The Blog

Why Faltering Facebook Price is Good News for Advertisers

Facebook's floatation on to the choppy waters of the Nasdaq hasn't exactly made for a comfortable time at Menlo Park. The handling of the launch, the lawsuits, and most of all the fallingshare price has made the social network more a subject for public speculation than at any time in the company's history - which is going some, for an internet poster-child like Facebook. But for marketers, the pressure on Facebook isn't all bad news.
|

Facebook's floatation on to the choppy waters of the Nasdaq hasn't exactly made for a comfortable time at Menlo Park. The handling of the launch, the lawsuits, and most of all the fallingshare price has made the social network more a subject for public speculation than at any time in the company's history - which is going some, for an internet poster-child like Facebook. But for marketers, the pressure on Facebook isn't all bad news.

Underneath all the share valuation debate is a very simple question about income. We know Facebook is huge, we know it's still growing, we know people love it and spend vast amounts of time there. The practical reality of the model pioneered on the web is that however much consumers think they dislike ads, they much, much prefer them to paying for services - plus they actually respond and interact with a frequency which would probably surprise them.

Yet to date, Facebook hasn't tried too hard to monetise those users. Given the level of public wailing and gnashing of teeth among users when Facebook tweaks its homepage design, thecompany is well aware that flooding the user experience with ad units will put a lot of people off.

That's without taking into consideration how Mark Zuckerberg and the original team that built the platform feel about monetising their baby - there is a distinctly populist, anti-corporate streak at Facebook. So while it was a private enterprise making money only for itself, Facebook could afford to be picky about which ads itfelt fitted the platform's ethos. The IPO has changed that - there are now market analysts asking why Facebook is supposed to be valued at over $100bn. Looking at user monetisation, they've decided for the moment that it just isn't worth that much, and that's starting to force Facebook's hand.

Mobile is the most often cited area where there is room for Facebook to grow, and as of this week Facebook has offered the first mobile-only ad option. Sponsored Stories, Facebook's most social of ad units, can now be targeted to the traditional right hand side ad spot, or directly into user's timelines. Volume in the latter may be restricted, but it's the only mobile ad space going and now ads can be targeted to appear exclusively in those slots. Given that Facebook estimates it has 500m daily mobile users, even with a 1 ad per day per user cap, that's an extra 182.5bn ad impressions a year from mobile, and in the highest engagement area of the whole facebook site that should see some pretty healthy income. Facebook might well say that this was being planned before the IPO, and that's probably true, but the fact is this moves like this to increase income per user will now have to happen if Facebook wants a 100bn market cap. For advertisers, that means more inventory and more options, and most important of all, an avenueinto the areas of Facebook once held sacrosanct from ads, where user interest is highest and the payoff for brands - andfor Facebook's bottom line - is greatest.

With contribution from Philip Dyte, Paid Social Planner, iProspect

Before You Go