Facebook, everyone’s favorite website to use but disdain
finally closed above its initial price offer this week. It has been a long 14 months for the facebook
faithful who held on to the stock as it dropped in value by more than half this
time last year:
Outside of the technical glitches that occurred at its IPO
on NASDAQ, Facebook’s equity valuation suffered for the next twelve months that
followed primarily due to market doubts regarding its monetization of its digital marketing platform. Specially, Facebook
came of age during the reign of the laptop and PC. Big banner ads and pay per
click ads on the left margin of the screen were key to its early sales of $1B a
year. Fears emerged that sales growth would slow tremendously as an increasing
number of its one billion users drifted away from the large screen of laptops
and to the tiny mobile phones where display ads and pay per click ads would be
much more difficult to show.
COO Sandberg and other execs quickly developed a “mobile
first” strategy to stop the doubts in their tracks. In order to stabilize its
pricing for ad placements, it had to develop ways to generate them into the
mobile user experience. Facebook thus began to incorporate a more effective way
of including ads within users’ News Feeds.
The drumbeat for mobile based digital marketing continues
at Facebook announced plans to
incorporate video based commercials that marketers can broadcast into a user’s
News Feed.
Nonetheless, with roughly $1.5B in earnings, Facebook is
trading at nearly 160X price multiple. This indicates that despite the recent
reprieve as its stock price reflects its most recent mobile successes will have
to continue to execute less it face renewed downside pressures. Nonetheless,
the lessons of the past year show to not count Facebook out as a major player
in the few dozen billion dollar digital marketing landscape.
No comments:
Post a Comment