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Facebook Files For IPO, Ignites Impending Growth For Social Commerce

  • Written by Alicia Fiorletta
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On Feb. 1, 2012, social networking web site Facebook, filed to raise $5 billion in an IPO. The company cited Morgan Stanley as a lead underwriter, and Goldman Sachs and J.P. Morgan in secondary positions.

Developed in 2004, Facebook is a recognized leader in the social media space. The company’s co-founder and CEO, Mark Zuckerberg, also has been cited as a constant advocate for social engagement and sharing. In 2010, he was named TIME Magazine’s Person of the Year with the title, “The Connector.”

The promise of instant communication and increased engagement is driving the continual growth of Facebook. In its filing, the social media giant revealed that it experienced a strong surge in year-over-year profit. During 2011, the company made a net profit of $1 billion off of $3.71 billion in revenue; a 65% boost in net income.

“Facebook was not originally created to be a company,” Zuckerberg explained in a letter to investors. “It was built to accomplish a social mission — to make the world more open and connected. We think it's important that everyone who invests in Facebook understands what this mission means to us, how we make decisions and why we do the things we do.”

Currently touting more than 800 million users, Facebook’s convergence of social networking and commerce has presented retailers with a direct outlet to further engage with brand advocates and loyal shoppers on a more intimate level.. Zuckerberg was one of the first to advocate this convergence. Shortly following the launch of Facebook Places in August 2010, he stated: “If I had to guess, social commerce is the next area to really blow up.”

According to Richard Hastings, Macro and Consumer Strategist for Global Hunter Securities, LLC, Facebook’s IPO presents an opportunity for companies to determine the financial impact of social initiatives.

“One of the things that has been missing in the social realm is financial measurability,” Hastings told Retail TouchPoints. “Google and Amazon both are doing amazing things, but within the deeper world of social, Facebook can really explain more analytical angles. Becoming a public company really presents this angle to social, which hasn’t been seen before.”

Many retailers struggle to determine the ROI benefits that align with social networking strategies. In the near future, Hastings predicts that retailers will be able to better analyze the financial impact of social behaviors, such as “Likes” and comments.

“We’re starting to see the first wave of financial measurability for social, which influences the whole space,” Hastings explained. “It makes retailers ask how profitable their current social strategies are, and how they can alter their tactics more effectively.”

Facebook Focuses On Innovation For  2012

Facebook’s go-to-market strategy will move in full force during 2012 and beyond, according to the company’s S-1 form, which indicates the site’s growth initiatives and potential developments. The company will focus more on increasing its user base, especially in less penetrated areas, including Germany, India, Japan and South Korea, by enhancing current mobile apps and other offerings. Facebook also plans to improve product development and create more memorable and engaging social experiences. 

“To provide the most compelling user experience, we continue to develop products and technologies focused on optimizing our social distribution channels to deliver the most useful content to each user by analyzing and organizing vast amounts of information in real time,” according to the S-1 form.

Regarding mobility’s importance in the success of Facebook, the company explained in the filing: “We are devoting substantial resources to developing engaging mobile products and experiences for a wide range of platforms, including smartphones and feature phones. In addition, we are working across the mobile industry with operators, hardware manufacturers, operating system providers, and developers to improve the Facebook experience on mobile devices and make Facebook available to more people around the world. We believe that mobile usage is critical to maintaining user growth and engagement over the long term.”

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