MANILA, Philippines — The initial public offering (IPO) of Facebook this week — putting the value of the company to over a hundred billion U.S. dollars — could provide new opportunities for advertisers and users in the Philippines, on of the social networking giant’s biggest markets in the world, according to analysts and industry watchers interviewed by InterAksyon.
With an IPO eight years after being founded in Mark Zuckerberg’s Harvard dorm room, Facebook is now practically pressured to deliver on revenues from display advertising — its cash cow for the time being.
“Advertisers will benefit from this as Facebook will now endeavor to create compelling and yet highly contextual and relevant ad real estate that go beyond mere impression,” Pena said.
The key to unlocking Facebook’s future revenue sources, according to Pena, is targeted advertising, as it remains to be one of the top online companies with possession of very granular information about Internet users — from the basic stuff such as name and birthday to the more advertiser-relevant ones such as likes and interests.
“[With more funding], they now have an opportunity to provide advertisers with relevant user contexts in which they may be able to funnel very targeted communications,” he added.
On Thursday, Facebook announced a price of $38 per share for its record-setting initial public offering, which gives the leading social network a market value of $104 billion.
The shares will begin trading Friday on the Nasdaq.
But can ads save the day?
In its S-1 filing before the SEC, Facebook admitted to some challenges it may encounter along the way, particularly its heavy dependence on display advertising, which constituted as much as 85 perent in its revenues last year.
And that poses a problem especially when consumers spend most of their time socializing on the site than actually using information available on it as paths to actual purchase.
According to the latest study by research firm TNS Global, 12 percent of Facebook users in the US are resistant to brands on the social network than they are open to them, and the trend only seem to be spreading and growing worldwide.
The entrance of the latest competitor in the social race — Google’s Google+ — only seems to complicate the problem, especially since it has the backing of Internet giant Google, which raked in as much as $37.9 billion last year, most of it from ads.
According to analyst Astro del Castillo of brokerage firm First Grade Finance, Inc., Facebook would have to watch its back closely as emerging companies that threaten to steal its position could affect its performance in the public market.
“Just like any commodity, the IPO success depends on the so-called ‘waning phase’ of the user. Usually, the so-called technology companies are susceptible to that,” del Castillo told InterAksyon.com.
The analyst pointed out that Internet companies today are still reeling from the stigma caused by the dot-com bust of 2000, especially since Web-based firms such as Facebook have the habit of simply coming and going.
“For example, there was Friendster, which was really a hot item in social networking before. But after a few years, it just disappeared,” he said.
Facebook founder and chief executive Mark Zuckerberg. AFP file photo
With almost 30 million Facebook users in the Philippines — or almost 90 percent penetration, one of the highest in the world — the country remains an important market for the social media giant, especially as a large part of the population remains untapped by it.
But in Facebook’s quest to leverage more on its users’ information for a more targeted approach to display advertising, it could be toeing the line of privacy, which has been the site’s Achilles’ heel in its almost a decade of existence.
“Facebook is already treading dangerous waters as far as privacy rights are concerned. The pressure to monetize consumers’ user data will be greater when there are shareholders to satisfy,” Balber said.
But the good that could come out of that scenario, at least according to LA Times columnist Michael Hiltzik, is that Facebook would now be more mindful of security issues for fear of public backlash, which now have the ability to affect share prices.
“Certainly the company’s approach to user privacy, which long has been twerpesque, will no longer wash,” Hiltzik said. “To the extent Facebook is thwarted in its attempts to monetize its user base by flouting privacy rules and conventions, the pushback by regulators, members of Congress and users will show up in its stock price.”
Google vs Facebook
But Facebook doesn’t only have to watch its approaches to privacy insomuch as regulators and users are concerned — it also has to watch its back for an emerging player in the social networking space, one that is purportedly built on privacy measures patently absent from Facebook.
Last year, Google finally launched its attempt to create a full-fledged social network, one that works on the premise that how information is shared online should be the same as in face-to-face conversations, with its introduction of the “Circles” concept in Google+.
And Google has a lot going for it. IDC Philippines Research Manager Jubert Alberto said about 68 percent of developers recently polled in an IDC survey said Google+ actually has the potential to catch up with Facebook in the fiercely competitive social media space.
“This is due to the wider Google assets, which include search, Youtube, maps, among others, as well as the innovations that Google+ offers,” Alberto explained to InterAksyon.
But for IMMAP’s Pena, Google+ remains to be a space for early adopters in the country, especially as it caters to a niche of users already abreast with the current developments in the social networking world.
“As far as I know, Google+ in the Philippines still hasn’t gone on the same level of traction that Facebook now enjoys,” Pena pointed out. “A general observation, though, is that many try Google+ but I hear many people don’t ‘religiously’ check their Google+ as much as they do so with their Facebook accounts.”
Be that as it may, Google remains to be a legitimate threat to Facebook especially since it has now started to integrate much of Google+’s features into search, email, and its other Web properties.
Want in on Facebook?
According to analyst del Castillo, it’s a “logical thing” for Facebook to offer stock options to their subscribers, essentially the bread and butter of the mammoth social networking site.
This could mean, the analyst said, that even Filipinos who have enough means and know-how of the stock market could own a piece of Facebook, too. “As far as I know, there are no restrictions. As long as you have a [global] broker, you can buy shares. If it’s true that they will be offering to users, the paper work would definitely be difficult.”
Del Castillo, however, pointed out that in terms of the Philippine environment, Filipino investors may not as easily grab the chance as their US counterparts, since local investors are not so much used to investing in companies that don’t have that much physical assets.
“I think the investing public is not yet that mature to really and willfully enter into investing in such IT companies,” he said, adding that the reputation of IT firms over the years could also hinder investors from pitching in.
