The letter from Mark Zuckerberg that was included with Facebook’s May 2012 IPO prospectus begins by stating: “Facebook was not originally created to be a company. It was built to accomplish a social mission – to make the world more open and connected.”
Facebook’s IPO was the biggest in history by trading volume, with 576 million shares exchanging hands. The hype surrounding the IPO reflected the public’s interest in the move: whether they were users or investors, over a billion people worldwide would be affected.
The IPO letter goes on to say “Simply put: we don’t build services to make money; we make money to build better services” and this neatly sums up Facebook’s conundrum: while Facebook have always stressed that users came first, the company was now also answerable to Wall Street.
Now, six months on from the IPO, will Facebook be able to stay true to their mission of making “the world more open and connected” while providing value to shareholders? Can they balance profit against the user experience that they believe so passionately about?
Now that it is a public company, Facebook is under huge pressure to maximize revenue streams. Facebook has two main options: to act as a platform for e-commerce and apps, and to sell advertising.
Expanding their reach into the wider web appears to be the less controversial choice with users. Facebook Gifts is being trialed in the US, allowing users to purchase items for their friends without leaving the Facebook site. Third-party apps are continually expanding, allowing even greater integration between Facebook and users’ web browsing. Although users are concerned about how their information (particularly financial details) is being shared across the web, they have a choice about whether or not to use apps or sign in using Facebook.
Advertising is currently the most lucrative revenue stream for Facebook and has the potential to increase massively, but it is the more unpopular choice with users. Of the $3.7 billion Facebook made in 2011, $3.2 came from advertising.
Around 60% of Facebook’s billion users connect via mobile devices, something that has only recently become monetized by incorporating ads. ‘Sponsored Stories’ now appear in users’ timelines, moving marketing from the periphery to the central focus of the page design. Sponsored Stories have apparently been hugely successful monetarily, generating $1 million a day for Facebook, but while the model of highlighting friends’ brand interaction to their wider network works well for companies, users have been mixed in their reactions. In some ways, having such focused advertising can be beneficial as you are more likely to be interested in where your friends are shopping, visiting or eating, but Facebook’s use of social data in this way could feel intrusive. This may only be the beginning. Facebook have only just begun to exploit the potential for mobile marketing: advertising could be targeted by location as well as by what your friends are Liking and purchasing, giving a three-dimensional approach to marketing. Brands may welcome this, but users’ reactions may be mixed.
Will Facebook keep to their mission?
The IPO letter shows how passionately everyone at Facebook cares about their mission to bring people together and how determined Zuckerberg is to continue with that mission. The potential for Facebook to use their vast wealth of social data to drive profits is enormous, but they must balance that against their mission. Are the two compatible? I believe so. Facebook continues to connect the world, integrate into all parts of our digital experiences to make it easier to “do things with friends” online. And the company continues to test the ways in which in-newsfeed advertising would add value vs. disrupt user experience.
Ekaterina Walter is a social media innovator at Intel. She is an author of the book “Think Like Zuck: The Five Business Secrets of Facebook’s Improbably Brilliant CEO Mark Zuckerberg”. Twitter: @Ekaterina. Blog: www.ekaterinawalter.com
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Simon Mainwaring is founder of We First, a social branding consulting firm that helps companies, non-profits and individuals use social media to build communities, profits and positive impact.