Facebook IPO Could Help the Social Network Challenge Google

By CIOinsight  |  Posted 02-01-2012

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.  


To read the original eWeek article, click here: Facebook IPO Could Help Social Giant Challenge Google