Following the recent public announcement of Facebook’s underwhelming profits since going public, the value of their shares has plummeted amid fears that they will be unable to reassert themselves within the market. Consequently, Facebook has landed itself in an unavoidable position whereby there is an increasing need for the social networking site to reaffirm its worth to shareholders.
Recently, WordStream has published research detailing the average click through rate (CTR) of Facebook ads, announcing this to be as little as 0.05%, which, put into perspective, is half of the industry average for the CTR of online banner ads. With the majority of Facebook’s revenue being sought from advertising, it is crucial that Facebook harnesses a new and innovative approach to revenue generation.
In light of this, many articles have surfaced detailing the possible strategies that Facebook could exploit in an attempt to re-establish its share value. One interesting possibility which caught my eye was embedded within an article by Social Media Today. The article introduced the concept of ‘Social Shopping’. This is a proposed process whereby Facebook could integrate a purchasing platform into the current social networking site.
This would work in the following ways; users would be able to post images of products or services they like, which in turn could be purchased by other users there and then. The way in which Facebook would differentiate itself from other product distributors such as Amazon, is by creating a shopping experience that is highly personalised and ‘comfortable’ as friends and family are able to recommend these products in place of an untrustworthy and unknown online source.
This Facebook addition would also incorporate a search bar, in turn allowing the user to search for a desired item with the opportunity to buy this item if they so wish to.
As highlighted by the article, the emphasis here is on the shift from demand generation, which Facebook is currently attempting to exploit, to demand satisfaction. Ultimately, Facebook will generate the revenue it so desperately requires from brands that will pay a charge to have access to Facebook’s millions of users.
However, I can’t help but think that Facebook developers would have to be very cautious with regard to patent infringements. With specific reference to Pinterest, this idea appears very similar to the image sharing nature of the Pinterest social media platform. This makes me wonder if Facebook has already scrutinised this possibility and found that there were simply too many obstacles to overcome.
Nonetheless, I will be interested to find out which, if any, strategies Facebook will employ to kick start its rejuvenation process. As always, I am interested to hear your thoughts on this. Do you think social shopping is the way forward for Facebook? Will Facebook be able to re-establish itself in the stock market? If not, why not?