How Facebook Can Rule the World

[UPDATE 1/3/11]: Facebook had an incredible year in 2010, and they have opened 2011 with a bang. News broke on Sunday evening that Goldman Sachs had invested $450 million in Facebook at a $50 billion valuation, and early Facebook investor, Digital Sky Technologies, would invest another $50 million. If that was not enough, Goldman Sachs committed to raising an addition $1.5 billion in funding from its high net worth clients.

With a $2 billion cash infusion imminent, Facebook’s highly-anticipated IPO likely will not happen in 2011. What reason does CEO Mark Zuckerberg have to go public? Facebook has hundreds of millions of dollars in cash to continue to fund operations, innovation and growth. The skyrocketing valuation of Facebook shares will fund acquisitions and allow some early investors and employees to cash in. IPOs consume immense quantities of time and resources, and it would be a headache Zuckerberg does not need. Instead of the late stage startup having every reason to go public, Facebook has every reason to stay private in 2011. Analysts and industry speculators now predict early 2012 as a preliminary target for a Facebook IPO.

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**Originally published August 25, 2010**

The indomitable social-networking site has enjoyed a meteoric rise from college dorm startup to multi-billion dollar household name. With over 500 million users, Facebook has a massive reach online, placing them in a uniquely powerful position to leverage their loyal and dedicated user base to help them develop new products and enter new sectors. Their unparalleled position has Facebook poised to dominate the Web in ways that no company ever has. As we know, however, potential and execution are two very different concepts. Facebook can succeed in this impressive quest if they:

1) Remain the Dominant Social Media Platform for Companies with Facebook “Pages”

With social media becoming an increasingly important part of consumers’ everyday lives, companies must develop a social media strategy to build, control, and maintain their brand online. Those who don’t are missing out on a valuable, inexpensive, and effective tool to market their products and strategy and manage their brand. Companies are beginning to leverage Facebook’s impressive scope to interact with current customers and attract new customers. A new service by Parature  makes it easy for Facebook Page administrators to make their page a customer service hub. Users spend record lengths of time on Facebook, and if  companies properly leverage Facebook’s user base and infrastructure, Facebook  can take advantage of  their growing importance in the marketplace, expanding offerings for companies willing to pay to further develop their Pages. The structure for this paid service could be similar to the WordPress VIP program, where high-traffic Pages gain access to extra services, features, and customizations.

Pepsi

To fully capitalize on this asset, Facebook needs to implement a sophisticated analytics system that allows companies to better understand the behavior of users and the extent of their interactions. Tracking the sources of “Likes” is currently unavailable, and with many retargeting campaigns linking to a brand’s Facebook Page, this would be a strongly desired feature.

2) Take Advantage of Facebook “Places”

Over the past year, location services like Foursquare (the dominant player), Yelp, and Gowalla have experienced exponential growth in their userbases as more individuals begin to adopt the technology. Last week, Facebook introduced their own location service, Facebook Places. Although they were a tad late to the party, forcing some to make a decision to switch, they still entered the market early enough to steal away majority share from Foursquare. While Foursquare currently has more features and has become largely installed as the primary and dominant location service, Facebook has a unique opportunity. Unlike Foursquare and the others, which are standalone apps, Facebook Places is an extension of Facebook’s current product mix, and is fully integrated with Facebook’s mobile apps. I’ve heard testimony from former Foursquare users that they were migrating to Places for the simple reason that it is one less app to switch to. As Places grows and introduces a more complete set of features and capabilities, users may be more inclined to ditch the plethora of social apps and replace them with Facebook.

foursquare

To maximize the potential benefits of Places, Facebook can implement a feature similar to Foursquare’s “Special Nearby”. Doing this would simply bring Facebook on par with the competition. However, to surpass their peers, Facebook must leverage and expand its extensive advertising network to target Facebook users based on their Check-Ins. The privacy issues abound, but Facebook hasn’t had a problem pushing these boundaries before.

3) Capitalize on Social Search

Social search is becoming an important topic in the debate about the future of search. With the wealth of metadata at Facebook’s disposal (thanks to its 500 million-strong and growing userbase), the company is uniquely positioned to dominate social search. Searching within one’s social graph has the opportunity to provide personally relevant information in ways that bots crawling the web can never provide. Although some disagree that social search will replace traditional search as we know it today – a point I agree on – social search has a place in our future online. TripAdvisor and Amazon have integrated with Facebook, allowing users to see recommendations from friends while browsing, and inroads like these are indicative of a growing understanding of the importance of social interaction in commerce. Because Facebook is the largest social media platform, they are the primary target for companies looking to integrate with social search. The indexed data that social search is capable of providing can supplement current search algorithms to provide increasingly relevant and personalized information to users in a central location. Facebook’s biggest competitor would be search industry titan Google, but Facebook’s advantage lies in their access to variables like comments, user influence, and network memberships that they can add to their search algorithm.

Largely, Facebook’s potential to create a further diversified and expansive presence online lies within the company’s ability to integrate a variety of popular services on its central platform. If they create high-quality, integrated products that leverage their existing platforms and access to metadata, Facebook can move closer to online domination. As we know, however, potential and execution are two very different concepts.

What do you think? Can Facebook dominate the Web or will they struggle amid concerns about privacy, patents, and ownership?

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About Michael Dossett

Inactive since Sept. 2011

Posted on January 3, 2011, in Uncategorized and tagged , , , , , , , , , , , . Bookmark the permalink. 6 Comments.

  1. Facebook is big, I agree, but there is no way they can maximize potential under Kark Zuckerberg. He will be way to self centered and only what is best for him no the company.

    • Thanks very much for your comment. Under Mark Zuckerberg’s leadership, Facebook has grown exponentially every year. There have been several setbacks (privacy protests, patent claims, company ownership scandals, etc.), but none of them have been able to stop Facebook’s rise to the top. Some said Mark was incredibly arrogant when he turned down a $1 billion bid to purchase Facebook. Several years later, with valuation shooting through the roof, that arrogance looks like it has been a huge asset to Facebook and to its employees and shareholders.

  2. Couldn’t have said it better myself. I think Facebook is in position to rule the web in a way no one else has before. It is hard to find other products/services that come anywhere close to how important Facebook is to people in their daily lives. For the reason, among so many others, businesses need to maintain a presence in Facebook. So Qui Bono? Facebook.

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