So even though I’m currently not working, I do love Fridays b/c it means that the stresses of the workweek (for me: job searching) are over and I can spend two delicious days being totally useless and wasting time and not feel one bit remorseful for it.
I’m also particularly glad that today has passed b/c the Facebook IPO finally happened. I live in Silicon Valley and not only has the news been plastered with a countdown and updates regarding the impending IPO, it has been overtaken with the media’s asinine speculations and non-stories regarding the event. At some point, news should actually be based on something that has happened– right? Two+ weeks of stories about what might happen have driven me over the edge. If I have to watch another bubbleheaded reporter standing at a luxury car dealership reporting on the many luxury vehicles that new Facebook millionaires may purchase– Lord…
At this point, the IPO has happened and it looks like the price spiked and then dropped and now is holding steady at $38/share, which was the opening price. And now there are headlines about the Facebook stock flipflop (or the haters that report that it flat out flopped.) Now, I don’t know a whole lot about the stock market so I’m not going to comment on what this means, what may happen, etc. I’m simply not knowledgeable enough to make any kind of an educated contribution. However, what I am going to write about today is my opinion on Facebook as a whole, based off of a conversation my friend and I had last night and my general understanding of the company and the challenges it faces.
It is worth noting that my friend, whom I will refer to as Mr. W, and I both worked at Google under the helm of Sheryl Sandberg and the majority of the Facebook executives that she later poached and installed at Facebook. So the bulk of the execs are incredibly familiar with online advertising, particularly Grady (I forget his last name– again accuracy is clearly not a priority on this blog) who had previously worked at DoubleClick and was integral to Google’s acquisition of the display advertising network. (I say this since the bulk of ads on Facebook appear to be display ads.)
I asked Mr. W what he thought the fate of Facebook was and he responded that a lot of the problems disclosed in the filings prior to IPO were serious and that it seemed like the company responded less quickly to these changes (mainly in consumer behavior) than would be expected for what was then a small and supposedly nimble and progressive company. He said that the fact that users visit Facebook via smartphones (either mobile web or via the app) and the fact that ads aren’t supported on mobile formats means that Facebook will struggle to monetize via this access channel until they have adequate ad options for advertisers. I feel that this was a fair assessment of a major challenge for the company. However, this issue seems largely technological– I’m not a designer or an engineer but it seems like it would mean adjustments to user experience via interface development, new ad format, or something in that vein. A change to the platform, essentially but doable with the strong team that they have amassed.
The real problem I see with monetization on Facebook is that there isn’t a really strong understanding on the part of advertisers as to why they should spend to advertise on Facebook– how much it is the same, different, better than other advertising options. Now, again– I will admit that a lot of my opinions on Facebook are not based off of expertise or any real insight into Facebook. However, while in business school– having left Silicon Valley for really the first time in my adult life– it seemed clear that people struggle to understand technology and get really mesmerized by buzzwords and “me-too strategies” rather than thinking very deeply about the best tactics for their company. One of my classmates interned at a consumer packaged goods (CPG) company and made the comment, “Coming up with a social media strategy for any of these big CPGs is basically explaining what Facebook is to a 60 year old executive who has never visited the site but is adamant that the brand have a social media presence.”
Before, when there was print, radio and tv, it was understood that ROI of advertising wasn’t going to be very clear. Meaning: you can target a certain demographic with advertising, but there isn’t a direct means of tracking whether people exposed to the ads actually purchased the product. (A/B testing seems like the best bet or something with tracking options, like coupons.) With the introduction of AdWords at Google, there was a greater level of trackability but really– that didn’t help out CPGs that much did it? You typically don’t purchase food goods online (or cars for that matter). I’m guessing that brands like to continue to pump money into TV commercials b/c so much more can be conveyed via video than in a flat format. But now, people are cordcutting and a lot of people get their media content through Netflix or some other internet or app-based source. So now video ad networks are cropping up which are likely snapping up the dollars that might have previously been spent on media buys on broadcast tv.
Facebook’s big strength is that a lot of people are on the site, a lot of people repeatedly visit the website (b/c of the changing content) and the level of demographic and psychographic information available to advertisers is more niche and more accurate than what had been available via other advertising media. But I think they need to convey to potential advertisers what this really means to their bottom line– especially if they’re thinking that FB is just about “likes” and “shares” and these other intangible and non-transactional behaviors.
The challenge then will be manifold. It is educating the advertisers and helping them account for the benefits of their advertising spend. It is keeping users engaged. And it is maintaining the balance– the consumer experience vs. the needs of advertisers. Before working in technology, I worked in publishing and my understanding is that magazines on average are split 60/40: 60% advertising to 40% legitimate content. Yes, advertising dominates. No, I haven’t checked this. Yes, you can be skeptical of my numbers if you want.
Commentary on the future of Facebook have speculated that it will get worse for users– which I agree with. As more of the feed or the total experience becomes advertising-oriented, the less FB will look or feel like what we first grew to love (at least me) and if user base atrophies, so will advertiser interest and so on and so forth. The balance is key and it remains to be seen how Facebook will adapt its platforms and its strategies (consumer and B2B) to maintain the balance and interest of both parties.
So that’s about as much thinking as I can do right now. I just ate a bunch of candy and a nap harkens. Happy weekend everybody!