Facebook is girding for an IPO filing Feb. 1, setting it up for more intense competition with online ad and search giant Google in 2012.
Buzz that Facebook will file for an initial public offering
(IPO) Feb. 1 has marketing and advertising experts expecting the
social network to challenge Google (NASDAQ:GOOG) at a time when the search
giant is trying to ramp up its own ad targeting efforts.
While Google has commanded the market
for search advertising for a decade, the company hasn't made the headway it
would like in display advertising.
That's where Facebook is cruising,
according to the
Wall Street Journal,
which cited comScore stats that the world's leading social network enjoys 28
percent display ad market share, up from 21 percent the previous year. Google
has less than 5 percent market share.
Yet some marketing analysts claim
Facebook has yet to tap its large potential in generating dollars from all of
its millions of installed Like buttons.
The company's 2011 ad revenues are estimated to
be in the range of $4 billion, compared with $40 billion for Google. An IPO
will bring an infusion of cash, positioning Facebook for some crucial strategic
investments in the United States and abroad, where the bulk of its user base of
800 million people exists.
Forrester Research analyst Nate Elliott
said that despite claiming 96 of the top U.S. 100 advertisers, most large brand
marketers have told him they haven't gotten much value from their ad
investments on Facebook. Moreover, user engagement on branded pages is
declining for a company that researcher Nielsen said commands 7 hours of user
engagement per person per month.
"Facebook can-and must-do much more
to turn the data it has on users into effective ad targeting,"
Elliott wrote in blog post Jan. 31. "And it
must build or buy much better tools for building, managing and
measuring branded pages."
Elliott noted Facebook would benefit
from buying a demand-side ad platform-Google acquired Invite Media in 2011-as
well as social analytics and marketing companies that could help Facebook monetize
branded pages. Facebook could use these assets to bulk up ad targeting on its
own properties, as well as to those all over the Web.
Elliott isn't the first analyst or
pundit to suggest this. Search expert John Battelle has long
suggested Facebook might build a
"FaceSense" third-party ad platform to rival Google's own AdSense
platform.
However, Elliott went further, arguing
that he expects Facebook to compete with Google on targeted ads in the next two
years. "If they're not competing with Google in this space-if
Google walks away with this opportunity unopposed, as it currently looks could
happen-then Facebook will have missed its single biggest revenue
opportunity."
Meanwhile,
Google isn't idling at the curb. The company's
Google+ social network, its answer to Facebook's worldwide social media
domination, won't be mistaken for Facebook today.
Even so, it's got a growing user base
and is becoming increasingly intertwined with Google's existing Web services.
Google appears to be positioning
Google+ and its Web services for better ad targeting. The company recently said
it will unify its privacy policies, allowing user data from individual user
accounts to be shared across several Web services. Ideally, Google will be able
to leverage this approach for better ad targeting.
Facebook's emergence as a player on the
public market should, at the least, make the advertising and branding market
more interesting.
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