When asked to respond to the question of whether Facebook is worth $100 billion, my mind instantly wondered back to the heady days of the dotcom boom. Ironically, the Super Bowl was playing in the background and a quick search reminded me that at the Super Bowl in 2000, 19 dotcom companies took out $2 million worth of 30-second ads. Twelve years later, the vast majority of those companies no longer exist – one was even gone by the end of that year.
So when figures like $100 billion are bandied about, it prompts the obvious question: are we looking at the biggest bubble yet?
Of course, for every pets.com and netpliance.com that year there was monster.com, and e-trade. Similarly in Australia over the past 10 years, we’ve seen the emergence of incredibly successful digital businesses, such as Seek, Carsales and Realestate.com – and globally, the biggest challenge to Facebook’s plans – Google.
Given the role digital media now plays in all our lives, it’s probably unfair to compare the Facebook IPO to what happened 12 years ago. The majority of those businesses had nothing more than enthusiasm and an idea behind them – Facebook is a different proposition altogether.
Now everyone’s had a chance to look behind the curtain, it appears Facebook is in a much healthier position than most anticipated. A year-on-year doubling of ad revenue combined with a global user base of close to 900 million, 50% of which are active users, puts Facebook in a very strong position. Nevertheless, $100 billion seems a bit steep. Most analysts put the social giant at a valuation of between $50 billion and $70 billion.
But what is of more concern to our industry is Facebook’s value to advertisers. Paul Adam, a senior FB bod, visited the GroupM office this week to talk about where he sees social media and the role of advertising heading over the coming years.
Paul, along with other key Facebook hires, was poached from Google. Almost all who made the move talk about how Google had changed, how innovation was being stifled and that the company and its direction had changed significantly in recent years.
Paul is a great example of the things Facebook is doing right: employing very smart people who understand how people live their lives online and the role social media plays in that – but also what some of their challenges will be:
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How do they keep that spirit that made FB so successful when the very nature of the company has to change once listed?
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Can Facebook continue to grow at the pace it has? Stats indicate a slowing down in user numbers. Breaking into China will be a priority.
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Privacy. Facebook’s value is in the data it collects – the digital fingerprint we all leave behind. It is already regularly criticised for its privacy polices and this is a huge topic of debate in almost every region around the world.
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Mobile. This is the big opportunity for Facebook. As yet we’ve heard very little about the Facebook plans in this space. It needs a product that does to mobile advertising what Google did to search through Adwords.
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Charge for access. Facebook’s mantra for along time has been “free and always will be”. How long could it hold out and would people pay?
Whatever happens, Facebook will be heavily reliant on ad revenue for many years to come. Paul was heavily critical of traditional advertising models, particularly invasive digital display, video pre-roll and magazine/outdoor ads. His closing slide posed the bold statement: “Why marketers don’t get Facebook.”
Claiming marketers don’t get Facebook is fine if you can back it up with a solution. Show us how advertisers can use Facebook for targeted and relevant advertising opportunities, with measurable ROI, and we’ll make sure they’re there.
After the presentation, there were a few interesting conversations among the team, all of which led in one direction – should the question not be: “Why does Facebook not get marketers?”
Danny Bass
Chief Digital Officer
Group M
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