This past month was very memorable for the world of tech and a very important day in Wall Street with Facebook’s IPO. A company who started in 2004 was worth $104 billion for one day, on paper. Underwriters valued the shares at $38 each, pricing the company at $104 billion, the largest valuation to date for a newly public company. On May 16, one day before the IPO, Facebook announced that it would sell 25% more shares than originally planned due to high demand. The IPO raised $16 billion, making it the third largest in U.S. history (just ahead of AT&T Wireless and behind only General Motors and Visa). The stock price left the company with a higher market capitalization than all but a few U.S. corporations – surpassing heavyweights such as Amazon.com, McDonald’s, Disney, and Kraft – and made Zuckerberg’s stock worth $19 billion. And this only lasted a day or two since the stock tanked shortly after and this morning it was at $31.74.
What happened to Facebook’s stock price is something that I am not qualified to talk about, however I would like to offer my opinion on a couple of things that I see happening in the next few years with these internet companies. Let’s start with Facebook.
Mobile is fueling Facebook’s growth in users and usage, but this presents a challenge for the company, as the S-1 filing makes clear: “We are actively seeking to grow mobile usage, although such usage does not currently directly generate any meaningful revenue,” it explains. Why not? No ads. 85% of Facebook’s $3.7 billion in revenues in 2011 came from advertising, and those ads were all on its website. Facebook’s advertising strategy has not made the leap from web to mobile.
Once Facebook starts serving ads in its mobile application usage will decrease as users get annoyed by viewing both content and ads in their tiny screens. People have accepted the fact that many websites are constantly bombarding them with ads while using their desktops and laptops. However, it is a very different story with mobile devices, in general no one wants their small screens to be contaminated with Facebook ads or any ads for that matter.
Facebook knows this and as of now, they are working on the legal details so they can start targeting a new group of users, 12-year-old kids and younger. Currently, to join Facebook you have to be 13 years of age or older. This is about to change soon as Facebook is developing the technology that will allow them to verify parent’s consent about young kids joining the social networking site.
The Wall Street Journal wrote an article about this mentioning that Facebook’s motivation to do this is the pressure they have because of the large number of users under 12 years of age that are using the site. Consumer Reports last year said 7.5 million children under the age of 13 were using the site, including more than five million under the age of 10. My opinion is that they are doing this to increase this number even more, giving them the opportunity to tap into those companies that promote products and services to young kids. I am sure we’ll start seeing a lot of Lego and cereal ads in Facebook soon.
Google recently ditched Google Places for Google+ Local, this is good for local businesses because now their listings in Google local appear inside Google+ giving them a much improved user interface and a chance of increased exposure. However, it is clear that Google’s focus is on Google+ and this is a big mistake, focusing on Google+ and not continuing making search a better product will hurt Google in the long run. While companies like Apple and Twitter become more focused on search with products like Siri and an improved Twitter search, Google’s interest seems to be on competing with Facebook to gain more users interested in social networking…
There is also Adwords which I believe is going to become irrelevant in the coming future as people start focusing on searching using Twitter, Apple’s siri, Facebook and LinkedIn, etc… Searching is what people do online when they are not looking at photos in Facebook. People search for potential customers, business partners, employees, jobs, stuff to buy etc… and using the sites I mentioned above allows them to do a more focused search depending on what it is that they are looking for.
There is also the profitable business of online reviews for products and services, as these social networking sites continue to grow, I believe online reviews from people we don’t know will become less relevant and instead we are going to pay attention to what our connections say about products and services, it is going to happen, it is what has always work in the offline world, it is word of mouth.
In the end all of these sites always become the same thing, online billboards for corporations to sell stuff to all of us, the consumers. They all start as a great way to share our lives with friends and family but end up being just another platform for big corporations and organizations to either sell or publish their information to us, all the time. Unfortunately these sites have to do that to be able to sustain themselves, they know people are used to join these sites and its services for free and it seems that selling personal information and advertise stuff on their sites is the only way to make money. If we want to have a true social networking site where our information is kept private we need to welcome services that do charge money avoiding the need for advertisement in their sites, and as long as the site has a policy of not advertising, this could lead to a great social networking site where people can freely share experiences, photos, etc with their family and friends.
What are your thoughts?
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