Facebook Goes Public. What now?

FACEBOOK GOES PUBLIC WHAT NOW?

A perspective on Facebook in 2012 from Publicis Modem London

FACEBOOK IS A BUSINESS THAT COLLECTS USER DATA TO SELL TO ADVERTISERS

“If you are not paying for it, you're not the customer; you're the product being sold”

— blue_beetle, 26.08.10, metafilter.com

BETWEEN APRIL AND JUNE, THE COMPANY WILL GO PUBLIC

“The deal […] could raise as much as $10 billion and value the social network between $75 billion and $100 billion”

— The Wall Street Journal, 28.01.12, Facebook readies IPO filing

SO HOW IS FACEBOOK CURRENTLY PERFORMING?

WITH MORE THAN 845 MILLION USERS, FACEBOOK IS THE DOMINANT SOCIAL PLATFORM

Sept. 2009 Mar. 2010 Sept. 2010 Mar. 2011 Dec. 2011

305m 431m

550m

680m 845m

IN 2011, FACEBOOK GENERATED $3.7 BILLION IN REVENUE AND $1 BILLION IN PROFIT

— Facebook S-1’s filling, 01.02.11, Facebook IPO: what we've learned from its S-1 filing

AND FOR THE LAST 5 YEARS, REVENUE HAS BEEN GROWING RAPIDLY

2011 2010 2009 2008 2007

$153m $272m

$777m

$1,974m

$3,711m

— Facebook S-1’s filling

Advertising 85%

Credits 15%

FACEBOOK GENERATES REVENUE IN TWO WAYS: ADVERTISING AND FB CREDITS

— Facebook S-1’s filling

DESPITE STRONG ADVERTISING REVENUE, FACEBOOK HAS ROOM TO GROW IN THE GLOBAL MARKET

In 2010, Brands spent $64 billion in digital advertising - ZenithOptimedia, 03.10.11,

ZenithOptimedia Adspend Forecast Update Oct

Google 46%

Yahoo 9%

Microsoft 4%

Facebook 3%

AOL 2%

The rest 36%

IN 2010, FACEBOOK OWNED 3% OF THE PIE WHEREAS GOOGLE OWNED 46%

— Daren Herman, 29.11.11, Total Digital Revenues

HOW CAN FACEBOOK INCREASE ITS SHARE OF THE PIE?

TWO WAYS TO GROW REVENUE: 1.  ADD MORE USERS 2.  INCREASE REVENUE PER USER

ADDING MORE USERS WILL BE A CHALLENGE

“[Facebook] user growth had slowed in the U.S. and Canada… a deeper look…shows its growth is also slowing in Europe and Asia....”

— The Tennessean, 12.02.12, Facebook sees its growth slowing down

SO FACEBOOK MUST FOCUS ON INCREASING AVERAGE REVENUE PER USER

— Based on Facebook S-1’s filling

2009 2010 2011

FACEBOOK IS WELL BEHIND GOOGLE WHEN IT COMES TO REVENUE PER USER

“Google generates 6X more revenue per user than Facebook” — Business Insider, 05.01.12,

Here's How Much A Unique Visitor Is Worth

“IT TOOK FACEBOOK ALMOST 800 MINUTES OF USER TIME TO GET $1 IN REVENUE”

— The Globe and Mail, 02.02.12, Why Facebook may not be a growth story

HOW CAN FACEBOOK INCREASE AVERAGE REVENUE PER USER?

ENSURE THAT EVERY USER IS LOCKED-IN

"Lock-in is the point at which users are so invested in their technology that even if competitors might offer better services, it’s not worth making the switch”

— Eli Pariser, 06.11 The Filter Bubble: What the Internet is hiding from You

BY ENSURING LOCK-IN, USER TIME SPENT INCREASES AND SO DOES THEIR DATA PROFILE

TIME SPENT, DATA AND EFFECTIVENESS ARE THE KEYS TO ATTRACTING BRAND SPEND

“From the point of view of the online advertiser, the question is simple. Which company can deliver the most return on a dollar spent?”

