Facebook’s ultimate screw you

August 19, 2013
facebook on top of the world illustration

ON TOP: Facebook is sitting pretty amid its recent stock surge

When I am right, I am right, and it happens so infrequently that I have to squeeze every ounce of self-congratulatory juice from the call. Last May on the eve of Facebook’s IPO, I wrote a blog post explaining that Facebook’s future looked so bright, I had to wear shades — or I should say shame. The shame came after Facebook’s stock dropped nearly 10 percent on the first day of trading and eventually bottomed out in September 2012 at $17.73, a disappointing 47 percent below its strike price.

Well, I am looking a little less foolish now that Facebook’s stock has risen 29 percent over the past four weeks to just about match its IPO price due to a big earnings beat and quarter-over-quarter revenue rise of 53 percent.

Looking back, my optimism may have been premature, but much of what I said back then is even truer today about Facebook’s success — not just as a stock play, but as the most potent social media network in the world, now and well into the future. Consider:

1. Break-out growth is within striking distance. Facebook’s total ad revenue of $1.6 billion is still far below the $12 billion in ad revenue Google generated in the same quarter. But for those of us in the communications game, who dabble in the earned, owned, and paid media, know that as Google advertising becomes more expensive and squeezes out some bidders, the human tendency is to look for an alternative. Facebook is that alternative, and will continue to grow revenue, even if it does nothing and just lives off Google’s sloppy seconds.

2. Facebook’s mobile strategy has roving eyes. So Facebook’s mobile strategy and user experience is wanting. Still, the company’s mobile ad revenue generated 41 percent of its total ad revenue in Q2, and its mobile monthly active users rose 51 percent quarter over quarter. Facebook’s mobile business is front and center, and the company is packing its pipeline with innovations to continue expanding its mobile quest into advertising, gaming, payments, and others sectors.

3. Google searches are starting to suck and it’s showing up in clicks. What happened to the organic search space on page one of Google? It’s shrinking to a point where it’s virtually all ads. This screws the pooch of the user experience and will cause many companies to transfer their ad dollars to Facebook. We’re seeing evidence of Google’s floundering in its disappointing Q2 results, with average cost-per-click slipping 2 percent over the first quarter of 2013 — the seventh straight quarterly decline.

4. My Libyan Sea experience gets Zuckerberged. Talk about targeting. I am lying on a beach overlooking the Libyan Sea this summer, and Facebook serves me up a promoted post for a photo book. Either through my activity or geo-location, Facebook knew I was on vacation and pushed the perfect ad to me, unobtrusively and elegantly. In short, Facebook ad targeting is getting much more sophisticated. The platform now knows the passion and interests of some 1.15 billion users — and it’s playing to them. That’s powerful.

5. Facebook is child’s play. Facebook’s advertising dashboard is super easy for anyone to use right down to the TV shows users watch and the media they follow. Try doing a similar campaign in Google, and it’s burdensome and complicated.

6. Middle America flocks to Facebook. It’s where mom, pop, and kids live and breathe. Sure hipsters have moved on, and those of us with ADD now rely on text and Instagram for image sharing. But for many in the Budweiser and rodeo crowd, and for those who are content with the familiar instead of the leading edge, Facebook is the platform of choice, a welcome friend they will forever turn to for news, games, music, engagement, and even those ridiculous birthday reminders. Some 128 million Americans — or 1 in 3 people — still use Facebook every day.

So for those who used Facebook’s failed IPO as proof of its eventual demise, well, you were wrong. With 1.15 billion users, you sure can build a great business, which Facebook’s recent stock surge suggests.

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