February 3, 2012
What does the Facebook IPO mean for advertisers?
It’s been a busy week for tech commentators. After eight years, Facebook is going public.
Above the noise of share options being counted, bloggers and journalists speculate about the company’s future.
Most experts agree that Facebook can’t count on rapid growth any more. With 845 million users, it’s close to saturation point in the Western world. Keeping investors happy will require hefty revenue streams… and the cash that comes with them. Until Facebook branches out into other fields, that leaves advertising.
The IPO prospectus notes that advertising is Facebook’s main source of revenue: it accounted for 85% of the $3.71 billion revenue (and $1 billion net profit) generated in 2011.
As such a large part of the company’s strategy, it doesn’t look like Facebook’s approach to advertising is going to change anytime soon (though minor rule-and-restriction changes can’t be ruled out).
The question being asked now is whether Facebook advertising is as effective as we think it is.
Some analysts warn that 2012 could mark the turning point – that unimpressive results this year will send the ad spend for 2013 to Google and other competitors. Although this could be slightly inconvenient for advertisers, the only party that really needs to worry is Facebook itself.
The new capital generated by this IPO could sponsor Facebook’s explosion into other online realms, challenging Google’s spiderweb of apps. But until it diversifies (if ever), Facebook will rely on advertising revenue to keep those new investors happy.
The upshot of it all is that advertisers don’t have to worry. If Google ads are a more efficient use of your budget, so be it.
After all, you can start a Facebook brand page for free.