If there’s one thing that has been consistent about Facebook since the beginning, it’s the limited amount of advertising on the site. However, in recent months the company has been doing everything it can to increase revenue, creating a tension between the founder’s vision and the interests of the shareholders.
The Art Of Selling Out
While Chief Executive Officer Mark Zuckerberg may not have wanted to exploit the site’s users, there has been a fine balance between increasing revenue while simultaneously protecting the user experience. What has been most impressive about the process is that he has been able to retain absolute control of the company despite the influx of over $2 billion in funding. It’s a feat which has been unmatched by any entrepreneur before him and it has enabled the company to retain its membership while becoming profitable.
However, the true test of Facebook is whether or not the company can successfully accomplish what Google did: provide a valuable service while building an unobtrusive revenue channel. So far the social network has done just that and has scaled its advertising business to almost $2 billion a year. The company is even expected to double revenue this year, with the help of the company’s credits platform. What has yet to be seen is just how far the revenue can scale.
Right now, everybody appears to think that Facebook will be generating as much as Google, since the social network has just as much traffic and influence (they have an increasing share of referral traffic to sites around the web). However as Facebook’s user base eventually slows in growth, something that will start at an unknown point in the future, the revenue per user will have to jump dramatically in order to satisfy investor expectations.
The Move Toward A Public Company
With Facebook’s valuation changing daily, jumping between $50 billion and $80 billion, it’s clear that investors have massive expectations of the company. So far, the social network has been able to meet those expectations. However one has to wonder what the future holds for Facebook. As the company moves toward becoming public next year, people are wondering whether Mark Zuckerberg will continue as the company’s CEO.
There’s no doubt that he wants to, in an effort to continue protecting the users who have generated so much value for the company already. However, the public markets are a scary place, where stock prices fluctuate like mad and investors want to see performance. Granted, companies like Amazon have proven that it’s possible to keep investors happy by setting long-term objectives, not the quarter-to-quarter analysis that most public businesses are subjected to.
Amazon became profitable years after launching, and for the longest time, investors didn’t even think it would be possible. The company proved to everyone that profitability could be achieved and early investors have been handsomely rewarded. Now the only question that remains is: Can Facebook remain steadfast on protecting the user experience while building a revenue base that satisfies the expectations of a much larger investor base?
Just about everybody in the industry, including myself, is bullish on Facebook, however the expectations are at a stage that many believe is unprecedented. Will Mark Zuckerberg continue to be able to hold the reigns of the explosive rocket ship that is Facebook? My guess is yes but we’ll have to wait and see if this 26 year old can continue to manage a global corporate behemoth.