Facebook – The Little Engine That’s Trying
Karen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Facebook (NASDAQ: FB) is sending the market serious signals that they’ve finally gotten the message, and they’re starting to look more like a company run by suits and not by a gaggle of college geeks in hoodies. The little Facebook engine has started a run up the hill by making significant personnel changes, forming strategic partnerships and developing multiple income streams to increase profits.
The shake-up in management started at the top with the resignation of CTO Bret Taylor, who’s leaving to form an unnamed startup with ex-Googler Kevin Gibbs. Shortly after that, CEO Sheryl Sandberg was named to Facebook’s board of directors. After their disastrous IPO, this internal housecleaning seems to indicate that Facebook is serious about its corporate image.
Facebook and Apple (NASDAQ: AAPL) are the best of Frenemies. Facebook loves Apple so much that they hire as many ex-Apple engineers as possible. Why just a few days ago they pulled off a major coup by poaching Apple’s user interface design manager, Chris Weeldreyer, to be their new product design manager. According to LinkedIn, at least 89 former Apple employees now call Facebook home. Yet on the other hand, Facebook and Apple are working closely together on the iOS6. Is this their way of confirming that a Facebook smartphone backed by Apple will be announced soon?
Apple stands to significantly benefit from Facebook’s recently launched Apps Center. In May 2012 alone, Facebook sent over 83 million visitors to Apple’s App Store, of which Facebook’s cut was 30% of the revenue generated from any sales. And since 7 of the 10 top grossing iOS apps use Facebook as their platform, Apple is going to be very careful not to step on Facebook’s toes.
Another strategic partnership is found with the Facebook/Netflix (NASDAQ: NFLX) combo. Netflix movie viewers in 44 of 45 countries will be able to share what they’re watching with a friend on Facebook at the same time. Unfortunately, it’s not available to U.S. users due to the Video Protection Privacy Act of 1988. Facebook Connect allows Netflix users to link their accounts directly to their Facebook account. Netflix’s ultimate goal, of course, is to increase their number of streaming subscribers.
Introducing new products while meeting user privacy demands, however, has proved a much thornier problem. Facebook Exchange, a new advertising system that allows advertisers to bid on a specific ad impression in real time, immediately drew user ire. Facebook’s acquisition of Face.com, a facial-recognition company, to allow Facebook users an easier way to tag and share photos, was met with a less than an enthusiastic welcome.
Facebook continues to try and develop new income sources without alienating their users. The company recently added a subscription billing option for games offered on its site and is selling music and other media downloadable from iTunes. Those annoying click ads might be going the way of the dinosaur thanks to mobile advertising, which delivers ads based on the user’s location. The click rate on mobile ads far outstrips the rate for PC based ads, so profit should triumph over privacy this time. On the plus side, however, when Apple made it clear they wouldn’t accept Facebook Credits as payment, the funny money quietly disappeared to the relief of Facebook users.
Facebook is working hard to prove they are a growing company capable of producing substantial profits for shareholders. The Facebook engine is huffing and puffing, trying to pull itself up and over the hill, and the market is waiting to see if it can.
kprogers has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Facebook, and Netflix. Motley Fool newsletter services recommend Apple and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.