Eight marketing lessons from Facebook's IPO

The announcement of Facebook’s IPO crashed the SEC site for a few hours (The site is back up now)  Here is a copy if you are in the mood for a long read. And there’s good reason. While I am not the IPO investing kind, I was there, keen to glean insights from the Facebook juggernaut. And boy was the wait worthwhile! For an advertising guy who has spent a long, long time in this business, there was a bunch of things I was able to pick up.

Lesson 1. Facebook was not built to be a company, but to accomplish a social mission. I think 21st century organisations need to think beyond mere business goals. Steve Jobs, famously, wanted Apple to put a ding in the universe. Google told us they would do no evil.  Patagonia, the trailblazing outdoor brand recently placed an ad in the New York Times asking people not to buy their products. Mark Zuckerberg’s letter that was part of the SEC filing has a letter (annotated version from Wired is available here) which states what he wants Facebook to achieve. We hope to strengthen how people relate to each other.

Lesson 2. We don’t build services to make money. One criticism about the numbers published by Facebook is that their ad business may not scale as quickly as the world would want it to. While the company did post a billion dollars in profit, some analysts don’t see this number growing exponentially. To counter this, Zuckerberg argues that by not focusing only on making money, Facebook is being more useful to people and ultimately more valuable.

The IPO offers some interesting lessons for marketing professionals: Getty

Lesson 3. Facebook is the ultimate loyalty engine. Taking off from the point above, on how usefulness is what people value, one needs to take a look at Facebook’s recent user numbers. Of its 840 million global monthly users, more than half come to the site every day.  There are other impressive numbers too. 100 billion friend connections (14 times more than the number of people on earth), 2.7 billion daily likes and comments.

As a guy who has worked in CRM and loyalty marketing, if I could get half my customers to engage with my brand every day, wow! I wonder how many people around the world interact with brands like Colgate or Lux on a daily basis.

Lesson 4. Create for speed, not for perfection. In his letter to investors, Zuckerberg speaks of The Hacker Way of building. This refers to a system where ideas are built quickly, and then tested and iterated in a continuous process. In marketing we are always trying to create completeness and perfection in what we do. Maybe this was necessary in an age of traditional media, where you needed complete, thought-through solutions to spend your marketing monies on.

But in the new age you could adopt The Hacker Way just like Powerbar, Apple, Nike and Starbucks are doing. We have heard of the always in beta approach, agile product development process as deployed by software companies, and now the “real time marketing” approach from some innovative companies. Maybe we need to be ready to create a hacker culture in agencies and marketing departments.

Lesson 5. Create ecosystems that others can profit from. A large chunk (12%) of Facebook’s revenue comes thanks to their relationship with game maker Zynga. Additionally, Facebook’s like and share buttons, logins and comment boxes can, through social distribution, be taken across other websites and digital properties, without the site even having to lead a person back to Facebook.  Could a bank create an ecosystem that brings together diverse services and solutions that many brands and companies can plug and profit from?

Lesson 6. Build a platform, not a product. Facebook is not a one dimensional product. While social connections is the best thing that it does, it has also become as WSJ puts it, a social bazaar. Facebook  is also the world’s photo album, an online space for games, the second biggest video sharing site, a great platform to target people for advertising and more. Now imagine an insurance company as a platform, not as a seller of me-too widgets. Gamechanging.

Lesson 7. Technology will help keep organisations lean. I was watching Instagram’s Kevin Systrom talking to Digg founder Kevin Rose the other day. And the most incredible fact that I picked up was that the Instagram app has now been downloaded 15 million times, and yet the company has just 10 employees. Even with Facebook, the numbers are impressive. A company poised to hit $100 billion in valuation after its IPO has only 3000 employees, to be valued 3 times more than the top 4 advertising holding companies put together, who employ some 300,000 people. On another front P&G is to cut 1,600 marketing jobs because they discovered that they could advertise free on Facebook and Google.

Lesson 8. Not innovating is a risk. As a matter of disclosure, Facebook has to list out risks and threats that the company could face in the future. The company has put out 12 key areas of risk. Almost half of them are around the area of not being able to innovate, change or stay relevant to users.  Did you know Kodak invented the digital camera in 1975? Traditional marketing and advertising teams have the knowledge to help brands engage with digitally empowered customers. Are we committing (risking?) enough resources and money to maximize on this opportunity?

Facebook is changing the rules of marketing and advertising by building upon a new kind of ethos, values and mission. What can we do to change the way we do business?

Published Date: Feb 03, 2012 10:08 AM | Updated Date: Feb 03, 2012 15:00 PM

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