Facebook and its trove of data: Zuckerberg has room to grow

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“Once everyone’s hopes and expectations are reflected in the price, how will this price develop? At this point everything has been accounted for, and no other expectations can be foreseen – until new, innovative concepts are presented that make it perfectly clear just how Facebook will be able to turn its trove of data into money far more effectively in the future than it has to date. Now it is up to Facebook’s managers.” This is how Ralf Kreutzer, Marketing Professor at the Berlin School of Economics and Law, summed up his professional opinion of Facebook’s IPO in an interview with Service Insiders. 

The IPO disaster and the future of Facebook by gsohn.

The headlines during the first week of Facebook’s share listing were far different: shareholders file lawsuits, fraud, alienated friends, the new AOL, the bubble has burst, politicians and regulators are investigating, banking disaster, stock market failure, fiasco, and intoxicated investors. Yet according to Karl-Heinz Land from Microstrategy, during the run-up to the IPO, the head of Facebook had explicitly warned against excessive expectations:

“Right from the start, Zuckerberg said that he wanted to list the company’s shares in order to safeguard the development of his company as a social network. As a result, the lawsuits filed by shareholders on account of the falling share price are simply unfounded, as Facebook is not a stock on which gamblers can hope to make a quick profit. “The drop in the share price offers an excellent opportunity to purchase shares as a long-term investment,” states Land.

Facebook and customized advertising

According to Professor Kreutzer, a look at Facebook’s current business strategy shows that it is in a good position:

“We need customized advertising. Companies are simply not getting the desired results with scattershot advertising nowadays, and it is far too expensive. Now we are moving towards a world in which one-to-one offers can be made in numerous places. This means companies targeting individual customers with offers that have been tailored to them specifically. It is clear we do not appreciate all of the advertising measures we encounter, yet when I receive advertising on a daily basis for which I’ve opted in, I’m confirming its relevance, and if a company begins overdoing it by sending me three emails a day, it is relatively easy for me to opt out again. This means that there are numerous options available to us, and I think the government should explicitly state that advertising is just as much of a value creator as is the production of products. If I produce a product but am not allowed to advertise and no one purchases my product, then my company will not be successful,” states Kreutzer, who will be giving a presentation on “Marketing as a Service: Privacy and One-to-One Solutions – Two Sides of the Same Coin“ at the Social Media Marketing Conference in Amsterdam on 11 July.

If one takes a look at the development of Facebook in recent months, the importance of social ads is clear.

“These are advertisements which appear on the basis of things my friends like and items they have purchased. According to a US study, social ads already account for approx. 20 percent of advertising, a figure that is expected to increase to 50 percent by the end of the year on Facebook. The most important thing about these ads is the fact that they are clicked on far more often because they have something to do with the individual’s group of friends. Here we can see just this type of individualization based on what is happening in my group of friends,” stated Kreutzer to Service Insiders.

 

Creating relevance for local advertising

Facebook also has room to grow in mobile business, where the objective is to deliver relevant mobile offers to customers. Also known as location based services,

“These are offers that take my location into account. It is very important here that respectable apps always include an opt-in, allowing people to actively approve the receipt of local offers. If I happen to be in Berlin in the vicinity of a Burger King, I might receive coupons with special offers on my smartphone. This is a method for attempting to increase the relevance of advertising. There is therefore a major trend towards increasing relevance through localization, and this is a field in which Facebook can play a big role. As a result of its users’ “Likes”, Zuckerberg’s company knows its customers’ preferences very well, and is able to offer advertisers information that allows them to deliver advertisements that are both local and personal. Facebook’s social graph also plays a special role in this regard.

If the customer opts in, their Facebook fans will be rendered far more transparent than ever before. For example, Lady Gaga would be able to see exactly where her fans are. “In her case, there would be a great many fans in South America and Eastern Europe, information that I could use when planning a tour, for example. Or, should I choose to evaluate such data for Puma or Adidas, I would be able to plan product launches in places where there is a large and loyal fan base. These opportunities allow me to reestablish relevance. I can go to where there is an interest in my products and services, increasing my relevance and making my company more efficient,” explains Kreutzer.

 

Generating trust in the use of data

Facebook needs to create a healthy sensitivity regarding the use of its trove of data. Users must be able to decide where they want to be visible to everyone, and where they do not wish to be. Now that all of the market’s hopes and expectations have been reflected in the issue price, Facebook must deliver on its promise.

“There are two things that must be ensured: Facebook must be able to identify relevant usage possibilities for advertisers, and it must do so without losing fans. I’m not sure that shareholders are really Facebook’s biggest fans – in fact, I would say that this is a position currently held by users. This means Zuckerberg’s company would be well advised to continually focus on trust as a key currency in daily life and in the advertising environment, in order to make something clear: You, our valued user, have entrusted me with great deal of information, and you can rest assured that I will treat this information in a manner you can trust. In both of these areas, Facebook management must show itself to be a good attorney, for companies and customers alike,” sums up marketing professor Ralf Kreutzer.

Original Source from german magazine “NeueNachricht” published by Gunnar Sohn: http://ne-na.de/facebook-and-its-trove-of-data-zuckerberg-has-room-to-grow/001495

See also: 

http://walterwarnecke.wordpress.com/2012/05/27/facebook-shares-not-for-short-term-speculators-shareholders-should-look-to-the-californian-companys-long-term-strategies/

http://www.briansolis.com/2012/05/facebook-to-marketers-its-time-for-a-click-to-action/

http://online-success-articles.com/facebooks-ipo-and-the-coming-tide-of-over-valued-stock/

http://www.niemanlab.org/2012/06/this-week-in-review-facebooks-ipo-aftermath-and-new-orleans-cuts-stoke-the-paywall-debate/

http://venturebeat.com/2012/06/01/facebook-stock-week-two/

http://affordabledisneyfamilytrip.aquasunestates.com/423/global-ipos-face-freeze-after-diamond-float-scratched/

http://gigaom.com/2012/06/01/when-facebook-goes-down-the-internet-barely-blinks/

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