With Facebook’s IPO set to debut on May 18, investors are
starting to take a well-advised closer look at the new issue. Analysts expect
Facebook to be valued at $100 billion after the share sale, which is 33 times
over ad revenues—Google trades at 5.5 times. (Google is worth $200 billion and
has ad revenues of $36.5 billion.). According
to one analyst, to justify the $100 billion valuation, Facebook’s revenues will
have to increase 41% annually for the next five years. This compares to Google’s revenue growth of
24% in 2010 and 29% in 2011.
The big question for Facebook’s clients (advertisers, not
users) is how to accurately measure the performance of their ads because
Facebook is making a pantload of money from them—ad rates
increased 41% over the past year. Webtrends
produced a study in January 2011 that assesses Facebook’s performance. It’s important to note that Facebook results
are no longer as specific; we only hear about percentage changes so you know
they’re piss poor and likely below the industry average:
Year CTR CPC CPM CPF
2009 0.063% US$
0.27 US$ 0.17 N/A
2010 0.051% US$
0.49 US$
0.25 US$ 1.07
Meanwhile, ad agencies are still dodging
accountability for the performance of their clients’ social media campaigns. They
say click-through rates are not important anymore, now it’s all about hover rates, engagement, and awareness. In the Wall
Street Journal, Sarah
Hofstetter, president of digital ad agency 360i, a unit of Dentsu Inc, says, If a marketer measures [return on
investment] as direct sales from the Web, then Facebook may not be the ideal
platform. But if the goal is to move the needle on brand health metrics,
whether its awareness or engagement... then Facebook should be a key part of
the marketing mix for most consumer brands. So, Sarah, how do you measure
all this awareness and engagement stuff? How do you give it a monetary value so you can
quantify its worth?
Then again, Kia’s VP of Marketing, Michael Sprague, seems to
be cool with no accountability. Sprague says,
Being on Facebook sends a message…
Consumers they say 'Facebook is
working with Kia, I like Facebook ergo I like Kia.' That's what we are hoping
for. *sigh* Hey Mike, I'm hoping to see a unicorn one day but wouldn’t you rather like someone to
buy your vehicles instead?
Hopefully, investors will press Facebook to reveal its
results and explain how it plans to maintain revenue growth now that mobile
usage is expanding much faster than online (which may have reached saturation), a platform Facebook is yet to
effectively monetize. Failure to
properly address these issues could end
up costing plenty to those investors who aren't in it for the quick flip, just like so many of the hyped online IPOs have of
late. Groupon anyone?
Fanboys like Facebook because its fun. It where you can share cat videos,
photobombed pictures and tell everyone that you’ve just become the Supreme
Ruler of Bob’s Tattoo and Meat Emporium—all while you give away all your personal
data for free to Facebook so it can make a killing selling it. Face it, advertisers will have more success
showing a guy being bludgeoned
with a 30-inch, 7-lb dildo than they will trying to get a fanboy to click on a
Kia ad… unless, of course, the guy being bludgeoned is driving a Kia.
And for your enjoyment, I provide this handy Web Economy Bullshit Generator. Brilliant!
http://www.dack.com/web/bullshit.html
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