Facebook's Struggles

When Facebook went public on May 18, 2012, there were two kinds of investors: those that jumped the gun and those that evaluated Facebook's profit model and decided to wait. 

The IPO offering of FB was set at 38.00 and slowly spiraled downwards as the months went by, plummeting as low as 17.70 at one point in September 2012. Since the August 2012 time frame FB stock has been floating around the 18-21 mark. The stock price has dropped nearly 45% since the IPO. Facebook has struggles that it needs to overcome in order to satisfy investors and grow its profits.

Is Facebook a necessity?
Facebook began in 2004, around the time that Google decided to go public. By this time, Google was already establishing itself as the 800 lb. gorilla on the World Wide Web. In a world dominated by technology, Google has become a necessity both for personal and professional users. Although there is a rise in the number of Baby Boomers using Facebook in 2012, it does not come close to the number of Generation X and Y users that make up the majority of users. Google's search engine and its acquisition of YouTube is clearly a need for all generations alike. That being said, it will be interesting to see how Facebook will become more of a necessity in people's lives rather than just a social tool. Many critics are saying it may eventually end up like MySpace and Friendster in this rapidly changing world of technology. Let's hope that doesn't happen.

As the world becomes increasingly mobile, how will Facebook make money?
Currently, 14% of Facebook's revenue comes from mobile advertising. This number needs to increase if they plan to be successful in the rapidly evolving mobile technology environment. Only recently some of us Facebook users have noticed ads on our news feeds, and even then how often do we click on them? It will also be tough for Facebook to design a phone to compete with HTC, Samsung, Apple, and Google's Nexus products, as they have already been successful and hold most of the smartphone and tablet hardware market share. In the software space, Android, iOS, Blackberry OS, Symbian, and Windows 8 make up nearly 100% of the market share. If Facebook's developers could design an operating system or engineer a mobile hardware device that is revolutionary and unique, Facebook could infiltrate the mobile market just as Google did with Android, and Apple with iOS. 


Facebook's "promote" button
Facebook recently started including a "Promote" button with newly created posts. This allows the post to remain at the top of people's news feeds. As shown below, the user can pay $7 via credit card or Paypal to "promote" their posts.
Why would anyone want to "promote" their post or have it stay on top of news feeds? The answer is straightforward: advertising. Having a post show up as the first on people's news feeds allows third parties to advertise their products or make an announcement. There are many small businesses that can use this to their advantage. Event planners, start-ups and small online retailers are some of the other beneficiaries of this feature, the list goes on and on. If this feature becomes more prevalent, it could be a win-win for both Facebook and users, ultimately allowing Facebook to increase revenue.

It will be interesting to see how Facebook continues making developments to their profit model. Seeing a Facebook phone or tablet in the future is wishful thinking but it could be the key to their success.

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