If you have been browsing any online news portal lately, you will notice that it is buzzed with news about Facebook going public and has just sent in their IPO (Initial Public Offering) application to SEC. From this IPO Facebook is raising USD $5 billion through the IPO.
Through the IPO filling, we can summarize some important points regarding Facebook:
- Facebook 2011 earning is USD $1 billion on top of revenue of USD $3.71 billion
- Compare to 2011, advertisement has increased 1600%.
- 85% of the earning came from advertisement revenue and 12% came from Zynga.
- There are 825 million registered users worldwide.
- 425 millions, or 51.51%, of the 825 million users are mobile apps users (iOS devices, smartphones, android devices)
- Facebook expressed concerns about mobile apps users because mobile apps do not display their advertisements.
- Facebook has expressed concern on low Click Through Rate (CTR) for their advertisement.
First of all, advertisement spending has increased over the years and Facebook has enjoyed a robust year in 2011. The trend and projection from Facebook is that the trend will continue and with the current 825 million user base, it is a very attractive platform for companies to advertise. But in the IPO filing, Facebook expressed concern that advertisers are not that confident in the advertising platform and also some other hurdles.
Previously we wrote about Facebook mobile app not being able to display advertisement and that could be a barrier of entry for advertisers looking at exposing their ads to these users. Furthermore, the growth in user based has slowed down but the Facebook mobile users are on the rise (last September Facebook announced 800 million users compare to 825 million users as of the date of IPO filing and 350 million mobile app users compare to 425 million. That is an increase of 3.15% in user base and an increase of 21.43% in Facebook mobile apps users).
With these information, how will Facebook be different in the next couple of years? What would advertisers like to see?
We would like to see the following changes:
- Advertising: bringing the advertisement to mobile app users so that all 825 million users can be targeted
- Better Integration: the advertisement should be better integrated to create maximum exposure and impact to improve the CTR (click through rate).
- Better Layout: instead of placing the advertisement on the sidebar taking up very small space, we would like to see the advertisement integrated into the “Newsfeed” area.
- Target=”_blank”: when an user is clicking an advertisement, it should open a new tab to load the target page in order to provide better browsing experience to the Facebook users.
Of course, there will be some other changes ahead for Facebook when the IPO is confirmed. And at Zymora, we predicted the following:
Shift of Priority
Facebook has been very user-oriented since the day it launched. They focus more on creating great user experience and paying little attention to their customers (advertisers), and that is how Facebook has been able to attract people to sign up an account. But with IPO where earnings are everything in the eyes of shareholders, Facebook has to shift their priority to the customers in order to generate more profits and increase the revenue.
Will that upset the Facebook users in the long run? Only time can tell. If Facebook can balance their focus on priority between users and customers, then the effect won’t be huge. If the priority is not balance, Facebook stands to upset both the users and the customers.
Overcoming the Challenges of Mobile Apps
Apple and Google, the creator of iPhone and Android and other devices such as iPad and Android tablets, have their policies about advertisement on their mobile apps. In a nutshell, Facebook is not allowed to advertise on the mobile apps.
Smartphone users, especially iPhone and Android platform devices, are on the rise every year, so the Facebook mobile app users number will be on the rise. It makes perfect sense because smartphones are with their owners most of the time and going online is convenient. As of now, mobile apps users are more than half (51.15%, in fact) and the growth trend will continue. It won’t surprise us if the number will grow to 70% region.
So how can Facebook overcome the hurdles and policies imposed by the two giants in smartphone industry? Once Facebook can advertise on their mobile apps, then it will be an extremely attractive platform for advertisers to advertise.
For those who have worked long enough at Facebook Inc will definitely enjoy the company shares. In fact, a lot of these employee working day and night are hoping that one day Facebook will go public, and without surprises, on the day of Facebook IPO, many of the employees at Facebook will become an instant millionaire.
Before becoming a millionaire, most of these employees will be in the office from 6am until 10pm, working extremely hard to improve the system, making Facebook better. But once the IPO is launched and many of them became instant millionaires, mood will shift and emotion will change. With abundance of money, the employees don’t show up until 9am and leave at 5pm sharp because suddenly life is much more interesting when they have the money. This has had happened with Google, Apple, Yahoo, and many more.
Time Frame of Feature Launch
Mark Zuckerberg has announced that Facebook Inc won’t change after the IPO. The way we see it is that after the IPO, Facebook is answerable to the investors and shareholders, and the pressure can be extremely overwhelming. Then there’s the paperwork involved, so being the CEO he is responsible and held responsible for many aspect of the business. To make the investors and shareholders happy, a lot of the new features will be rushed out to engage users and businesses (like Timeline for brand page).
Let’s hope that our wish list will be answered and Facebook will balance their priority between clients (advertisers) and users to better improve the platform where both parties will enjoy an integration that will bear fruit to great results (better CTR for advertisers and better experience for users).
[For more information about Facebook IPO, check out the WSJ website for the interactive IPO scenario and information WSJ]