Wednesday, May 23, 2012

The audience IPO

Image representing Facebook as depicted in Cru...
Image via CrunchBase
I thought it was going to be too late to blog about the Facebook IPO – no matter how interesting it is. However, today, we can read up on the discovery that Morgan Stanley, JP Morgan and Goldman Sachs (the underwriters) decided to downgrade their view on Facebook and cautioned their investors on the social network’s lack of mobile monetization on the 9th of May.

This isn’t illegal. It’s just crumbled cookies to everyone else.

The Facebook public offering has been called a giant technology IPO. In stock market terms Facebook does count as a technology stock.

I’ve been calling it an audience IPO.

I treat the Facebook IPO as an audience IPO because investors are essentially tapping into the huge walled garden (fed by the Facebook platform) filled with the social networks’ mammoth user numbers and betting on that. They’re betting that this audience will make Facebook money.

I think there can be little doubt that Facebook is able to make some money from the audience via the desktop experience.

A reporter challenged me as to whether Facebook had reached its peak when it comes to monetization. I disagreed. I think Facebook can earn more from the desktop experience and I see opportunity, rather than challenges, in the other two significant digital channels; mobile and connected TV.

A trivial way in which Facebook could make significant extra revenue from the desktop without interrupting the user experience at all would be add the Google VC backed VigLink to the site. Facebook could earn from purchases inspired by the network. If they didn’t want to support the Google venture then Skimlinks, as once tested by Pinterest, could be used instead. Facebook could even conditionally turn the affiliate tracking on and off depending on whether brands were spending.

Alternatively, Facebook could introduce its own pre-roll on video content or ads overlays. YouTube has taught the web to accept this on videos. Facebook could move on the back of that acceptance. Facebook could even do that to YouTube videos in a way similar to Coull.

So what about the mobile and connected TV audiences? The connected TV audiences do feel like an issue for the future but it is not that much of a stretch to imagine causal gaming on the platform and Facebook’s potential roll in that.

The mobile app already includes “trending stories” and that is an easy route to monetization. The Karma app deal is another very obvious but clever step towards more mobile money.

This post isn’t to defend the IPO price. We will have to see whether it was talked up and then almost secretly cut by the insiders before the rest of the market could react.

This post is to say that Facebook’s ability to connect to an audience across desktop, mobile and connect TV is where I believe the value in the company sits. I think the social platform has plenty of growth left in all three of the digital channels when it comes to this audience.

blog comments powered by Disqus