A recent piece in the Financial Times about a visit to Facebook's headquarters by leading figures from the advertising industry got me thinking about the potential valuation figures for the company when it floats next year as most commentators predict. I think that the valuation figures being quoted from $75-100bn are probably feasible based on its size and potential but I do not see advertising as we know it, being the driver of revenue, in fact just the opposite. Facebook is not about transactional relationships but communal or social relationships and although this may be changing on the edges, I don't think at its core it is changing. However there are other commercial opportunities.
One of the students at Greenwich was showing me recently some of the brands she follows on Facebook including the fashion magazine Glamour which has over 20,000 followers or friends. Having looked at some of the UK retail brands such as M&S which has over 250,000 and it is clear that a growing number of businesses are understanding how to develop active and relevant communities on Facebook which support their other online and offline activities.
But this brings no money into Facebook - as far as I can see. However, as a guess I would have said that the active community on Facebook for Glamour magazine must be worth at least £10k a month to Glamour magazine, maybe more (50p per user per month?). I cannot see any reason why Glamour magazine would want to advertise on Facebook, when it already has such an active community which will spread by word of mouth and through the magazine and web site. What must the M&S site be worth to Marks & Spencer with a much larger community?
However, in the future, might Facebook look to impose a community or poll tax when a corporate community has reached a critical mass of members say over 15,000/20,000 but could be smaller depending on size of organisation. Facebook might select to charge only for commercial organisations not NGOs or charities but potentially could be a significant source of revenue and I doubt that Facebook would lose many brands as a result. I think this is a possibility as one of the very clever approaches which Facebook has followed from the start is building the size of the network before it seeks to commercialise. Let more and more companies see the benefit of belonging to Facebook and then introduce a corporate community tax when they are on the hook and feel commercially they cannot withdraw.
In this scenario, Facebook can be seen as the owner of a very desirable shopping centre which charges a commercial rent for organisations to have a shop front in the world's largest social network. The benefit of this potential approach is it would not impact on the social relationships at the core of the Facebook model which earlier attempts based on conventional advertising have done before being withdrawn.
But this brings no money into Facebook - as far as I can see. However, as a guess I would have said that the active community on Facebook for Glamour magazine must be worth at least £10k a month to Glamour magazine, maybe more (50p per user per month?). I cannot see any reason why Glamour magazine would want to advertise on Facebook, when it already has such an active community which will spread by word of mouth and through the magazine and web site. What must the M&S site be worth to Marks & Spencer with a much larger community?
However, in the future, might Facebook look to impose a community or poll tax when a corporate community has reached a critical mass of members say over 15,000/20,000 but could be smaller depending on size of organisation. Facebook might select to charge only for commercial organisations not NGOs or charities but potentially could be a significant source of revenue and I doubt that Facebook would lose many brands as a result. I think this is a possibility as one of the very clever approaches which Facebook has followed from the start is building the size of the network before it seeks to commercialise. Let more and more companies see the benefit of belonging to Facebook and then introduce a corporate community tax when they are on the hook and feel commercially they cannot withdraw.
In this scenario, Facebook can be seen as the owner of a very desirable shopping centre which charges a commercial rent for organisations to have a shop front in the world's largest social network. The benefit of this potential approach is it would not impact on the social relationships at the core of the Facebook model which earlier attempts based on conventional advertising have done before being withdrawn.
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