All posts in “IPO”

Column: It's Time For Facebook to Grow Up

This post was originally published by Marketing Magazine by Patrick Gladney, Director of Research and Insights at SMG. Follow him @pgladney

Last week was kind of like Facebook’s Bar Mitzvah – a time for the social network to grow up and begin taking responsibility for its own actions. Funny that Mark Zuckerberg chose to wear his trademark “hoodie” to ring the bell on Nasdaq the day of the IPO, signaling to the market that he still plans on playing by his own rules.

Zuckerberg may still choose to dress casually, but I would hazard a guess to say that he’ll soon begin to feel the pressure of the Street. Facebook needs to share a strategy that will explain how they plan to achieve revenues that will justify their valuation, especially in light of GM’s public announcement that they will be pulling ad spends from the platform because they can’t clearly define the value of Facebook ads to their business.

With GM as the backdrop, Facebook is working hard to help its advertisers achieve measurable results. Just last week at the CMA conference, Facebook and L’Oreal took the stage and admitted they were still working together to crack the ROI challenge. While most brands by now are committed to investing in Facebook as a content channel play, brands publishing content to generate awareness won’t pay a dividend to Facebook investors, and besides, for large advertisers like GM, awareness isn’t the problem. GM needs people to buy cars.

Working in Facebook’s favour is the fact that they are already an immensely profitable company, earning $1 billion in profits on $4 billion in revenue. Also working in their favour is the fact that their entire mobile platform is yet to be monetized, which is promising knowing that the 54% of users who access Facebook through mobile are two times as active. But unfortunately, activity, including time on site, does not yet translate into sales. Sure, ads on Facebook can be accurately targeted, but accuracy doesn’t amount to anything if the ads perform no better than their display ad brethren.

Early attempts at “f-commerce,” designed to create an integrated user experience where consumers can shop and buy without leaving Facebook, have failed to generate any meaningful results or more companies would be doing it. Mind you, most trailblazing Facebook e-tailers haven’t worked to create much in the way of retail excitement to entice Facebook buyers. Brands need to do more than simply iframe in their e-commerce site and emulate companies like BMW, who last year began selling exclusive limited edition brand merchandise on Facebook. In targeting BMW owners, this initiative helped test the potential of f-commerce to drive customer retention and generate advocacy through the network effect. But once again, we are back to putting the onus on brands to develop great content and customer experiences, with a relatively small amount of measurable sales potential in return.

So is Facebook a good bet? The risk is that the tremendous potential of Facebook turns out to be just that. The long term success for Facebook depends on the ability for brands to measure sales. And now that the company is public, they will be measured against other media companies, which are valued based on revenue per user. According to a recent mathematical model published by the MIT Technology Review, Facebook will have to increase their profit per user by between 160 and 600% for their current valuation to make sense in this context.

At Social Media Group, we’re obviously bullish on the potential of social media. But now that Facebook is a publicly traded company, it’s time for the platform to mature past the stage of experimentation and help deliver solid business returns.

Facebook IPO: Will Zuck Need to Eat His Words?

Patrick Gladney is the Director of Research and Insights at SMG. Follow @pgladney

This week represents a coming out party of sorts for the gorilla of social networks, Facebook. Any day now, the Facebook IPO means that people will be able to own a piece of the company rather than just “Like” it. So how will Facebook fare once it is traded on the open market? Will the merciless scrutiny of Wall Street and public investors alter the trajectory of a channel with a (projected) larger market cap than Disney, News Corp or CBS? I wonder, particularly when one reads the 16 words from a letter Mark Zuckerberg wrote, included in Facebook’s IPO filing:

“Simply put: we don’t build services to make money; we make money to build better services.”

Perhaps Zuck is looking to mimic Google’s famous  “informal” corporate mantra “Don’t be evil” in choosing such an altruistic social mission statement. But Facebook consistently gets in trouble with privacy watchdogs, intent on protecting consumer data. So much so, that one might easily believe that money making trumps services at Facebook. Or perhaps those services relate to the needs of advertisers, instead of ordinary members?

Regardless, I find it interesting that a business the size of Facebook downplays the significance of making money, almost as if it’s a dirty practice.  Businesses are built to make money, and I am sure that investors will see this as the priority. Investing in the business to improve the service offering makes sense in the early stages, but my guess is that Wall Street will want Facebook to grow up. As the old saying goes, “if you want to run with the big dogs…”

What do you think Facebook’s real priorities are?

Social Media Roundup for December 2

 

 

Biggest Social Network IPO in 2012?

Earlier this week the Wall Street Journal reported that Facebook is planning to roll out its long-waited IPO between April and June, 2012. The Journal also reported  that the social network is planning to raise a total of $10 billion by selling roughly 10% of the company’s shares through the IPO. This means that Facebook could be worth $100 billion if the deal goes through next year! According to CBC News, this amount is more than four times the market cap that Google had when they released their IPO back in 2004. Take a look at their poll results that asked readers if they agree with Facebook’s valuation. What do you think?

Facebook has remained private for the past seven years, so why release an IPO now? According to Mashable, one of the major reasons that Facebook decided to do an IPO now is because they have to.

Under the U.S laws, once a company get 500 or more private shareholders, you have to publish detailed data about your company’s financial performance.

The Economist believes that as the social media industry continues to grow,  Facebook will continually see more competition from other networks, such as Google+.

Facebook will want to seek a listing before rivals erodes its lead in the social-networking sphere.

Below is an infograghic, created by Namesake, that documents Facebook’s current status and its IPO path.

 

IPOs Continued

Looks like Facebook isn’t the only one that plans to hit the public sector. Today, the biggest social gaming company Zynga filed IPO documents with SEC (Securities & Exchange Commissions). Shares were priced between $8.50 and $10. If the deal goes through, Zynga could be vaulted to a valuation of $850 million to $1.15 billion (max $7 billion). According to Mashable, The company, which is famous for its popular social gaming series Ville (Farmville and CityVille), originally planned to IPO several months earlier but delayed due to volatility on the stock market. The company was originally valued at around $10 billion dollars.

If everything goes to plan – Zynga will be listed on Nasdaq under the ticker ZNGA in mid-december.

 

Google + hangout + Free Voice Calls

Google+ users can now make free conference calls within Hangouts. This was announced by Jarkko Oikarinen, the inventor of the first-ever Internet chat function-Internet Relay Chat, through his Google+ page on Dec 1. Anyone with a phone number can be invited to join the conversation, no Google account required! It looks like Google’s ambition isn’t just to attract more people to Google+, but to improve the way we communicate by integrating internet calling with party lines and conference calls. Oikarinen states:

“We are constantly listening to feedback so that we can make Hangouts even better for Google+ users, and we’re excited by the really cool ways people are using the product”

This feature currently support free calls to the U.S and Canada, and is available within Hangouts . Why not give it a try?

 

YouTube’s Biggest Web Redesign

Google bought YouTube and kept it running as a separate entity for many years. We’ve heard that YouTube has been planning on a site wide redesign for quite a while. Well, on December 1st the new YouTube design finally launched for everyone. Our first impression? The black and red side bar on the landing page looks a lot like Google’s new User Interface that rolled out couple of months ago. Pages also look and function a lot more like a social network.

Below is video demonstration of the new YouTube which will give you a thorough walk-through on the changes.

From the video, it is not hard to realize that the redesign is made for just one purpose – to get users to focus on Channels, whether through subscribing to other people’s channels or creating one by themselves.