— Eli Pariser, 06.11 The Filter Bubble: What the Internet is hiding from You

INCREASED TIME SPENT MEANS SELLING MORE ADS

“We now see that keeping traffic within Facebook via Fanning and Facebook Application campaigns can reduce CPCs by 45%”

— TGB Digital, 01.12, Here's Facebook's Q4 Ad Performance In A Set Of Delightful Charts

WHEREAS INCREASED DATA MEANS SELLING BETTER ADS

"As a business strategy, the Internet giants’ formula is simple: The more personally relevant their information offerings are, the more ads they can sell, and the

more likely you are to buy the products they’re offering” — Eli Pariser, 06.11

The Filter Bubble: What the Internet is hiding from You

“THE FIGHT BETWEEN GOOGLE AND FACEBOOK HINGES ON WHICH CAN ACHIEVE LOCK-IN FOR THE MOST USERS”

— Eli Pariser, 06.11 The Filter Bubble: What the Internet is hiding from You

FACEBOOK USED 3 APPROACHES TO BUILD LOCK-IN FROM THE BEGINNING

2006 2005 2004 2004

1. DEFINE USER’S IDENTITY & CONNECT PEOPLE TO PEOPLE

2006 2007

2. ALLOW ANYONE TO CREATE WITHIN THE PLATFORM

2006 2009

3. BECOME THE SOCIAL LAYER THAT CONNECTS THE WEB

BUILDING DIGITAL IDENTITY

GATHERING THIRD PARTIES

SPREADING THE SOCIAL LAYER

2004 Facebook launched

the Profile

2007 Facebook launched platform applications

2009 Facebook launched

the Like button

FACEBOOK

1 2

3

IN 2011, FACEBOOK RELEASED NEW PRODUCTS THAT CONTINUE THIS STRATEGY

#1.  “The next five years, the next era is going to be defined by the apps

and the depth of engagement that is now possible”

— Mark Zuckerberg, f8 2011

THE TIMELINE A NEW DIGITAL IDENTITY FOR EVERY USER

THE TIMELINE RE-ARRANGES YOUR PROFILE INFORMATION

3. APPS 2. STORIES

1. COVER

USERS CAN NOW ADD SPECIFIC APPS TO THEIR TIMELINE

TIMELINE ALLOWS FACEBOOK TO KNOW YOUR DETAILED DIGITAL HISTORY, NOT JUST YOUR CURRENT PROFILE

#2.  “All your stories, all your apps and a new

way to express who you are”

— Mark Zuckerberg, f8 2011

THE OPEN GRAPH A FUNDAMENTAL CHANGE IN HOW SOCIAL EXPERIENCES WORK

FACEBOOK KNEW WHAT YOU LIKE

“Sharing content to Facebook meant clicking the "Like" button, cutting and pasting a link into the status update box”

— Read Write Web, 14.12.11, Top trends of 2011: Frictionless sharing

NOW WITH OPEN GRAPH, FACEBOOK KNOWS WHAT YOU DO

“Anytime you're reading news from a social news app or listening to music from a social music app, Facebook automatically shares it to your Facebook Timeline”

— Read Write Web, 14.12.11, Top trends of 2011: Frictionless sharing

BRANDS NEED TO GO BEYOND THE LIKE…

“We want 100K fans” — A common request, 2011

…AND THINK ABOUT ACTIONS

“This new expressive language means you will be able to add whatever verb you so choose. You can start to use words like read, watch, listen, buy and more in the

stories that get shown to friends of your "engagers.””

— AdAge, 23.09.11, Facebook Just Shifted From Scale to Engagement

— Facebook f8, 2011

WHAT ROLE DO PEOPLE PLAY IN YOUR STORY?

