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Facebook Ipo

By LB0112 Mar 24, 2013 1957 Words
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 advertising world, advise brands on how to best advertise on the Social Media Giant. The strategy of this group is to not just attract brands to spending their advertising dollars but to also help the brand work with Facebook to enhance their experience. (O’Reilly, 2011). Facebook is also going to attempt to make ads more prominent on desktops as well as for the first time on mobile devices that will be tougher for users to ignore. Users will now see advertisements in their “news feeds” for companies that they have “Liked” so now while a user is checking the status updates of their friends, they will now also see an advertisement from their favorite fast food chain, car manufacturer, or clothing manufacturer. (Guynn, 2012). One other advantage Facebook has is it doesn’t have to guess who its users are it knows, because its users share their information freely. (Guynn, 2012). Another area where the Problem Solving Competency is addresses is in Customer Satisfaction. Facebook needs to be concerned about is overall Customer Satisfaction of the Social Networking site. As already discussed advertising dollars are very important to Facebook and its investors and getting more users to click on the ads is a focus, but the company needs to balance between ad revenue and too many ads that would lead to Customer Dissatisfaction. In 2011, despite a 3% increase over prior year, the American Customer Satisfaction Index (ACSI) e-business report shows that Facebook is only at 66% customer satisfaction and is not only the lowest among social media sites but also of all measured companies in the report. (Anonymous, 2011). This could potentially open a huge door for Google+ to walk through, with Google having one of the highest on the report. On the report the following areas were listed as areas of what respondents liked least about Facebook, Privacy and Security concerns, Complaints about the technology that controls the news feed, dislike of the advertising, constant and unpredictable interface changes, spam, navigation troubles, and annoying applications (Anonymous, 2011). The concern here is that 3 of those least liked on the report were Spam, disliking of advertising, and annoying applications, which are all big revenue streams for Facebook and if the customers don’t like those things, they are least likely to use them which means less revenue for Facebook. Facebook’s challenge in the future will be to improve their Customer Satisfaction and Loyalty, while improving the advertising and applications to be more user friendly without alienating themselves from their advertisers. It’s a high wire act that will be a challenge for Facebook to balance. Addressing a Legal and Ethical Issues Course competency is how Facebook addresses the security of its user’s information. A vital aspect of Facebook’s business is the ability to protect their users and provide better security of the user’s personal information. This is one aspect that led to the demise of MySpace. In the last month, Facebook has announced a strategic partnership with Trend Micro Incorporated, which is a global leader in cloud security. The partnership of Facebook and Trend Micro will help position Facebook better in the Social Media Marketplace, by helping to educate users and protect user’s personal information against malicious sits and malware. Facebook users now are protected on their Mac, PC or Mobile device so that when a user clicks on a link on Facebook, the Trend Micro’s Smart Protection Network will have first scanned the URL (behind the scenes) to insure that it is safe. If something is found the Trend Micro software will warn the user and ask for confirmation prior to going to link. (Computer Weekly News, 2012) "Now that Facebook is a primary platform for communication, whether you're nine or ninety-nine, it's only become a bigger target for cybercriminals," said Carol Carpenter, general manager, consumer division at Trend Micro. "This is why we're thrilled to partner with Facebook to offer an additional layer of protection to users so they don't have to think twice when interacting with friends and uploading pictures from their weekend." This added security feature will make users more comfortable with the personal information on the site and hope to alleviate user’s fears, which should allow Facebook to prevent itself from going the way of MySpace. Addressing the third course competency of Global Orientation, Mark Zuckerberg has said “By giving people the power to share, we are making the world more transparent.” With over 800 million active users with the average user having 130 Facebook friends, Facebook has changed Globalization from strictly an economic concept to one of technology. It has brought societies together as different societies are becoming more similar and more interconnected. President Barack Obama uses Social Media to communicate with the American citizens. In Egypt, Tunisia, Libya, and Yemen revolutions took place because young people took to social media sites like Facebook to communicate and speak their minds. Demonstrations in Israel, Wall Street, and Tokyo would not have taken place without Facebook. (Savir, 2012). The KONY 2012 campaign to stop African Warlord Joseph Kony was fueled and went viral through people sharing the video on Facebook and other social media sites. Facebook has done a great job in positioning itself in the Global Marketplace and these are just a few examples. Facebook’s IPO was not a successful one with its stock already $8 below the IPO (as of June 2, 2012). In order for Facebook to be a successful and relevant company in the future, it needs to listen to its Customers and improve their Satisfaction, by better positioning itself in the Social Media Marketplace through enhanced security, constantly improving the technology. It also needs to work with its advertisers to give them better value for their advertising dollar and improve the amount of people look at the ads. Facebook is already positioned as a Global leader in Social Media, but the company needs to continue to involve so that in 5 years and beyond the company is relevant. I have addressed the three Course Competencies, Problem Solving, How Facebook is addressing concerns from companies spending their marketing budget and not getting their money’s worth, Legal and Ethical Issues, through Facebook’s added security to protect user information, and Global Orientation through how it positions itself in the world and how Facebook has helped World Leaders and helped organize demonstrations.

Sources:
* Anonymous (2011, July) Low Customer Satisfaction for Facebook opens door for Google+. PRNewswire Retrieved from ABI-INFORM database * Bonfire Social Media (2011, October) Social Media Satisfaction: Facebook=Fail retrieved from: http://bonfiresocialmedia.com/social-media-customer-satisfaction-facebook-fail/ * Computer News Weekly (2012, May) Security Software and Service Companies; Trend Micro Announces Partnership with Facebook Offering Users Protection for Their Digital Life Retrieved from ABI-INFORM database * Edwards, Jim (2012, May) retrieved from: http://www.businessinsider.com/data-google-totally-blows-away-facebook-on-ad-performance-2012-5 * Guynn, Jessica (2012, March).  Facebook makes a splashy pitch to advertising firms; it tells marketing executives that brands will gain a greater presence on the site. Los Angeles Times Retrieved from ABI-INFORM database * Hamilton, Dan (2012, May) retrieved from: http://news.cnet.com/8301-1023_3-57434835-93/gm-to-yank-$10m-in-facebook-ads-saying-they-dont-work/?tag=mncol;txt * Lewis, Angela (2010, February).  Facebook and Twitter: Socially network yourself to success Training and Development 37.1.  Retrieved from ABI-INFORM database. * Murphy, Samantha (2012, May) retrieved from: http://mashable.com/2012/05/15/facebook-fad/ * O’Reilly, Lara (2011, June).  Social Media: Facebook offers brands a wider advertising platform.  Retrieved from ABI-INFORM database. * Reisinger, Don (2012, May): retrieved from: http://news.cnet.com/8301-1023_3-57436223-93/study-youre-not-clicking-on-facebook-ads-and-you-never-will/ * Savir, Uri (2012, January) The Facebook revolution. Jerusalem Post. Retrieved from ABI-INFORM database.

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