Thursday, February 02, 2012

Facebook Filing for IPO

According to Forrester Marketing Analyst Nate Elliot, “Media reports suggest that Facebook will file for an IPO this week that could value the company at $100 billion — and leave the company sitting on $10 billion in cash.” Now what will Facebook do with all that money, you may ask? Well, Elliot said on Tuesday, January 31, that with this money Facebook would have the ability to revamp revenue streams in an attempt to capture “global domination.”

"The fact is this new-found wealth could not only allow Facebook to solve its biggest business challenges, it could also help Facebook finally achieve its longstanding goal to change how marketing works," Elliott wrote in his blog post.

Elliot continues stating that Facebook makes “almost all” of its revenues from advertisements. However, he also said that the social network "harbors a dirty little secret: Marketing on Facebook doesn't work very well." According to research conducted by Australia’s Ehrenberg-Bass, only about 1 percent of Facebook users that are “liking” certain brands on Facebook are actually engaging with the company.

“Facebook can – and must – do much more to turn the data it has on users into effective ad targeting,” wrote Elliot. “(Buying a demand-side platform would be a good start.) And it must build or buy much better tools for building, managing and measuring branded pages.”

He went on to say that Facebook must "swing for the fences – and data is the key. Two years from now, Facebook should be competing with Google to see who can best use your own data to help marketers target ads to you, no matter where those ads appear."

Facebook has faced some major scrutiny concerning the use of user data to provide targeted ads. Back in November the FCC decided that Facebook had "deceived customers by telling them they could keep their information on Facebook private, and then repeatedly allowing it to be shared and made public."

Elliot made sure to mention this issue in his blog post. "One external threat it can't outrun, though, is the government," he wrote. However, with extra money Facebook will be able to defend itself better. "One of the first things Google did after its IPO was to hire an army of lobbyists, and I expect Facebook to follow suit — especially if it follows the advice above and looks for creative and expansive new ways to use its data," Elliott said.

"Expect lots of blue business cards floating around Brussels and Washington by the end of 2012. After all, $10 billion buys a lot of influence," he said.

Elliot went on to discuss the success of Facebook across the globe. In Brazil Facebook has just recently become the largest social network in the country. Elliot believes that Facebook needs to focus on progress like this as it plans for the future.

"In the global markets where users are most enthusiastic in their use of social media — including Asia and many large emerging markets — Facebook isn't doing as well," Elliott said. "It's behind in Russia, Japan, and Korea, and it's not even playing in China."

Back in November, when appearing on Charlie Rose, Mark Zuckerberg was asked about the expansion of Facebook into China. He said that, at the moment, he would much rather focus on "places in the world where we can connect people more simply." He continued saying that "if you do the things that are easier first, then you can actually make a lot of progress." Therefore, China is "not the top thing we're thinking about right now."

Sources: Forrester - How Facebook’s IPO Could Transform Marketing and PCMag - What Will Facebook Do With $10 Billion?

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