Facebook IPO: Opportunities for brands and marketers
With Facebook’s highly anticipated IPO announced on Friday, the press has been covering all kinds of depressing opinions from sceptics, pessimists, and suit-wearing Wall Street executives. Yes, it’s important to play devil’s advocate and look at the Facebook IPO from all sides, but don’t let the tidal wave of doom saying drown out the obvious: Facebook has a lot of trump cards left to play.
Financial analysts, the media and venture capital investors are poking holes in the Facebook ship and it seems as if they’re almost hoping it will sink, especially after its shares dropped in value over the two trading days following the IPO.
To combat all the pessimists out there, here is Justin Kistner, director of social products at Webtrends analysis of why Facebook will live to become one of the most powerful companies in the world.
Mobile: The Unknown
To date Facebook has taken a cautious approach when it comes to mobile investments and is just now getting into the game. And the timing is perfect – its approach has set it up nicely because Facebook is the best positioned to offer the first browser-level mobile development platform. In fact, Facebook recently announced it. It’s called the App Center.
The App Center lets you install apps on Facebook’s mobile site. From the user’s perspective, this is important because it means apps are always up-to-date and from a developer’s perspective, it saves time and money. Instead of needing to specialise in the native language of each mobile OS, the same developers that build web-based games can build apps for mobile. The App Center also addresses key challenges for developers, such as having to maintain legacy architecture to support backwards compatibility that comes with a large installed user base.
Facebook’s investment in Instagram and Glancee further demonstrates its dedication to winning in mobile. As does its newly released news feed ads that will flow into mobile. If Facebook can achieve similar monetisation value for its mobile users, then that will add massively to its revenue.
Ads: The Not Yet Unleashed
Facebook is just starting to put ads into the news feed and there is a wealth of untapped potential there. For example, Facebook said they would start by serving no more than one ad per person per day into the News Feed. If they sell their inventory of 500 million daily active users, that’s 182.5 billion ad views per year.
Credits: The Hidden Gem
In its entire 14 years of business, Google has never generated more than a single digit percentage of revenue from anything other than advertising. Right now, 15 percent of Facebook’s revenue comes from credits. If Facebook extends their credit system to real goods and services it would change all projections of their future revenue.
The Brand Budget: It is a Popularity Contest
With 900 million users, Facebook has proven it’s the big man on the internet campus. Just like in high school and college, this is a popularity contest because brands must be where the consumers are. As the social ad practice matures past fan acquisition to fan monetisation, we’re going to see social ad investment increase because more and more brand marketers will understand the system.
As brands improve targeting, Facebook can sell more clicks on less impressions, which allows them to increase revenue on the same inventory. We are working with our customers to identify the best practices to improve performance. For example, we learned that targeting increases the average click through rate (CTR) sevenfold, which can drive cost down from more than a dollar per click to less than a quarter per click.
Facebook has already proven to be pretty powerful. It has generated more revenue every year than Google did at the equivalent age of its ad platform. There’s no reason to assume it won’t solve the issues at hand, especially with the influx of an anticipated $10 billion in cash. I believe Facebook is well positioned and will continue to make millionaires long after the IPO.