Monday, May 21, 2012

Expectations for the public Facebook

Perhaps you've seen the joke that states that Facebook has gone public because even THEY couldn't understand the privacy settings.

Well, that's not the exact reason, but as of now Facebook is a publicly-traded company, with shareholders - and with shareholder expectations.

For better or worse, our investment climate expects public companies to continue to make more money, to make more money than they did last year, to grow faster than they did last year, and to consistently beat expectations. If you do outstanding business one year, and then do the same outstanding business the next year, you're a failure.

So now that the public has a significant stake in Facebook's ownership, how will Facebook respond to these expectations?

Last Friday, Jody Swaney started a Google+ thread on this topic. Those of us who participated in the thread all agreed that Facebook needs new revenue streams to meet those shareholder expectations.

But where will Facebook get new revenue to pile on top of its existing revenue? Will it need to introduce a premium tier paid service to complement its free service? If so, what would be included in the premium tier? Will Facebook come up with new forms of advertising revenue? Will it come up with new ways to take a percentage of third party sales (Melina M) - perhaps with a "Facebook apps" store? Will it do other things in the mobile arena (Michael Sweeney) to increase revenue?

And if Facebook can come up with a new revenue stream from its userbase, remember that Facebook has a pretty big userbase. While I'm fond of saying that over 80% of the world is NOT on Facebook, the fact remains that there are around 900 billion Facebook accounts. Keith Tackel did the math - if you can get just $10 a year from 200 million of those accounts, "that is some serious money!"

Of course, it will remain to be seen if Facebook can be one of the few tech companies that benefits from consistent leadership and continued innovation - in other words, the next Microsoft. (Apple strikes out on the "consistent leadership" measurement.) But as a public company, Mark Zuckerberg and the rest of Facebook's team presumably realize that new rules now apply.
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