Facebook Faces the Music

I have avoided writing about Facebook primarily because nearly everyone else is. For full disclosure, I do not have a Facebook page. However, I do manage such a page; after all, I am a big social media proponent. And therein lies the rub. I have watched Facebook shares struggle post IPO like many other interested parties. I was a bit skeptical of the share value pre-launch but I did expect the hype and interest to drive those shares higher. Yet, as the initial price rose and the value of the company hit $100 billion, I wondered how they would monetize Facebook. Apparently, I was, and obviously now, not alone in wanting to query Facebook management on how they intend to increase revenues.

Facebook touts nearly a billion monthly active users, but with 1Q2012 revenues of $1.058 billion, one has to express skepticism. Doing the math, Facebook generated only 33 cents per user, and I thought selling songs for a buck was going to be difficult. As I look at a Facebook page and see what I consider barely relevant to completely disinteresting advertising, I do not see Facebook as the Google killer for ad placement. GM is more correct than Ford as to the value of advertising on Facebook. People are not going there to buy stuff. They go to connect with other people.

Most of the postings on company-sponsored pages tend to be complaints, and I for one think that is a good thing. It provides information on how customer support and care processes are working and also reflects how responsive the company can be when a problem is identified. However, do companies want to pay to have a page on Facebook, such as when products are sold on eBay or Amazon?

Facebook needs a breakout strategy to address the large number of users that access them through mobile devices. If the studies conducted by Cisco, Infonetics, Symantec and others are even half right, success in the future requires a mobile strategy.

After an up day yesterday, Facebook will open down this morning and that should not be a major concern of a serious investor who believes that Facebook has a strategy to monetize nearly a billion monthly active users. It should only concern those who wanted to get a quick return and profit from the IPO. By that measure, get ready for an avalanche of shares due to be released by Facebook insiders over the next six months. Within 181 days of the IPO, an additional 1.7 billion shares will become available for sale. If the stock does not look like a good long-term investment, expect those insider shares to be sold.

Investors learned a lot during the first dotcom bubble. Those lessons are now being employed when analyzing Facebook, Groupon, Zynga and others. Get a real business plan, strong management team, execute, differentiate, maintain strong barriers to entry and generate revenue with sustainable growth. With that formula, success and investment will follow and that is music to anyones ears.

David Byrd is vice president of marketing and sales for

Broadvox

, and is responsible for marketing and channel sales programs to SMBs, enterprises and carriers as well as defining the product offering. Prior to joining Broadvox, David was the vice president of Channels and Alliances for Eftia and Telcordia. As director of eBusiness Development with i2 Technologies, he developed major partnerships with many of the leaders in Internet eCommerce and supply chain management. As CEO of Planet Hollywood Online he was a pioneer in using early Internet technologies to build a branded entertainment and eCommerce website company partnered with Planet Hollywood. Having over 20 years of telecom sales and marketing experience, he has held executive positions with Hewlett-Packard, Sprint and Ericsson.