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What is a Facebook Founder To Do?

Now that the dust has settled and the lawyers have emerged from the debacle that was the Facebook IPO, it will be interesting to see what will happen next.  Will Mark Zuckerberg’s personal wealth fall to that alarming level below $15 billion (check out the Zuckerberg Wealth-o-Meter on WSJ.com if you’re that concerned)?  Will Facebook give the shaft to the NASDAQ and jump over to the NYSE?  And will my wife finally figure out which one of her 336 “friends” un-friended her last week?  In an effort to end the suspense, my answers are: Yes, Yes, No.

As we know, Facebook issued an advisory in the days before the IPO that increased mobile usage by its vast user base will continue to crimp their ad revenue, which accounts for somewhere around 85% of their total revenue stream.  To add fuel to the proverbial fire, GM announced they were discontinuing paid advertising on the site a mere two days before the scheduled IPO citing a poor return on their investment.

I’m going to leave the financial analysis to the experts, as the extent of my financial expertise stops at semi-mastery of TurboTax 2012 Deluxe Edition.  Instead, as a casual observer of social media trends, I’m going to pretend that I know what will happen next.

Facebook, now a public company, will need to respond to pressures on its stock price.  As such, they will need to stem the bleeding from the trend towards mobile usage.  They can do this in a number of ways.  Below are some ideas, ranked from bad to not-so-bad.

Cripple the mobile app a bit by withholding certain functions thereby forcing people to use the full website.  Nah.  Dumb idea.  This isn’t 1990’s Microsoft.  Forget I said it.

Slap more ads on the mobile app, or at least make them more engaging.  This appears to be a no-brainer, but as we know, ads on mobile phones have an inherent difficulty.  They don’t work.  They are small, unattractive, and get in the way of the app.

Squeeze more revenue from their app partners (12% of their revenue is from their Zynga partnership) without pushing them away. Facebook gets paid every time you buy more coins or virtual goods for your Zynga games.  They also charge Zynga every time you leave Facebook and go to their game sites.  This is linear growth at best.

Exploit the power of the mobile device.  Now we’re talking!  That phone is more than just a handy way to post a picture of yourself at Yankee stadium on your wall.  Among other things, that phone has an awareness of where it is in the world.  And where IT is, YOU are (hopefully).  Facebook has been painfully aware of this, as its attempts at exploiting location services has failed to date.

Enter “Glancee”.  Glancee is a location service which doesn’t require you to check-in, and Facebook acquired the company a few weeks before the IPO went down.  In a nutshell, Glancee runs in the background on your device, monitoring your location and looking for people you may be interested in nearby.  This is quite different from Foursquare which requires you to actively check-in at a location—something that gets old very quickly.  How does it determine which people you might find “interesting”?  By mining your Facebook data of course (friends, “likes”, communities, etc.)!  The creep factor is much higher, but in my mind this type of service, if implemented effectively, will accelerate the ongoing evolution of how we humans interact.  And when humans interact in new ways, there is the potential for new business.

One billion.  Nuff said.  Analysts project that by August of this year Facebook will have 1,000,000,000 users signed up.  That’s roughly one-seventh of the world’s population, and it certainly won’t stop there as emerging countries continue to get connected.  Tracking the habits, movements, friends, interests and clicks of that many people has got to be worth a heckuva lot of money to someone.  Currently, Facebook’s own policy doles this information out very sparingly, mostly using it to place ads in the right places for the right people.  Facebook doesn’t even charge companies for this targeting service—just for the ads themselves.  To charge for the intelligence, though, Facebook has to demonstrate that the return is worth the cost.

Ad placement aside, though, the biggest benefit of all that data is that it’s their data (well, it’s actually your data—but they have it).  The personal data of one billion people summarized and cut in any number of ways (by sex, age, location, educational level, interests, etc) is, indeed, a gold mine.  Packaging and selling some of this data, as long as it remains anonymous and unidentifiable, is certainly possible and something they could pull off without too much backlash.  However, if users ever get a whiff of marketers engaging them individually based on a crumb of information they posted, there would be a massive revolt—and legislation would be soon to follow.  The threat of one-seventh of humanity (and Congress) carrying pitchforks and torches descending on its new “thumbs up” sign in Menlo Park is enough to keep Facebook from doing something so overt and so stupid; at least for now.

Looking ahead, Facebook will continue to falter, but ultimately it will not fail.  As the social-technology landscape continues to morph and evolve, the company can afford to try new things, take some risks and perhaps overstep now and then.  That’s because the data they are sitting on will always be valuable.  And right now it’s burning a hole in Mark Zuckerberg’s pocket.

Categories: General, Mobile
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