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What to Make of Facebook Going Public

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So it’s only natural to wonder…what is the future of Facebook? Now that the Social Media giant has gone public, will this be the beginning of a new corporate powerhouse that can reinvest in itself and become an increasingly more powerful and better company? Or, is this the beginning of the end for Facebook like most online fads before them? Can it outlast newer and cooler options?

You might be surprised by my answer.

First, Facebook is legitimate. No, not just because of its massive number of users (that would be quite the understatement), but from a revenue perspective, they’re demonstrating that there is a sustainable business model that can produce substantial revenues, and at a higher return that what it costs to operate the business. That’s the makings of a good company. But in my opinion, the only way Facebook can triple (or more appropriately, 10x..) its revenue and match the likes of Google, is based on the success of that advertising.

For those of you who have ventured into Facebook advertising, you know that it can be very effective in pulling in new “likes” and generating a lot of low-value, low-cost impressions, but to truly MARKET yourself, a promotion, or a service, it can be difficult to really get movement behind your campaign. The truth is, the ads are a backdrop to the experience (like most content-based websites), and with the increasingly rapid consumption of Facebook via mobile devices, those ads continue to run to the same population of computer consumers. If you’re looking to reach an older audience, well then fantastic, but for most businesses, its essential to reach the younger demographics. And by young, keep in mind that most 30-somethings are mobile-centric.

Additionally, Facebook no longer has a stranglehold on teens getting into the social media space. That population is trending towards Twitter (a possible sign of long-term weakening?).

As an advertising option, Facebook just doesn’t present the same success and results that Google provides. Google alone isn’t the end-all, be-all to online marketing, but it’s the biggest and safest place to be if you want a measurable return. The key is that 100% of its users are searching for something. That’s not saying that you can reach 100% of Google searchers, not all users interact with ads, but of their users, all of them are using Google.com for one, clear purpose (Google spin-off products aside).

Not a bad place to put your ad. Next to content that’s related to your business, and what the user is seeking…

Facebook, conversely, has to push its advertising platform further and further into post-related content. Until now, it’s been user-based, which is nice, but it’s so hard to predict actions based on preferences. We may think we know our customers, but social-profiling isn’t easy. Even still, a push towards post-related advertising poses limitations.

1. A lot of posts are filled with sarcasm. We post and talk much differently than we search. When we search, it’s almost as if we’re asking a librarian where information is based on what we’re looking for, contrasted with the types of things we put in our posts, which is conversational to say the least. Text is everything when it comes to online advertising, and the text placed in search is a more accurate environment than text in social media. It likely always will be.

2. Searching is proactive. You don’t know how to do something? You search before you try, not after. You plan on going on a trip? That’s when you start searching locations, options and pricing. Not after. Social media content is present-tense or after-the-fact. Now it is possible that you may ask a friend, “Where should I go on vacation?” In that case, it wouldn’t be a bad place for some companies to advertise, but most posts are closer to, “10 days until Vegas!” or “Just landed in Vegas!” This content isn’t as advantageous to tourism boards, hotels, rental car companies, airlines and everyone else that falls into the mix. Again, if you’re buying an ad based on the text that surrounds it, you want that text related to words prior to the decision, not after. Search wins this battle.

So my biggest concern about Facebook’s longevity is that its advertising platform is less successful than Google and Search. Until that changes, Google and others win out.

Secondly, the last decade has shown us that it’s extremely hard for websites to stay relevant. I’m active with the space, and even I have noticed that my amount of time spent with Facebook is diminishing. It’s not disappearing, it’s just declining. The relevance of the experience is decreasing, and that’s not good. Facebook needs more users, using the product more, in places where ads can be served, or this will be a quick decline. If they can accomplish those goals, there’s a good chance Facebook remains as one of the great online successes.

If they can’t, I think you’ll see within 5 years a similar fate as Myspace. It will have a place to play and leave its mark, but it won’t be the $100 Billion company investors dove into.

The one thing Facebook can say, is that it has never sat back on its success and failed to innovate. They’ve continued to improve and enhance the experience. Hopefully those decisions will continue to engage users….and not push them away.

I’ll leave you with some interesting comparisons by the Assocated Press:

ANNUAL REVENUE: Google, $38 billion; Facebook, $3.7 billion.

ADVERTISING REVENUE: Google, $36.5 billion; Facebook, $3.2 billion.

ANNUAL NET INCOME: Google, $9.7 billion; Facebook, $668 million.

SOCIAL NETWORKING USERS: Facebook, more than 900 million; Google, more than 170 million.

EMPLOYEES (as of March 31): Google, 33,100; Facebook, 3,500.

CEO: Google, co-founder Larry Page; Facebook, co-founder Mark Zuckerberg.

AMOUNT RAISED IN IPO: Google, $1.67 billion; Facebook, $16 billion. Figures include shares sold by early investors and exclude bankers’ option to sell more shares.

IPO STOCK PRICE: Google, $85; Facebook, $38.

MARKET VALUATION AT DEBUT: Google, $24.6 billion; Facebook, $104 billion.

DATE OF STOCK MARKET DEBUT: Google, Aug. 19, 2004; Facebook, May 18, 2012.

CLOSING PRICE OF STOCK ON FIRST DAY OF TRADING AND PERCENTAGE GAIN: Google, up 18 percent to $100.34; Facebook, up less than 1 percent to $38.23.

CURRENT MARKET VALUE: Google, $196 billion; Facebook, $105 billion.


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