The filing today by Facebook for their upcoming IPO revealed data that many folks outside of the social network itself were eager to see. The data didn’t disappoint. The metrics, in a word, are staggering. Or, you could use the word “impressive”.
Prior to today’s filing, I’ve written before on this blog about my feelings on the service (that it’s “good, not great” and that it faced many more long-term challenges than people may assume especially from an advertising perspective). I still have the same opinions, though they now fly in the face of a truly substantive body of work built by Facebook over the last 8 years. I suppose their immediate (and 2009-2011) position is undeniable. But what does the future look like for marketers? What are the myths from today that might play out later if Facebook is not vigilant? What are Facebook’s challenges?
Right now, 83% of Facebook’s revenue is tied to advertising. Where there are audiences, advertisers will flock (as the saying goes).
Myth #1: That advertisers will flock to the service more than they do today. One person was quoted by saying the following:
“As the integration between earned and paid media becomes tighter, brands are going to need to advertise more with Facebook to spark conversations and draw attention to the increasingly interesting experiences they’re creating [within Facebook].”
If you’re an advertiser, wouldn’t you want to find a much less competitive environment in which to get your message across and still reach your audience? In layman’s terms, if everyone is going right, doesn’t it make sense to go left sometimes and own your audience and/or your communication platform? This is what I’ve never understood. When demand for advertising increases, prices increase, and competition goes through the roof. Sometimes, it is good to compete and advertise anyway. Sometimes, you have to because there is no other place to advertise. In this case, there are tons of other outlets for advertisers to communicate to customers. Choice is always underrated for some reason when it comes to advertising.
Myth #2: That the service will stay relevant and that no competitors will create anything better.
I won’t bring up MySpace here, everyone knows the story and you can’t compare that to Facebook. That service did not stay relevant for myriad reasons in hindsight. Different time, and much different service. Yet, there are large businesses and companies who I’d bet are hard at work at a competitive service. Google+ is actually growing much faster than Facebook did in its early days, and they have deep pockets. Further, to say that Facebook definitely will remain as relevant three years from now as it is today is an unknown. No one can say that with certainty.
Myth #3: The timing of Facebook’s filing is immaterial and doesn’t mean anything.
Quite the contrary. The company will likely be valued at $100 billion (with a “b”). In their public offering, they’re looking to raise $5 billion. That’s a 5% float, and certainly the company does not need cash at this time. To file now could mean a couple things. Perhaps they’re getting close to the 500 investor limit. Or, perhaps they know something about their business we don’t (like that they feel momentum slowing). I realize this last statement is guesswork, but for a company so calculated in everything they do, the timing bears questioning.
Myth #4: Nothing will materially change with the service, and therefore the same strong metrics will hold up over years.
Actually, Facebook users hate change. One little, tiny change to the interface sparks uproar. Can you imagine what may happen under the burden of shareholders? Comparing the pre-IPO Facebook to the post-IPO Facebook could be significantly different. Today, as they have rolled out the new “timeline”, 45% of respondents to an independent poll said the changes made them question using Facebook to begin with. If the pressure was high now, it will be exponentially higher later. And we’re not even considering the company’s data practices which have come under scrutiny to this point. In short, there could be massive change in the future and who knows what effect that will have on its user base.
Myth #5: Revenue through Mobile will do nothing but grow and will help sustain the company if #’s 1-4 above start to recede.
Well, mobile revenues pretty much can do nothing but go up for them because they’re at $0 now. This is an opportunity and a challenge, obviously. Yet, it remains to be seen if this is an area they can scale before it passes them by. It makes sense that it should be an obviously major revenue stream (remember the old “So-Lo-Mo” slogan – short for “social, local, mobile” I’ve talked about?), but it will all come down to the execution.
I don’t think anyone can argue the massive success of Facebook. Congratulations to them. For today, and for the immediate future, it is a social network that has changed personal lives, businesses and the way advertisers think and spend. Even skeptics of the service, like me, can’t deny that. Beyond the immediate future, I’m not sure. It would be crass to call it a “fad” (it’s not) and it would be hyperbole to call it the biggest and most important company ever right now (it’s not). It is likely somewhere in between, and I believe three years from now, things will look drastically different for the service and in my opinion, it won’t be rosy.
Regardless of what I think, the world will be watching.