Earlier this week, Facebook began the process for its highly anticipated IPO. The company hopes to raise $5 billion or more in its filing, which is considerable given the company began in a dorm room and has only been around for 8 years.
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In spite of all the excitement around the news, there have been some questions regarding the impact of the IPO on users and marketers. Without users, Facebook would not have turned into what it is today, and without marketers, the business value of the platform would not exist. But, does the IPO change this?
According to Chris Treadaway, the founder of Polygraph Media as well as the author of Facebook Marketing: An Hour A Day, Facebook will still have to please its users and marketers but will have the additional strain of maintaining profitability. He says it will face a scrutiny that it’s never been subjected to before.
“Users will be affected because Facebook will be trying to do everything they can to increase revenues, increase profits, while kind of gradually, incrementally making the user experience a little more… advanced with every passing day,” Treadaway pointed out.
Facebook faces a tough battle because, on one hand, public markets will demand to know what its plans are, how it will monetize personal data, and what its financials are. On the other side, users may counterattack the company if it feels Facebook is using too much of their personal data to make money.
Although users often complain about the power of Facebook, Treadaway tells us that he doesn’t think they will be too quick to abandon the service that has brought so many people together, and essentially, kept the world connected.
“For the last 15 years, we’ve been gradually giving the Internet broadly a lot more of our personal information, and, over time, we’ve gotten a lot more comfortable with what we’ve done,” he said.
“There are just too many benefits of using Facebook currently… for people to just stop doing it altogether, or be, all of a sudden, so concerned about it that it causes people to use it different ways.”
On the marketing side, we know that Facebook provides a great opportunity for brands to connect and sell to consumers, which, in turn, creates revenue for both the brands and Facebook. In fact, the filing showed that 83 percent of Facebook’s revenue in 2011 came from advertising.
“Even though click through rates and impression-based costs have increased a little bit over the last few years… there’s still a ton of room for that to grow,” said Treadaway.
“If you combine Facebook’s targeting options with the price that people pay at least on an impression basis currently, there’s really no better deal out there on the Internet… and there wouldn’t be even if Facebook increased their rates 3 or 4-fold over time,” he added.
But since there will be a stronger pressure on Facebook to bring in revenue, questions are being raised about how the company will ramp up its ad platform. Some are speculating that a new behavioral ad targeting system called “Open Graph action spec targeting” could be the answer.
In a nutshell, these “action specs” are verbs that Facebook collects from the statuses that users provide. Users constantly let Facebook know what they are “watching”, “playing”, “purchasing,” “eating”, and “drinking.” The idea is that Facebook would take these actions and generate leads for brands.
Treadaway tells us that he believes Facebook will play a more active role between consumers and brands selling goods going forward. He also said tools that help marketers do this would likely be available sometime over the next year.
How do you see Facebook’s IPO impacting users and marketers? Let us know.