Keep Advertisers Happy
"[Facebook must] deliver high and measurable ROI [return on investment] to advertisers," explained Ken Sena, an analyst at Evercore Partners, noting that Google (GOOG) gained massive desktop success by ensuring that advertisers received a healthy ROI. "This needs to be the first step for Facebook."
"Facebook must also do a better job of identifying the demographics of its users in order to appeal to different advertisers," said Sica of Sica Wealth Management. "This could be accomplished by growing in applications associated with gaming and entertainment, which will also increase the amount of time users spend on the site."Facebook's post-IPO cash haul could be used to fund acquisitions in this area, he added. The fact that Facebook is dealing with slowing revenue growth makes the task of delivering advertiser ROI even more critical. The social networker saw its revenue slip 6% sequentially in the first three months of 2012, although sales were up 45% on the prior year's quarter. Facebook's costs are also rising, according to a regulatory filing, increasing $110 million, or 66%, year over year. Clearly, Facebook has its work cut out, according to Pund-IT's King. "Facebook has obvious opportunities related to targeted advertising and mobile-enabled services but competition in those areas is fierce and the company's Byzantine user policies (which sometimes seem dedicated to stripping away what little privacy participants have left) have incited regulatory agency and user concerns," noted King, in an email. "Being an outlet for online services or retail sales seems to have potential, but that would probably have to be accomplished via partnerships with established players, as Facebook doesn't seem to have any ambitions to become a supplier." King, however, notes that the Internet giant might decide to offer membership services and features which users would have to pay for. The analyst acknowledges, though, that changing customers from "freemium" into premium is easier said than done.
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