Facebook stock since IPO
So you are social network that has over 900 Million active users, including 156,830,620 people in the United states. Your stock has been crushed since the IPO because investors don’t think that your strategy justifies the earnings multiple; specifically, there are concerns that you don’t have a real strategy to monetize your users. The shifting of user behavior is also a threat to your current business model. Specifically; users are now accessing facebook via mobile devices for longer periods of time than by computers. You haven’t figured out a successful way to monetize mobile users, and what’s worse, your app is poorly rated.
I don’t think the fix is that difficult, just the mindset change. During the IPO hype, facebook’s COO, Sheryl Sandberg, went on CNBC and said that Facebook is not in the search marketing business, instead their business is demand generation. People don’t go to facebook looking to buy something. Stop right there. That’s the problem.
Why demand generation won’t work on facebook; have you clicked on an ad? People go to facebook to see pictures posted by their family, to keep up with friends, to share bits of their life with those who care, and to keep up on subjects that interest them by following brands/organizations. It’s a communication tool, and facebook messenger has further facilitated facebook’s capacity to be a communication tool. facebook sells enterprises on the ability to engage their audience and create demand, but when the third largest advertiser in the United States, General Motors, goes on record saying that facebook ads don’t pay off, you have to start questioning your value proposition and your business strategy. Simply put; facebook users don’t go to facebook in an emotional state to buy. They go to Amazon or Google in that state, because they are good tools for buying.
Facebook needs to forget being in the demand generation business, and shift to demand satisfaction. Think about how people buy; people ask their friends for referrals and read reviews. So here’s how to leverage that on facebook; you add “facebook shopping” where you can search for and buy actual goods like on Amazon, but instead of reading strangers’ reviews (or even made up reviews by the product manufacturer or store owner), you see reviews by your friends and their network. For security purposes, profiles can be hidden, but you can still be able to see how many degrees of contact they are from you so you know how much you can trust that review.
Then add “facebook social shopping”. Much like on Pinterest, users can post their favorite things and leave comments, with the kicker being that you can click “buy now” and own that item. That is real demand generation; people discovering things that they didn’t know existed through sharing by friends and family that they trust. facebook doesn’t even need warehouses full of goods to accomplish this, as brands will pay to have access to their 900 Million active users. facebook could even charge a margin on the product much like eBay for smaller mom-and-pop operations. Throughout the shopping experience, facebook’s data analytics can serve up suggestions much like Amazon’s “Others also bought” and “Recommendations for You”, and friends can even pick out items and suggest them to you. It all becomes a very personal shopping experience that only facebook can bring you.
Before facebook went public, they could afford to be just a social network, too cool to be caught up in being about selling things. Now that facebook is public, it’s time to focus on its new mandate; maximize shareholder equity.
Facebook stock since IPO
