Year after IPO, Facebook aims to be ad colossus
NEW YORK — The IPO arrived, and it flopped. Facebook's stock finished its first day of trading just 23 cents higher than its $38 IPO price. It hasn't been that high since.
Amid the hype and excitement surrounding Facebook's stock market debut a year ago, there were doubts. Investors wondered whether the social network could increase advertising revenue without alienating users, especially those using smartphones.
The worries intensified days before the IPO when General Motors said it would stop paying for advertisements on the site. The symbolic exit cast a shroud over Facebook that still exists. Facebook's market value is $63 billion, some two-thirds of what it was the morning it first began trading. At about $27 per share, the company's stock is down roughly 30 percent from its IPO price. Meanwhile, the Standard & Poor's 500 index is up 27 percent over the same period.
The world's biggest online social network has kept growing to 1.1 billion users. Some 665 million people check in every day to share photos, comment on news articles and play games. Millions of people around the world who don't own a computer use Facebook, in Malawi, Malaysia and Martinique.
And much has changed at Facebook in a year. The company's executives and engineers have quietly addressed the very doubts that dogged the company for so long. Facebook began showing mobile advertisements for the first time last spring. It launched a search feature in January and unveiled a branded Facebook smartphone in April. The company also introduced ways for advertisers to gauge the effectiveness of their ads.
Even GM has returned as a paying advertiser.
Facebook is looking to its next challenge: convincing big brand-name consumer companies that advertisements on a social network are as important as television spots.
“We aspire to have ads, to show ads that improve the content experience over time,” Facebook CEO Mark Zuckerberg said.
To achieve those aims, the company has rolled out tools to help advertisers target their messages more precisely than they can in print or on television. Companies can single out 18- to 24-year-old male Facebook users who are likely to buy a car in the next six months. They can target 30-year-old women who are researching Caribbean getaways.
Analytic tools like these weren't available a year ago. But last fall, Facebook hired several companies that collect and analyze data related to people's online and offline behavior. Facebook's advertisers can now assess whether a Crest ad you saw on Facebook likely led you to buy of a tube of toothpaste in the drugstore. Sean Bruich, Facebook's head of measurement platforms and standards, believes the tools are paying off.
“What we can see conclusively a year after the IPO is that ads on Facebook really do help drive people into the store and help them make purchasing decisions, help influence their purchasing decisions,” he says.
People “are getting served ads based on things they didn't put on Facebook and maybe wouldn't be comfortable putting on Facebook,” says Rainey Reitman, activism director at the Electronic Frontier Foundation, a nonprofit civil-liberties firm. Facebook says mechanisms are in place to protect privacy.
“We've never had anything like Facebook,” Reitman says. “We've never had an entity that was able to collect so much information on so much of the world's population, ever.”
“Anywhere that more than a billion people spend time with their friends each month is extremely valuable to us,” says Brad Ruffkess, connection strategist at Coca-Cola.
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