Risk

5/17/2012
05:35 PM
Jeff Bertolucci
Jeff Bertolucci
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Facebook's History: From Dorm To IPO Darling

Facebook's IPO brings the world's most popular social network into Wall Street's big league. After a wild ride, Facebook's future depends on profiting from an increasingly mobile user base.
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Facebook has come a long way in eight years. What started as a social network exclusively for Harvard students has quickly evolved into a global phenomenon rapidly approaching one billion active users. In fact, eight of 10 users of the social network live outside of the U.S. and Canada. Beyond personal use, businesses have deemed Facebook an important way to reach current and potential customers.

Facebook's emergence as a publicly-traded company with a market value in the $100 billion range is further proof of its success, at least from Wall Street's perspective. The company faces major challenges, however. Topping the list is how to stay relevant to--and profit from--its users, many of whom are now spending more time with mobile devices such as smartphones and tablets than with laptops and desktops.

Can Facebook thrive in a mobile market? So far, mobile users are remaining faithful. A new survey by NPD's Connected Intelligence, a market research firm, shows that nearly 75% of Android smartphone users in the U.S. accessed Facebook's app or website in March. This group spent a fair amount of time on Facebook, too-- more than 15 minutes per day, or nearly 8 hours a month, the survey shows.

The trick, of course, is how to generate revenue from those users, particularly when smaller screen sizes on mobile devices reduce the effectiveness of display ads. Another problem: Hundreds of millions of people using Facebook apps on iPhone and Android devices don't see any ads--at least not yet.

"Ultimately, Facebook's mobile success rests on delivering compelling mobile app and Web experiences, and monetizing on these experiences," said NPD Connected Intelligence's research director Linda Barrabee in a statement.

Facebook's management team appears focused on monetizing. Meeting investors this week in Palo Alto, Calif., CEO Mark Zuckerberg, COO Sheryl Sandberg, and CFO David Ebersman said that social ads, such as ones that include information about your Facebook friends who "like" certain products, will play a key role in this effort.

But what about the effectiveness of Facebook ads: Do most users look at them, or simply ignore the ads and focus solely on news feeds? According to WordStream, a developer of Internet marketing software and services, the average click-through rate of a Google ad is 10 times higher than that of a Facebook ad.

A decade from now, will Facebook be the social networking powerhouse it is today? The Internet public is fickle--witness the rapid fall of MySpace--and Facebook will have to find creative ways to stay relevant in an increasingly mobile online world. In the meantime, let's look at the journey so far.

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Leo Regulus
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Leo Regulus,
User Rank: Apprentice
5/19/2012 | 6:20:36 PM
re: Facebook's History: From Dorm To IPO Darling
Pity that this wasn't a normal, readable article.
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