More key is they made $2.3Bil in profits last year! Their profits was over 1.5x Facebook’s revenues. These guys can torch everyone in LBS with really only Mastercard possibly competing.

When Pets.com went IPO the reason I said they would fail is not because people wouldn’t buy Pet Food online, it was because Walmart can step in and crush them instantly. My money is on Visa.

I will leave you with this thought. What do you view the value of Facebook now if Deals and Places are dead? People want deals. We don’t give a flying pig about sharing that info with our friends on Social Networks. We only do that because we get forced too!

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About chiefalien

Howie Goldfarb with 20 years of Sales and Marketing experience founded Blue Star Strategic Marketing in central Vermont to serve as the objective and strategic adviser of brands to help them grow and thrive. His Degree in Finance and 14 years of B2B sales to Fortune 500 companies gives him a CFO’s view of marketing. Thus bringing a dose of reality to the confusing world of jargon, spin, and hype. Also playfully known as the Chief Alien of Blue Star Strategic, Howie relishes his role as an industry outsider. A native New Yorker and former Angelino, he currently lives in the Green Mountains of Vermont and is still seeking his first moose sighting. His passions are living life, art, music, the outdoors, he tries to cook and loves the Vermont Fresh Network – local sustainability initiatives like farm to table and buying local.
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