Facebook Changes after IPO
Today when I opened my inbox, I got an email from a well known marketer talking about the changes of Facebook. He mentioned that Facebook is going to have a paid membership option. Don’t like the sound of that. I did my own research and came across this original interview on NPR.org. I pasted the transcript below. I am definitely interested to see the upcoming changes on Facebook.
Facebook hopes to raise more than $100 billion tomorrow in a monumental initial public stock offering. The news buzz has mostly focused on Mark Zuckerburg and America’s new class of billionaires, but many wonder what going public will mean for Facebook’s 900 million users. In his latest piece on slate.com, tech columnist Farhad Manjoo warns users to expect more ads, lots more ads. Zuckerburg, he wrote, will carefully need to balance the whims of advertisers against the desires of users, or risk losing them both.
If you’re active on Facebook, what do you expect to change tomorrow? Give us a call: 800-989-8255. Email us: talk@npr.org. And you can join the conversation on our website. That’s at npr.org, click on TALK OF THE NATION. Slate columnist Farhad Manjoo joins us from a studio at Stanford. Nice to have you back at the program.
FARHAD MANJOO: Hi. Good to be here.
CONAN: And it was interesting – when they announced the public offering, Mark Zuckerburg said we never even expected that Facebook would be a company. Our real purpose isn’t even to make money.
MANJOO: Yeah. That’s sort of the tone that a lot of tech CEOs take these days, which is, you know, they’re trying to build companies for the public good instead of to make a lot of money. I mean, I think I believe it in Mark Zuckerburg’s case. He wasn’t expecting to make a lot of money from this when he first started it. He thought he was kind of creating something cool. But obviously, you know, with tomorrow’s IPO, it’s going to have to be a monster moneymaker.
CONAN: Yeah, he’s going to have to take those hundreds of billions and then put them somewhere.
MANJOO: Yeah. I mean, so – and this is kind of the double-edged sword for Facebook. You know, they get a lot of money from investors, but those investors are going to expect kind of big returns. That’s why they’re putting money in at such a high valuation. And the only way – I mean, the way that Facebook makes money right now is by running ads on the site, getting money from companies to run ads on the site. But, you know, I bet that most of your listeners have not clicked on a single Facebook ad, because they get sort of very low clock-through rates, even compared to other ads on the Web.
And so this is the challenge for Facebook. They have to figure out a way to advertise, to get a lot of money for ads, to get more money for the ads they run on the site. And the way they’re going to do that is by, you know, making the ads more intrusive in some sense, making it a bigger part of the site, not off to the side but as part of the central part of, you know, the place you read on Facebook.
CONAN: For one thing, you noted that they recently sold the exit page.
MANJOO: Yeah. So, you know, when you log out of Facebook now, there’s a huge ad. The one that I saw yesterday when I logged out was for Samsung, and that ad sells for something like $700,000 a day.
CONAN: And because Facebook is so pervasive, it really can’t increase its audience all that much more. The 900 million are about the ceiling. So you’ve argued they have to figure out a way if they’re going to keep their investors happy to get more out of each one of those people.
MANJOO: Right, right. So this is – it’s sort of a, you know, it’s a basic math problem for Facebook. They’re running out of people on the planet to get on the site, and so what they have to do is get essentially more money from each of those people. Now, they don’t get money from us, from the users directly, but they get money from the companies that want to advertise to us. Right now, on average for this year, Facebook is expected to make about – just about $5 per user. And at the valuation that investors are putting on them, they’re going to have to sort of increase that every year for the next 10 years at a regular pace, or else, you know, or else their stock price will fall.
CONAN: But those are not just necessarily banner ads which are of limited use anyway.
MANJOO: Yeah. I mean, the way – Facebook has this idea that they can make ads that people won’t hate, and the way they do that.......
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