Tag Archives: facebook ipo

With More Mobile Users Will Facebook Ad Revenue Survive Post-IPO?

There’s been an awful lot of talk recently about the Facebook IPO and what the future will hold for Mark Zuckerberg’s social creation. While many are sure that the behemoth network will continue to grow and share prices will soar, there are also those who are beginning to see cracks appear that might well lead to some serious problems.

It’s been argued that there is too much tinkering with the original layout and functionality that will cause some users to pack up and leave. The quiet grunts of discontent when Facebook Timelines first reared its head are turning into louder protests with each poll on the issue, and according to some research, 88% of users are concerned about the privacy implications of all the data that Timeline aggregates.

Ad revenues are the lifeblood of Facebook, yet not all companies are that enamoured with the ROI that Facebook has given them. General Motors – one of the three biggest advertisers in the US – is pulling all of its Facebook ads due to lack of effectiveness. But why is this happening?

People primarily use Facebook to ‘hang out’ and interact with friends. You just don’t want to be bombarded with adverts when you’re commenting on a photo or replying to a message, the same way that you don’t want someone to come up to you and reel off a sales pitch while you’ve out for coffee with a friend. Services such as Google’s AdSense have proven to be more affective as it actually targets people who are looking to buy – or at least research – a product.

Another contributing factor to the apparent decline of Facebook’s average revenue per user is the increased access from mobile devices. There simply aren’t any adverts on the mobile apps, so that’s a whole chunk of the target market taken out right there. Facebook even admitted as much during its S-1 filing, by saying that more people were using the mobile apps than originally thought, and revenue was going down.

Please be clear – I don’t see this as the death knell for Facebook – it’s still head and shoulders above the competition in terms of user base and reach. There simply isn’t another service out there that can connect you with as many people and on as many levels as Facebook does. However, everyone thought MySpace was going to rule the world, and then Facebook came along.

So the questions are these… What must Facebook do in order to keep its revenues climbing, and what would need to come along to cause a wholesale exodus from the world’s largest social network?