3 things Mark Zuckerberg can do to revive Facebook earnings

Riken Mehta

 

Mark Zuckerberg, the fastest person to reach the one hundred billion dollar mark, has his work cut out ahead. After the disastrous Nasdaq listing, critics are out for Zuckerberg’s blood, raising concerns whether the 28 year old can manage the social networking company, which has more users than a small country.

Moreover, the ability of Facebook to generate revenues to justify its whopping valuation is also being questioned.

Here’s my attempt helping out good ole Mark:

Mobile Ad Revenue

Every time you log on to Facebook from your cell phone, it takes an average 5 seconds to load (For smartphones with 3G connectivity). Facebook can use this window to feature an advertisement while you’re waiting. Out of 1 billion users, nearly 50% (500 million users) access Facebook via mobile, making it very lucrative for advertisers.

 

                Existing                                              Login Banner Ad

A sure-shot winner

A couple of weeks back, Facebook started a logout banner/advertisement for desktop. As per the setting, an ad will play once a user logs out of Facebook.

Bharti was the first one to lap up this opportunity, wherein it paid Rs 30 lakh per day to Facebook for the logout banner. On first day itself, Bharti got 28 million clicks, giving it cost per view at 10 paise.

After success of logout ads, it makes sense to have login ad. The same concept can be used for cover photo on desktops with jacket/page push ads. (I know it sounds horribly irritating but these ads will be displayed only once in a day- first time you log onto Facebook) 

Facebook AdSense

Facebook recently launched Sponsored Search results that allow marketers to purchase ads, which will appear in Facebook’s search bar. This is somewhat similar to Google’s AdWords difference being the ad will lead you to Facebook page or app of that advertiser and not on its official website. However, this may not help Facebook’s cause.

If Facebook wants to make serious money then AdSense is something they should work on. AdSense allows owners to place Google ads on their website. For every click on the advertisement Google will share the revenue with site owners. (For one click, if Google gets 10 bucks then it will retain 7 bucks and share 3 bucks with website) It’s a win-win for both parties. Google has an edge over Facebook when it comes to AdWords. Google will remain the default search engine and users will rely more on Google AdWords than Facebook Sponsored Search Results. But when it comes to AdSense, Facebook has a superior advantage over Google.

Facebook records Likes (pages) of all users and throws ads based on your interest. Let’s understand with an example. Suppose Moneycontrol.com, India’s  No.1 Financial platform has tied up with Google AdSense and Facebook AdSense. When I log on to Moneycontrol.com, Google AdSense will display a home loan ad but Facebook knows that I am a big fan of cars and liked a page on my profile (Supercars and Exotics in Mumbai) so it will display Car Loan ad instead of Home Loan ad. In this scenario, Facebook ad is more relevant to me as Google is unaware of my interest.

In marketing parlance, Facebook is considered as a Brand Builder while Google is termed as a Sales Driver. The equation will change post launch of Facebook AdSense. Currently Google gets 65% of its revenues from AdWords and 35% from AdSense. It makes more sense for Facebook to launch AdSense since it has to start looking for revenues outside the world of Facebook.

Facebook Video

As per latest the Comscore data, Facebook toppled Yahoo! last month to become the second most popular online videos website. Google’s YouTube holds the numero uno position with 1.5 times more unique visitors than Facebook.

Facebook does not have a dedicated video page where a user can view all the videos (Popular, Most Viewed, Top Search, Sponsored). Currently, when you open YouTube, an ad plays for which Google charges Rs 7-8 lakh per day. Apart from that, Google also gets revenue from Recommended/Sponsored Videos, Video Preroll/Postroll, AdWords. The popularity of videos is growing at a healthy pace on Facebook and it should seriously consider creating a dedicated page for videos and monetise it.

Netflix, an online movie/TV show provider bought shares of Facebook worth 1 million recently. If market rumors are to be believed, then Facebook may acquire Netflix and shortly you will be able to watch your favourite movies and TV shows on Facebook.

It’s free and always will be! But should

This has been Facebook’s promise since inception. And this has made it an obsession among everyone, especially youngsters.  The company can leverage this addiction. Facebook gets PAID! Let’s say USD 1 per year (lowest denomination). Now the big question is will users pay? Even if 50% decides to do then it will mean 500 million dollars revenue per year. One can also argue that people may switch over to Google Plus. It can happen so that is why I think this is the last resort company should adopt.

Wrapping up

Honestly, it requires no rocket science to implement the above marketing strategies. They have been successfully implemented by tech giants and Facebook has to replicate it with 1 billion user’s database on its side.  Facebook Offers and Sponsored Stories are the new initiatives the company has taken but Mark needs to explore more opportunities like the above ones to extrapolate revenues and win the hearts of his shareholders.

Good Luck Mark!
 

 (With inputs from Sagar Salvi, Saunak Ghosh, Malay Tripathi, Mithun)