“With all content increasingly filtered through social networks, it's what people do with advertising rather than what they say about it

that will make all the difference this year. Guaranteed”

— AdAge, 16.01.12, Why Marketers Must Think in Verbs or Face Increasing Irrelevance

THE GUARDIAN ON FACEBOOK ACTION: ”READ” OBJECT: “ARTICLES”

FORD ON FORD.COM ACTION: ”CUSTOMISE” OBJECT: “CARS”

HOW DO THE OPEN GRAPH AND TIMELINE INCREASE REVENUE PER USER?

APPS ENHANCE FACEBOOK’S DATA SET

“At best, if a company knows which articles you read or what mood you’re in, it can serve up ads related to your interests. But at worst, it can make decisions on that

basis that negatively affect your life. After you visit a page about Third World backpacking, an insurance company with access to your Web history might decide to

increase your premium, law professor Jonathan Zittrain suggests.” — Eli Pariser, 06.11

The Filter Bubble: What the Internet is hiding from You

FACEBOOK KNOWS WHO YOU ARE, WHAT YOU LIKE & WHAT YOU ARE DOING (ONLINE)

AND THE CLOSER USERS ARE TO FACEBOOK, THE MORE TARGETED THEY CAN BE FOR BRANDS

For Valentine’s Day, Facebook Data Team shared the top coupling and de-coupling songs played by users via the Spotify App

— Huffington Post, 13.02.12, Facebook Breakup Songs: Data Team Reveals Top Spotify Songs For Breakups,

New Relationships

IMPROVED TARGETING IMPROVES EFFICIENCY

“Facebook Sponsored Stories Ads Have 46% Higher CTR” — TGB Digital, 16.01.12,

Here's Facebook's Q4 Ad Performance In A Set Of Delightful Charts

TIMELINE AND OPEN GRAPH BUILD ON FACEBOOK’S LOCK-IN STRATEGY

BUILDING DIGITAL IDENTITY

GATHERING THIRD PARTIES

SPREADING THE SOCIAL LAYER

2004 Facebook launched

the Profile

2007 Facebook launched platform applications

2009 Facebook launched

the Like button

1 2

3

+ TIMELINE new

+ OPEN GRAPH new

FACEBOOK

WHAT NEXT? 9 “WHAT IF’S?” FROM US

#1.  WHAT IF ALL BRAND PAGES BECOME BRAND TIMELINES?  

Brands currently use pages to act as social hubs for specific experiences. Pages become the place where brands highlight different

applications that they have developed for their users. With Timeline, brands will be able to create a more custom-experience within

the existing template. Multiple pages are yet to be considered, however Launch Announcement Expected at Feb. 29 Marketer Conference

— AdAge, 15.02.2012, Facebook to Release Timeline for Brands This Month

#2.  WHAT IF YOU COULD TARGET ADS BASED ON A USERS DETAILED HISTORY?  

Actions-Based Ad Targeting: Brands can target a number of things using Facebook’s existing ad platform – demographic, location, listed interests, etc. But what if you could

target a person’s historic actions? The applications that they use? The music that they listen to? The news that they read? Etc.

BlackBerry could target all users who read an article about Power Problems with a specific ads

#3.  WHAT IF FACEBOOK SOLD ADS BASED ON PLATFORM USAGE ON OTHER SITES?  

The Facebook Platform is used across hundreds of thousands of websites – from “Like’ buttons to Facebook logins. Facebook keeps this data and can develop robust

profiles of what their users are looking at, sharing and buying across the web. Facebook could start to target advertising based on web-actions, not just within

Facebook – for example, target a New York Times reader or Trip Advisor user without having to work directly with the brand

#4.  WHAT IF THE STREAM PREDICTED FUTURE ACTIONS?  

The ‘Future Stream’ – As Facebook Graph Rank becomes more action focused, historic user patterns could help predict future ones. For example, if you go to the

same pub each week or cook the same meals, Facebook could alert your friends to ‘things you might be doing’ in the next few days.

#5.  WHAT IF FACEBOOK CREATES ITS OWN PRODUCT RECOMMENDATION ENGINE?  

