During recent years in the social media
market there have been silent, but growing whispering about social media
companies going public. With going public I refer to transformation of these
companies from privately owned companies to publicly traded companies on the
stock exchanges. The question is why do these companies go public? The simple
answer would be to raise money for future investment purposes and needs. But
what does this transformation mean from customer point of view, does the transformation
affect customers?
With social media customers I refer to
users of social media, which includes a great majority of the western world
population. We might think that these kinds of company affairs do not affect
our life, what will changes when to company goes public? Many social media
customers won’t even realize any change in the services provided by these
companies. I want to argue against this opinion, there will be big changes in
the future when social media providers are publicly traded on the stock
exchanges.
Let’s start with case Google, which was
listed in 2004. The company wanted to raise $2.7billion with the IPO (initial
public offering). By first look nothing changed in the company services, but
this is a false thought. In general, we are too impatient to realize changes
happening around us. It is necessary to compare Google before 2004 and Google
now. Target marketing has been the key factor for Google success, this includes
gathering information of every user of any services the company provides. This
allows Google to provide marketing companies right marketing platforms which
will reach to end user of their products. As an example, in a regular Google
search engine search there will always be 2-3 ads on the first page for the
results. This is kind of understandable, nowadays marketing is everywhere, in
TVs, magazines, and streets. There is nothing unusual with it, but the
difference is made when moving from general marketing to target marketing by
using background information of the user. Google will find you lucrative ads to
present, how is this possible? It is possible by gathering information of every
Google search a user makes. I argue that in many cases Google knows a lot of
you and who you are, what you do on your spare time, and other interest you
have. This is quite an easy task because you search history will reveal all of
this.
Until know there is nothing suspicious
about their marketing methods, all above is generally approved. But to give a
wider perspective the new trend in social media, as Facebook and Google+, are
platforms where you are voluntarily giving away information about yourself.
This information is a chamber of jewels for these companies. 85 % of the
revenue Facebook is generating is coming from marketing by selling marketing
place on Facebook. In 2004 when Google still was mainly a search engine for
most of the users, 95 % of their revenue was generated from selling marketing
place on their platforms. For Google it was just the time before they went
public. Which are the changes we have seen since 2004 in Google services?
Google has expanded in every direction,
since being a search engine company before 2004. Google acquired the company
which had created the basics for Google Earth. Google added mail-, maps- and
document building functions to its services. Most of these were gained through
acquisitions. In the later days they have put a lot of effort to develop these
existing systems but also developing new products such as mobile operating system
Android and Google+ social network services. The questions remains why these
developments and the growth have accelerated progressively after the company
went public? I argue that the answer is quite simple. Growth is needed to
satisfy shareholders of the company. If a company is not able to generate growth
investors will abandon the company and they will not invest in the company.
Investing in a company’s shares is equal to lending your money to the company and
expecting some compensation for your investment. The compensation is generated from
the profits the company is able to generate. The key issue is that investors
and shareholders are forcing the company to change to be more efficient and to
maximize profits. The information you are providing for them is information
they are able to use to increase their profits. This is all done by knowing the
end users of their products and by being able to target the needs of these
users.
Case Facebook. Facebook is going to turn to
a public company next month, sometime in May 2012. If we consider Google case,
we are able to do some assumptions of what Facebook has to face in future. Investors
will demand growth and profits. Facebook is probably the biggest company,
measured by how many users a marketing company can access by posting an
advertisement on Facebook. To add to this equation, Facebook probably has the
biggest databank of information of its users. By combining these two factors
and the demand of growth and future profits, are you willing to provide your
information to all firms that may benefit from your information? Facebook faces
a couple options for the future, they have to start using their user
information more efficient to get marketing companies to post advertisements on
Facebook, or as a second option, they have to develop and expand to new
products. By the fact that Facebook tries to raise $5billion by their IPO, it
may seem likely that they are investing in product research and development.
But the only thing that is sure is that the company profile of Facebook will
change due to transformation from privet to public company. Will Facebook turn
from networking platform to marketing platform in future?
by: Daniel Partia
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