Facebook Ipo

Topics: Facebook, Social media, MySpace Pages: 5 (1957 words) Published: March 24, 2013
With the recent Facebook IPO, many analysts and Wall Street experts are wondering, Is Facebook going to be a relevant Social Media company over the next 5-10 years? Facebook is a free service to its users that allows its customers to keep in touch with friends and family and makes money through advertising. (Lewis, 2010) But if 44% of its users never click on those ads, will advertisers continue to spend a portion of its marketing budget on Facebook advertising? (Reisinger, 2012) Facebook is the second most visited social networking site in the world (Lewis, 2010), how does it continue to grow and become the most visited. Lastly, how does Facebook prevent going the way of MySpace and protect itself from privacy issues, I will address three course competencies in this paper, Problem Solving, Legal and Ethical Issues, and Global Orientation. The Key Marketing Terms this paper addresses are Advertising, Customer Satisfaction, Loyalty, Strategic Partnership and Globalization. I will go into Facebook’s issue getting its users to click on Advertisements, Facebook’s ability to create customer satisfaction and loyalty by improving its click through rate (CTR), how it will protect its customer personal information by aligning itself with a Strategic Partnership, and how it will continue to grow in the Global Community. Addressing the Problem Solving Competency, I will analyze the current problem Facebook is having with their advertisers and how to improve Facebook users frequency on clicking on ads. Greenlight, a U.K. based digital-marketing agency, recently released a survey of 500 people that said 44% of respondents said they “never” click on an advertisements on Facebook, and another 31% said they “rarely” click on the ads. (Reisinger, 2012). This survey comes on the heels of General Motors Corp. pulling $10 million in direct to Facebook ad payments. GM marketing executives reviewed the company’s Facebook strategy and determined it wasn’t getting it money’s worth out of the ads that the company paid for. They still plan to use Facebook for its free marketing, including its own GM Facebook page. (Hamilton, 2012). GM currently spends about $40 million on Facebook initiatives. The $30 million it will now spend will be on other GM promotional activities on Facebook, which don’t directly lead to any revenue for Facebook. (Hamilton, 2012). While Facebook brings in approximately $3.7 billion dollars a year in ad revenue and really won’t feel the effects of GM’s cut, will this lead to more companies reviewing their advertising budgets for the Social Media giant? If more companies start to realize that they like GM aren’t getting their money’s worth out of direct pay advertising and can just use the free advertising, how will Facebook be able to make money and satisfy their investors? Wordstream, a search marketing management company, is suggesting that Facebook “is a much less effective ad medium than Google”. They say that “Facebook has less reach, and its individual ads are less effective, than old fashioned web advertising.” The average click-through rate (CTR) for the internet is just 0.1 percent; Facebook is even lower at just 0.051 percent, while Google’s CTR is 0.4 percent, which is a real concern for Facebook (Edwards, 2012). Compared to Google, which recently launched its own Social Networking site, Google+, Google reaches 90% of all Internet users compared to Facebook’s 51%, and Quarter 1 2012 ad revenues were $2.9 billion (up 1% year over year) for Google compared to Facebook’s $1.06 billion (down 6.5% year over year). (Edwards, 2012). Facebook needs to figure a way to Problem Solve this issue over the next year to see increases in ad revenue; otherwise their stock price will continue to fall as Wall Street will become concerned over their long term viability as a company. One way that Facebook is trying to Problem Solve the situation is it put together “Client Council” where top ranking advertising executives from around the...
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