Last Friday I was one of the millions of people who logged-on or tuned in to watch the IPO of Facebook. I added the stock ticker to my browser and watched it through the corner of my eye for the remainder of the trading day. I’m not a day trader, or heavily invested in stocks, I was just interested in how Facebook would fare on Wall Street. It had been so widely publicized that I wanted to watch history being made in real-time. In reality, history was not made. Instead, Wall Street offered a reality check to the digital business model.
At about 11:30 the Google Finance ticker came alive and the stock slowly crept up. I remember thinking how nice it would have been to be able to buy into the IPO at the “bargain” price of $38. After a peak of $43 or so, it started to trickle back down to its initial price. It never regained momentum, and three trading days after the IPO, the stock sits at $31. Some commentators came out immediately and blamed the fact that the 28 year old CEO wore a hoodie to his “impress Wall Street” tour. Others said the valuation was so much higher than the actual value of the business; and added that to meet earnings expectations they would likely have to turn off a large percentage of their user base with an increase in annoying advertisements.
One undebatable fact is that Facebook needs to raise revenue. There has been a lot of speculation on how they can do this. There has been talk of an e-commerce payments product, similar to Paypal. Sure, why not? They know everything about you now; why not give them access to your checking account? Okay, that was sarcastic, but since Facebook has an iffy track record with privacy, this may not be the best idea. Can’t you see the notifications? “Four friends would like to know how much money you have, click here to post it on your wall.”
Perhaps the greatest opportunity is in attracting B2B marketers, something they have been lagging behind their competitors in. The chart below is from an inbound marketing study conducted in 2011 by Hubspot. You can see B2B and B2C customer acquisition through various digital channels.
To strengthen their B2B advertising product, Facebook needs to offer features that attract B2B marketers. For example, their ad analytics capabilities are still very basic and simple. They could also add more of a variety of ads, such as interactive banner ads, videos, and even an integrated instant response form that advertisers could add to their business pages, creating some type of landing page platform. Lastly, with the majority of Facebook users accessing their accounts on mobile devices, perhaps there is an opportunity to offer advertisers access to an integrated QR Code scanner, location-based notifications and more. The possibilities are really only limited by two things; the creativity of Facebook’s development team and the willingness of users to share their data.
The coming months will reveal Facebook’s plans for increasing revenue, and I wouldn’t bet against them. I wouldn’t necessarily buy their stock either, but keep this in mind. Facebook has access to an enormous amount of talented entrepreneurs, experienced executives and creative designers and programmers. They’ll find a way to fulfill the promise they made to the public last Friday.
