According to a recent report issued by PrivCo, my earlier post, Five Reasons the Facebook IPO is Troubling doesn't seem to be too far off. Although Facebook revenues have grown to $1.92 billion for the first half of 2011, up more than 100% versus the first half of 2010, financials for 2012 and beyond are at risk due to declining repeat visits, Google competition, Twitter's continued growth and "Facebook fatigue". It seems that Facebook has real reason to be worried (down the line).
Now more than ever Facebook is in desperate need for new innovation or the social networking giant may be cast in the same light Google was for a long time. Obviously when you have the "street cred" like Facebook you are never down and out. But in the company's history it has never had real competition, nor has it really been out innovated. With new products on the horizon and the looming IPO, Zuckerberg and Co. are in need of some quality product enhancements and new tactics to prove to analysts that the company is, in fact worth $100 billion.
As I've said before, what Facebook has been able to do, simply by the numbers is mind-boggling. The company has captivated so much of the [Internet] world. Between Internet and mobile devices, Facebook has been able to get users repeatedly checking in to see what their "friends" are up to. But climbing mobile usage may not be the best-case scenario for Facebook. Roughly 35% of Facebook's 700 million active users access the site through its mobile applications. This is both a good and a bad thing for Facebook. The good: it shows that people are interested enough in what their friends are sharing to check the site while on the go. Mobile "check-ins" has helped this number as well. The bad:the mobile application does not allow for advertisers or any other viable money making abilities (yet) besides the obvious, collecting user information. In the same realm, Facebook is yet to capitalize on the tablet game. It's been over a year since the first iPad came out and the market is being flooded with competitors. Yet, there is still no official application from Facebook. Rumor has it that they are currently testing the app, (we may have just seen the first screen shots here) and when it's launched it could potentially be a great addition to the Facebook family. But this is all speculation at the moment.
There are certainly a few partnerships outside of e-commerce that could really leverage Facebook's ability to earn money. Music providers Pandora and Spotify, and video streaming behemoth, Netflix could create significant growth in the social music and video scene(s). But then again, creating partnerships like this is also somewhat risky to a portion of users who like the site the way it is, and don't want to see radical change at all. As our mother's all told us, "you will be known by the company you keep", so Facebook needs to be careful who it partners with.
As I stated in my previous article, a major concern for a future public offering lies with user fatigue. The decrease in a user's desire to revisit may be attributed to a number of potential factors. Some claim that their friends list is meaningless and holds no real connection, others are concerned about privacy issues, and others (early adopters) are looking for newer sites that don't inhabit parents and bosses. After only three weeks, Google+ is already attracting market share, which means it is taking share from Facebook. PrivCo's findings show that the site has already crossed the 20 million users mark, and still growing. PrivCo believes that Google launched its social media product just in time for 2012 ad-budget planning season, forcing businesses to set aside portions of 2012 social-media budgets for Google+ at Facebook's expense. And Google, (uncovered as a Zynga shareholder in this week's Zynga IPO filing amendment), has plans on Google+ for social gaming-one of Facebook's largest profit sources.
Some argue that much of Facebook's money making abilities lay within social gaming. Although they are partially correct, that is only a portion of it. Earlier this month, Zynga filed an amendment to its S-1 IPO filing which included a developer addendum between Facebook and Zynga. What this showed was how reliant Zygna is on Facebook. Facebook gives Zynga exclusive rights to provide gaming on the site. Because of this, Facebook committed to a certain amount of growth to cover Zynga. In the agreement, however, Zynga is able to nullify its agreement if any other social platforms emerge (Google +) that provide a better vehicle for its gaming. Since Zynga is a healthy business (with an inflated IPO), with the ability to pull out at any time, investors may shy away of the Facebook IPO if Google + continues to grow rapidly and Zynga sees growth and money making potential.
It is without question that the inevitable Facebook IPO is going to be behemoth. But with all that is happening within the industry the company may need to pull some serious tricks from its sleeve. In order to wow potential public investors and prove that unlike many of the previous social media brethren, Facebook can survive the long haul they cannot risk playing catch up to new sites and losing the innovative edge they've had over competition for the last six years.