Tuesday, May 15, 2012

Facebook without user trust (and cash flow) won't last

It has been a talk of the town.  Facebook is doing IPO this Friday.  I cannot even remember where I read that news.  It's probably because Facebook IPO news has been on the headline of Google News on Technology section for a few days.  It seems everyone is talking about future of the 900-million-user-strong social network.

Over the last couple of days I noticed increasing chatter about how user's perception of Facebook is less favorable than other tech giants like Google, Microsoft and Apple.  Associated Press-CNBC poll of 1,000 Americans show a majority, 59 percent, says that they either don't trust Facebook at all or trust them "only a little" with their privacy.  People are leery of how their data will be used once they share it on social network.

Mark Zuckerberg has his work cut out for him;
turn around negative company perception and
cater to two core users, end users and marketers.
This is understandable.  Everyone knows that Facebook is a company built on user sharing data, and it's been a very aggressive one at that.  It has been challenging the way we have been sharing data with people around us. Profile wall, news feed, Facebook Beacon, friend suggestion, messaging, fan page, business pages, photo tagging, subscription, Timeline and interest, all of these are features designed to make it easier to share more with our friends and with Facebook.  It's still fairly fresh in people's mind that Facebook is known for default sharing privacy settings and its third party applications leaking user data.

By becoming public company, Facebook will have another challenge, delivering numbers to public shareholders.  Facebook has already started to explore multiple avenues to monetize their gigantic user base to justify $100 billion market cap.  What Facebook has to learn to get better at is catering to marketers and focusing on helping marketers succeed on Facebook.

Just the other day WSJ reported that General Motors will stop advertising on Facebook because of ineffective Facebook ads performance.  Coincidentally Facebook reported slight 6.5% dip in their revenue for the first quarter of 2012 quarter over quarter.  Although marketers cannot afford to ignore 900 million user base, they are not finding easy way for them to measure how effective Facebook ad campaigns are.

Much like how Facebook has been focusing relentlessly on improving user experience and adding features, they now have to do the same for marketer experience at the same time.  And somehow solve eroding user trust to avoid alienating where it all started from, users sharing data.

It won't be an easy challenge for any company.  That's exactly what Facebook is up against.

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