By Peter Klinge Jr.
That is the headline question of the day. The FB IPO appears imminent. It’s reportedly lofty pre-IPO valuation of $100B to which we’re all awaiting the coronation of is less certain. An interesting shareholder structure according to SEC filings. Founder Mark Zuckerberg will retain effective control of FB post IPO due to the offer of different classes of stock. He’ll get all the votes for FB business decisions, and the retail investor gets to observe and watch hopeful promises for stock appreciation.
I read 6 people control more than about half of the stock. Not a good sign from this investor’s perspective for quality governance in an independent board that asserts a regulator on a CEO and a company’s major decisions.
As a social media endeavor there’s irony that the wealth generated from the IPO further enriches a plutocracy. I’m not at all against wealth but believe in full disclosure so that the markets don’t oversell to me and others in the retail investor space.
On the Facebook business side a few issues and concern areas on the FB value and future growth. They report their value from revenue streams that depend on squishy math on what and who you’re counting; and in how to place a value. Let’s take a few points in consideration
- Advertisers know they need to invest media and marketing related effort into social media, but few seem to grasp how to measure such an investment or what to measure. For example, is their favorable brand effect or impression, is there a direct selling path between FB user interaction with the sale of a product or service?
- Though FB claims 900 MM users worldwide it’s unknown at what level they truly interact. Do they interact at all outside of their own communities of friends? Do they even pay attention to branded messaging? In fact advertising is considered an offense to many and FB has managed what’s viewed on a user page very well to make advertising pretty unobtrusive.
- As to the Like feature… this relates nicely to marketing consideration and preference, but…what’s NOT to like. There’s no credible negative review aspect to the FB community interactions. I liken the Like button to the wave effect at sporting events. It is fun to push the Like button and to do so is easy and passive; trivial. If you don’t like something, are you really going to post a negative comment? Generally, people will say or do nothing if they don’t like something and the FB bias is toward Like. Don’t worry, be happy! This doesn’t really help an advertiser gain feedback or understand how to make an impression for their brand.
- 900 MM users. FB and advertisers delude themselves into thinking that here’s a mass media platform. They work the FB value proposition both ways. In a sense there’s the potential to ‘broadcast’ to a huge worldwide audience and also to micro target based on user view data, but advertisers can’t add cookies to their ad placements so analytics are wanting.
First off FB and its user base is not the second media coming to replace live tune in events such as the US Super Bowl, World Cup, or the bi-annual Olympic events, or even popular TV programs.
WSJ May 2, page B1 The Big Doubt over Facebook is a good article on the marketer’s dilemma with social media and in particular with FB. There’s a good graphic on what $1 MM buys in different media. The examples range from 2 :30 commercials on American Idol, to Yahoo, and print vehicles such as People magazine or The New York Times. A $1MM buy on FB obtains 125 million views or impressions. The fault in the article was that it doesn’t compare FB impressions to the other vehicles in graphic.
Even still we’re talking impressions not actual consumer attitudes, preferences, or behaviors of FB users to browse, shop, or buy goods and services.
- The Facebook user profile. This might be one of the broadest audience groups of any media. It appears FB has users young to old, with all kinds of communities and interests groups. This confers some great advantages on one hand for advertisers and FB. But on the other it seems that the users are not an audience in the sense of ideal for marketers as much as a user generated content community for their own social media bubble. Frankly, they are oblivious to the greater FB world outside of their own friends, family, company alumni, and high school reunion groups.
I estimate I’ve been using FB for about 3 years. I can’t recall any advertiser impressions, don’t want it, and I never pay attention to the FB general messages. I asked my friends about what they thought about FB’s pending IPO, and if they thought it would change anything. A few replied. They are generally enthusiastic about how FB helps them stay in touch or reconnect with old friends, etc. But they were somewhat indifferent to FB as a business and don’t think the company would change.
When I asked if they would be willing to pay some sort of membership or monthly fee to continue on in their friend community, the reply was most definite.
Many said “… FB would never charge us. That would be so unfair.” But those that realized the business implication of the question said “… I like FB but I wouldn’t pay for it. I would do something else. I spend too much time on FB anyway.”
This is anecdotal to be sure but I too doubt the Facebook effect. Perhaps they should stay private awhile longer to sort these issues out to make social a viable business.
Peter is an executive with different companies. He offers expertise in management and marketing.
