Google, Mark Zuckerberg, Social Media, Advertising, Facebook, Initial public offering

What the Media Gets Wrong with Facebook

The media gets it wrong

Facebook does not make any money.

Facebook advertising does not work.

Facebook is not effective when it comes to mobile.

Facebook could be the next MySpace.

These have been the predominate sentiments that have been expressed ahead of and since the Facebook IPO.

First of all, I do not pretend to offer stock or investment advice. I cannot, nor am I interested in, defending the stock price or supporting their valuation claims.

However, I would like to explore these other claims.


Facebook does not make any money

Facebook makes money.  Facebook is in fact profitable.  According to their documents filed with the SEC, Facebook generated 3.7 Billion dollars in revenues in 2011 with a profit of 1 Billion dollars. Facebook has nearly 1 Billion users. If Facebook can further penetrate emerging markets as well as beat out some rivaling networks in other regions, Facebook could reach 2 Billion users worldwide. Listed among their weaknesses is advertising on mobile. Just ahead of their IPO, Facebook rolled out ads on their mobile app. Currently the advertising volume is low, but it will grow and no doubt, Facebook will find other ways to monetize mobile.

Mark Zuckerberg has made clear his intentions in developing services around Facebook.  In the Facebook IPO prospectus he wrote "we don’t build services to make money; we make money to build better services."  Facebook is committed above all to user experience.  Without users, advertising is worthless.


Facebook Advertising Does Not Work

This could take up several posts of its own. However, much of the criticism of the Facebook advertising model has been misinformed. Much of the media has been citing polls and anecdotal evidence regarding pay-per-click ads or display ads. These ads have been the  stalwart of web advertising and fall in line with the traditional interrupt and distract methods of advertising. These types of ads make up a very small portion of the Facebook advertising portfolio. Facebook’s advertisements are contextual, and for the most part are content or are a result of actions taken by people in your personal network.

The reporting on this has revealed a couple of different realities.  First, many users on Facebook do not even recognize when they are being advertised to since they are merely responding to content.  Secondly, comparing traditional distraction and interruption advertising with paid content that is contextually welcome, are not equal comparisons.


Facebook is not effective when it comes to mobile.

Mobile is the new frontier. Smartphone ownership has increased to over 50% of the population and time spent with media on mobile occupies over 25% of our time spent across all media types.  This has app developers, ad networks, and companies in general seeking strategies on monetizing mobile.  However, except for some narrowly defined categories, most organizations already have access to the most used mobile platform, the Facebook app.  While Facebook has also been hard at work to monetize mobile through increasing the number of sponsored impressions (currently users see only a couple a day on mobile), organizations can still use Facebook to organically reach their existing audience. Leveraging time spent with mobile through consistent and captivating content updates and call-to-action on social media remains a strong resource for organizations seeking interaction with customers on mobile.


Facebook could be the next MySpace

What is the next “big thing”, and how will this challenge Facebook? Fact of the matter is Mark Zuckerberg did not invent social networking.  He merely innovated and delivered a better experience. Google faced similar skepticism.  Remember how many search engines we used before Google even existed?  Here are nine current search options you never consider.  Google eventually learned how to create a platform or ecosystem that could invade the web.  Gmail, Maps, YouTube, Blogger, the Chrome browser, and Android all served to help Google to become the platform that powers the internet.


By acquiring a mass audience Facebook has proven that it has the staying power to be a long term player in the future of the web. Similar to Google, watch for Facebook to continue to expand their ecosystem.  New plug-ins, applications, web widgets, maybe even their own phone OS that extend their presence into your everyday life, tracking your web movements and trying to connect you to people, brands, and advertisers as you go.



Photo credit: RakeTentim

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Google, Mark Zuckerberg, Social Media, Advertising, Facebook, Initial public offering

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