Thumbs Way Up The inevitable is happening. Facebook is going public

What this means for companies in the facebook ecosystem.

Unless you live under a rock with the Geico guys, you know the news. Facebook is looking to raise $5 Billion in an IPO that is sure to shake up the market at an estimated $85 Billion valuation. Yes, those are B’s. Overnight, if everything goes as planned, a new Fortune 50 company will be born. For anyone working in the social space, recent IPO’s from LinkedIn, Zynga, and now Facebook put smiles on faces. For companies that are building off of social technologies from facebook and others, the market is becoming more valid and promising on a daily basis.

For social commerce companies, the news of Groupon’s IPO and now facebook is even more promising. Companies in the social commerce space have been very happy with the collective attention of funding, conferences and new competition – however there has been some speculation on the viability of the market, if people are actually shopping socially, and if facebook and other social networks like twitter, pinterest and tumblr are going to make it easier to support social commerce initiatives. With the IPO, you can see that the resounding answer it yes.

Many are worried that the IPO will force facebook to charge a “tax” on transactions or conversion events (like buying a product in-stream or in a facebook store). In the years we have been building stores and commerce experiences in facebook, this is possibly the most common concern from clients. The easiest thing to see, especially if you have read the S-1 filing and have seen follow up articles on what they will do next for revenue, is that facebook isn’t interesting in taxing or taking a cut of physical goods. They are a platform to help brands and retailers build an audience, engage that audience and with the help of a massive ecosystem dealing specifically with social commerce – help them convert those friends and fans into customers.

They are going to do this through several methods, mainly focused around advertising. Facebook is a content platform but their revenue (at least a very large piece of it) comes from advertising. If you look at where facebook is going with their use of new sponsored stories and their proliferation through social communication channels (ticker, news feed, etc) you can see that they will also be in the news feed and soon in applications. There is a theory that since they have made social plug-ins easy to install and use, with all of the plug-ins using a standard javascript SDK that there could be a sponsored story or ad network plug-in where site publishers could get a piece of the action (think google adwords / adsense).

Because facebook also makes a portion of their revenue from credits (they take 30% off the top of all credit based transactions that are not negotiated with partners), there is a reason for them to focus more on virtual goods like games, music and videos / movies. I do see a potential for added functionality around applications like spotify, amazon, etc for facebook to push their credit system for purchases – however I don’t know of one brand or retailer that sells physical, shippable merchandise to take a hit to their margin that large.
So, if you sell products like that on facebook, you can rest assured that there won’t be a tax or a cut – but you can almost bet that there will be a way for you to amplify the experience with an ad product of some kind and that ad might be seen by more than just the users (over 850 million of them) inside of facebook. Personally, I love this quote as it sums it up nicely for me: CEO Mark Zuckerberg proclaims, “Simply put: we don’t build services to make money; we make money to build better services.”

Having founded a social commerce company, I can only imagine that one day facebook and other social sites will be the newest channels for retail commerce. Until then, these promising events like funding, new competitors and large IPO’s prove that it might be closer than some think.

Here is an interesting info-graphic that tells an interesting picture of facebook (prior to IPO).

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Facebook Prior to the IPO

 

Blog Post Image Credit: http://www.deathandtaxesmag.com/177345/morgan-stanley-facebook-ipo-illusionists-in-chief/