“We understand that a lot of people are disappointed in the performance of the stock, and we really are, too,”
This was what Facebook CEO Mark Zuckerberg prefaced question time during Facebook’s first shareholder meeting last week. Shares of Facebook are trading at around $24.00 compared to their $38.00 IPO evaluations. If you bought into Facebook when it was made public you are probably never going to see a return on your investment. Perhaps buy some Google shares.
Facebook’s earnings were actually up quite remarkably, bringing in nearly $219 mm in net income. Most of this was attributed to growth in mobile advertising. Don’t like those ads on your cell phone when scrolling through your news wall? Too bad, they’ve worked well so you’ll probably be seeing more of them.
While earnings and reports are all fine and dandy, the biggest thing to take away from this first shareholders meeting is that Facebooks monetization strategies have been effective. This means that Facebook knows, and share holders know that advertising on Facebook makes them money, especially in the growing mobile world. The inevitable result of this is that Facebook will continue on the same avenue of advertisement generated revenue for the foreseeable future. The model has proven it’s success and thus will logically be scaled and invested in with even greater urgency and enthusiasm.
The downside to this is that it will eventually reach a saturation point. Facebook can only display so many advertisements before people start deleting their accounts in large numbers. All media platforms must strike a balance between content and adverts, and should they fail to set a balance risk losing subscribers or users.
This can easily be remedied for traditional media forms such as television, radio or print, as a few poorly performing issues or episodes can be immediately remedied without too much fear of losing viewers, after all, most cable or dish subscribers are unlikely to cancel their service just because one station increased the number of commercials it played.
Facebook faces a much more serious consequence should it mishandle the balance of advertisements and user experience, and that fear inducing enemy is called “virality”. This is the act of something going “viral”, or, simply put, shared amongst tens of thousands or even millions of people in a matter of hours. In the same way social media excels at catching authoritarian regimes off-guard to plan a street protest, it can also be a double edged sword.
Imagine Facebook jumps its advertising to levels intolerable to a few very vocal social media titans. Statuses get shared, liked, groups are created and before you know it there could be a full blown Facebook rebellion… on Facebook! People get so upset about minor user interface changes, imagine the fury that could erupt over completely intrusive commercialization of user personal domain. The streets of the internet would run blue with Facebook’s blood.
Just some food for thought. Keep closing those ad boxes, and scrolling past those ads in your news feed, and prepare yourself for more, because once shareholders taste those returns, there’s no turning back from the inevitability of advertisement saturation and user dissatisfaction.
For complete rundown on the entire shareholder meeting visit U.S New’s recap of the events.