“Products you may want’ – Facebook already has a ‘People you may know’ and ‘Recommended Pages’ product. Why not use a users content consumption habits, friend networks and application profiles to develop a product-recommendation tool similar to Amazon? With social graph data, the recommendations would combine

friend habits along with individual user interests.

#6.  WHAT IF FACEBOOK STARTED PAYING USERS TO MARKET PRODUCTS?  

Facebook currently 'piggybacks' on their users actions (via Sponsored Stories) by providing targeted executions to their friends - why not actively incentivise influential

users to recommend different products? Though the social graph, Facebook can analyse what categories,

topics and products their users already carry influence in — Paraphrased from Dan Haggard & his 'Trend Setter' idea,

The Social Network, the End of Intimacy, and the Birth of Hacker Sensibility

#7.  WHAT IF FACEBOOK CREDITS BECOME THE DOMINANT DIGITAL CURRENCY?  

Facebook Credits + NFC = True Mobile Wallet – as more and more mobile devices are NFC-enabled, more retailers will provide terminals that allow for

quick, tap payments. If Facebook continues to be a popular mobile application, credits could become the easiest way to pay for purchases

— Image credit

#8.  WHAT IF FACEBOOK MADE A ‘PAUSE SHARING’ BUTTON?  

Turn off ‘frictionless sharing’ – with every application auto-publishing user actions and a second-by-second Ticker updating, users may quickly tire of having all their actions shared. Why not give users a clear ‘switch’ to turn their sharing on or off?

— Techland, Harry McCracken, 03.10.2011, Facebook’s open graph needs new approches to privacy

#9.  WHAT IF FACEBOOK EXTENDS ITS AD NETWORK TO OTHER WEBSITES?  

Extending Ads Network – Facebook is the most popular social network website and has one of the biggest set of data.

Facebook could extend its ads network to other websites, services and devices

WHAT DO YOU THINK FACEBOOK COULD DO NEXT?

Let us know on Twitter by using #fbwhatif @PublicisModemUK

THANKS FOR READING – Tyler Turnbull, Joint Head of Planning tyler.turnbull@publicismodem.com @tyturnbull http://gplus.to/tyturnbull

– Damien Le Castrec, Planner damien.lecastrec@publicismodem.com @damienlc http://gplus.to/damienlc

_ THANKS FOR THEIR INSPIRATION

  blue_beetle, 26.08.10, metafilter.com   The Wall Street Journal, 28.01.12, Facebook readies IPO filing   Daren Herman, 29.11.11, Total Digital Revenues   The Tennessean, 12.02.12, Facebook sees its growth slowing down   Business Insider, 05.01.12, Here's How Much A Unique Visitor Is Worth   The Globe and Mail, 02.02.12, Why Facebook may not be a growth story   Eli Pariser, 06.11, The Filter Bubble: What the Internet is hiding from You   TGB Digital, 01.12, Here's Facebook's Q4 Ad Performance In A Set Of Delightful

Charts   Mark Zuckerberg, f8 2011   Read Write Web, 14.12.11, Top trends of 2011: Frictionless sharing   AdAge, 23.09.11, Facebook Just Shifted From Scale to Engagement   AdAge, 16.01.12, Why Marketers Must Think in Verbs or Face Increasing Irrelevance   Mashable, 29.09.2011, Why Facebook Timeline Will Be Huge for Brands   Dan Haggard & his 'Trend Setter' idea, The Social Network, the End of Intimacy, and

the Birth of Hacker Sensibility   Techland, Harry McCracken, 03.10.2011, Facebook’s open graph needs new

approches to privacy

_ ABOUT PUBLICIS MODEM

Publicis Modem is a full service digital agency within the Publicis Worldwide network offering strategy, creative, analytics, user experience, multi-platform (web, mobile, social, gaming) development, paid media, search, social media and eCRM services.

With more than 1,500 people deployed across 30 countries around the world, Publicis Modem is one of the largest and most global digital agencies in the world, enabling us to serve Fortune 500 brands on a global basis including LG Electronics, RBS, Visa, Sanofi and General Mills.