Facebook Ipo Case Assignment

In global marketing the way that advertising is used for any enterprise is critical to their control of market share. The industry is fairly irrelevant; this is based on the advances in social media, now more than ever companies of any size are provided a platform of users to advertise to directly, and precisely. The aforementioned advance has been created with the data capital that is comprised in the widespread usage of social media. As an established engineering and business professional in my field I have worked countless hours with various marketing departments and analysts understanding the ways that we take our enterprise to market. Although my personal industries of defense, and oil do not cascade into the simpler forms of marketing via social media, I do have thorough and relevant concept of social and digital commodities such as google ad-words, etc.

With this paper I will be putting my own analysis on the Facebook initial public offering. Foremost with analyzing the revenue associated with Facebook’s advertisements, in addition to analyzing the metrics of “conversion rates” of clients from said advertisements. This will allow for an appropriate segue into advertising metric tools, conversions, active engagement and brand recognition. Summating the paper with the attribution model of Facebook and social media platforms of the like, and ultimately analyze the challenges related to branding products as services through social media.

The initial question posed for this assignment has proven difficult to find a specific answer. Asking for the analysis of Facebook’s advertising revenue before has taken me down several investment rabbit holes. While the article provided to being research does state clearly “85% of its (Facebook’s) revenue of $3.7 Billion last year”(Kunz) was done with advertising the year prior to its IPO, the data for what that revenue was after IPO was immensely convoluted. All of the information related to speculators and analysts driving the initial stock price to the high that it ultimately fell from very quickly had to be sifted through. I found an article as recent as this past April however that showed the advertising revenue and broke the subject down further to analyze mobile marketing revenue. As of April 2016 advertising revenue for Facebook was up 57% from the previous year at $3.3 billion to a grandiose $5.2 billion. As stated, the article broke that figure down, and it is important to note that desktop ads are quickly becoming obsolete, and their mobile app counterparts are calling for much higher prices. Of the $5.2 billion “four fifths of that revenue” was from mobile advertisements (Seetharaman). The Chief Operating Officer for Facebook in a recent interview stated that “Businesses are no longer asking if they should market on mobile, they are asking how”( Seetharaman). When looking at the following graphic compared to where the assignment originated with the 2012 IPO to where mobile advertising revenue sits in Facebook’s priorities, it is easy to see it is number one.

“Facebook is expected to garner about 12% of the $186.8 billion global digital-advertising market this year, up from 10.7% last year and 8.6% in 2014, according to data firm eMarketer. By contrast, Google’s share is projected to decline to 31% from 33% in 2015 and 35% two years ago.” (Treadaway). This to me shows a massive amount of growth to still be captured, and based on Facebook’s trends in the past few years it is obvious their sights are set on more of this market share. When looking back at GM making the announcement that they would be pulling their advertisements from Facebook, I do not believe it truly affected the IPO that drastically. When looking into the subject it did expose the costs associated with advertising with Facebook as being high in 2012, but even the provided article goes on to say that GM was having to cut costs for their own financial issues. If Facebook had the advanced metrics they do now in 2012 for showing return on investment, I think GM would’ve chosen to trim the budget elsewhere.

Moving into the ever more important metrics, let’s take a deeper look into the accomplishments of Facebook’s advertisements. We live in an over stimulated world, our minds have adapted to take in information, and filter it as such to only allow us to focus on a select number of stimuli so to function. “Advertising is everywhere. Audiences have grown accustomed to tuning out irrelevant marketing pitches — it’s estimated that 77 percent of online display ads are never even see ”(Zarrella). Based on the previous paragraphs this statement seems contradictory. However, in the contradiction, therein lies the “secret sauce” if you will, of Facebook.

What Facebook has brilliantly achieved is the collection of data capital. Every strategic planning meeting I have sat in on the last three years with different corporations a common theme rears its head, data capital. As our lives move towards more mobile consolidation there is not a company, or industry who is not concerned with data capital. With that being said, Facebook in my opinion is the magnate of data capital. THE MOST VALUEABLE DATA CAPITAL IN THE WORLD. Guess what, they do not pay a dime for their data capital, because people willingly provide it to them in their own platform every single second of every day. With all of the information provided, even if it is clicking on articles, liking something, they do not even need to know your age, gender, race, religion, they already are stacking up a digital profile. This profile allows for the most precise advertisement EVER. There are entire firms dedicated now to “refining target audience” this is continuing to narrow the funnel of who sees the advertisements that a company is putting out into the Facebook network that will have the highest conversion rates (Holzner). This precision allows Facebook to call for a premium, and to provide advertisers detailed metrics on who, what, when, where, and how their products were represented in a way that could never have been achieved before.

The metric tools that Facebook has developed for advertisers are almost as specific as the target audience they are able to reach. If you have services that you are advertising you are interested in looking at impressions, this is the total number of people who have seen your ad. Based on budget the next most important metric would be the Cost per 1,000 impressions, allowing the marketer to see a critical part of return on investment, while it is critical to note this is still achievable with smaller campaigns with different tools. Frequency in which the ad is shown, the amount spent overall is viewable and a specific budget can be set. The “click thru” rate is one of the most important, this metric shows how many times a potential client ended up on the attached landing page through an advertisement. Of course as with the previous metric there is a way to view the cost per click of the “click thru” traffic. Lead generation, based on how many people have provided further information to be contacted about services, and the corresponding cost of each lead. Lastly for goods the checkout,