Justin Cooke, CEO of Fortune Cookie and chair of BIMA reviews the implications of the Facebook IPO.
You can hardly visit a single news source today without seeing the news of Facebook’s IPO filing posted everywhere, with everyone discussing the significance of the timing, the financial details and possible ‘bubble’ risks.
But let’s take a look at the most important implication of Facebook’s IPO – the impact it’s going to have on the whole digital industry worldwide. Going hand in hand with this IPO is a massive injection of cash and fresh financial support for the world’s most fast-moving industry.
We’re expecting to see $5bn being pumped into the industry, helping to develop an underlying ecosystem that will enable users and brands to better engage and connect with each other and confirming that this shift in the way the world communicates online is very much here to stay.
Since Facebook started eight years ago, we’ve seen five major tech IPO’s - Google, Linked In, Zynga, renren, and Groupon - raise billions for this industry, around $6bn in fact, and Facebook’s IPO, which is seen as conservative by many, will see this figure rise to $11bn.
We’ve already entered a new era of the Internet, this is not just about social media, it’s about engagement and how the world connects and communicates. The launch of Facebook and its counterparts are the very fabric of that new Internet and we will see this investment benefit users, businesses, agencies and global and local economies across the world for years to come.
In 2010, 62% of Facebook’s income came from US based companies, shrinking to 56% in 2011 as Facebook’s international reach continued to grow, attracting tech businesses large and small to join the Facebook developer ecosystem. Facebook has confirmed this and responded to this global trend, by opening more international sales offices. Nearly a sixth of the world is active on Facebook and they expect to reach the 1bn user mark by the end of this year, with significant user growth areas coming from outside the US, such as Brazil and India.
Facebook’s developer platform has already seen hundreds of thousands of businesses build social products within the platform, such as games, media and music and this fresh investment will boost that growth significantly.
Having always been a partnership focused company, this will bring in a new wave of businesses from around the world that will set up camp under the Facebook ecosystem. Users will gain a broader, more exciting range of social experiences sustaining the hype and popularity of Facebook as a platform.
Local economies will also benefit as these new companies plug into this ecosystem, and where local talent can continue to innovate to make the experience between brands and users ever more relevant, engaging and useful. This is certainly true for the UK.
We’ve seen the UK become one of the most digitally connected European nations, with London establishing itself as the European digital capital and attracting the world’s biggest media and global brands to position their European head quarters here in the UK.
A recent Deloitte study found that in the UK, Facebook not only supports 35,200 jobs, but contributed an estimated €2.6bn to our economy. Facebook does this by allowing ecosystems of businesses to flourish by providing the platform and creating the economic value. Facebook is helping to develop many UK startups using Facebook as their commercial and marketing platform, such as shopcade.com, a social shopping application on Facebook that connects people to shop and recommend products together and get rewarded for it.
This is exactly why it’s important that investment is poured into supporting platforms like Facebook, who are breathing life into the phenomenal commercial potential for economies around the world.
How well businesses can better engage with their customers online is a significant factor here, Zuckerberg mentions in his IPO letter to investors, ‘More than four million businesses have Pages on Facebook that they use to have a dialogue with their customers. We expect this trend to grow as well.’ Advocating the potential in brand to user engagement through Facebook, he also states ‘a more open world will also encourage businesses to engage with their customers directly and authentically’.
With Facebook announcing its plans for pricing rules for agencies rates running alongside the IPO planning, we’ll also see more matured and fair relationships brewing between agencies and brands, and consequently, a more collaborative, effective and measurable new wave of social media marketing through Facebook – a welcoming thought.
As for the question of the IPO creating a bubble, let’s be realistic and stop jumping on the hype and controversy bandwagon. We’ve gone far beyond the bubble now, the whole shape of the Internet and how we communicate has taken a dramatic and irreversible shift. Facebook has more than proved its longevity, the hysteria surrounding it has been consistently rebuffed with the achievement of well-timed milestones, growing their user base and constantly innovating to improve the user experience.
Justin Cooke is the CEO of Fortune Cookie, a global agency transforming the digital channels of the world's leading brands and Chair of the British Interactive Media Association, the trade body for everyone working in digital Britain.