3 Things Facebook Still Doesn’t Know About You
Matthew is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
There is no doubt about it, Facebook (NASDAQ: FB) knows a whole lot about you. They know your birthday, the brands you like, the books you’ve read and they even know what happened on your last trip to Vegas. Still, despite everything they know about you, there are three things that they don’t know about you and it’s just killing them.
Until they can get you to fess up there will continue to be pressure on the stock. Their ability to learn the answers to these three questions has the potential to drive their business for decades to come. Of course, if they can’t anticipate your answers they could be doomed to follow in the path others that came and went.
Can They Monetize Your Mobile Activities?
Do you know what I think is one of the best features of using the Facebook app on my Apple (NASDAQ: AAPL) iPhone? No ads, and that’s a big problem for Facebook’s future revenue potential. Especially with the launch of the iPhone 5 which some are saying could boost the GDP of the US economy higher than any stimulus package dreamed up by our politicians. As estimates range from 8 to 20 million units being sold by the end of the year, that’s a lot of potentially new mobile users.
Even as Apple continues to make a mint from the growth in mobile, social networking sites are struggling to cash in. LinkedIn (NYSE: LNKD) for example said that 23% of their total traffic comes from their app while 27% of total traffic comes from mobile devices. However, what LinkedIn and others are finding is that up to 40% of the clicks on mobile ads are accidental. Raise your hand if you’ve ever clicked something on your phone that you didn’t intend to. It’s rather frustrating isn’t it? The screen is small enough as it is and very sensitive so it is easy to have a frustrating experience by accidentally clicking ads.
What Facebook is going to have to figure out is how to properly monetize all this mobile traffic. We assume ads are the way to go, because that’s the way we’ve always monetized content. What they’ll need to figure out is if there is a better way. That leads me into next question Facebook must get you to answer.
Will You Stick Around?
I think we’ve all gone through those phases where we’ll swear off Facebook for a day or a week. Maybe we followed through but we’ve always come back. We have this human desire to be connected and Facebook has given us a platform that we can connect with. Will we ever grow tired of it? I know I can only take so many pictures of my Facebook friends’ kids and I really don’t care what they ate for dinner, but I still log in every so often to see what’s new.
More importantly for Facebook’s future though is if they are doing enough to keep us coming back to their site to stay connected. I find it interesting that so many will openly complain on Facebook when they upgrade the site by forcing users to switch to the timeline or add a cover photo. However, when Apple announces an upgrade to their iPhone millions clamor to be the first among their friends to shell out hundreds to buy the upgrade.
So can Facebook develop (or buy) products that make their users keep coming back for more? While the opportunities are endless just consider this one example. What if they either partnered to sync with or purchased a company like OpenTable (NASDAQ: OPEN)? Think about a future where you can tell you friends via Facebook to meet you at your favorite hangout and all they have to do is log in to their OpenTable by Facebook app (though their mobile device of course) and add their name to the reservation. When your business is built around connecting the world, you open up a world of possibilities. This leads me to my final question.
What Do You REALLY Want From Them?
No one wants to be sold to; we just need a little help in determining what we want to buy. Amazon (NASDAQ: AMZN) does a great job with this by suggesting what else we might like. Do we as Facebook users want their help in suggesting a product we should consider buying.
Think about a future where you’ve taken a picture of your little junior breaking your in-laws favorite vase. Through the wonders of technology and algorithms, shortly after posting the disaster you get an email from Facebook saying that they’ve found that very vase for sale though Amazon. Is that an invasion of privacy or your new best friend?
Amazon’s done a good job over the years by diversifying into new lines of business that’s an extension of their core offering. Whether going from books to a device to read books or from selling videos to providing them on demand, they’ve always been able to take advantage of new opportunities. Social networks are no different, take their peer LinkedIn which was started to link professionals but now drive a majority of their revenue by providing data to recruiters and HR reps. Again, Facebook has an open ended future which leads me to one final question.
Are Facebook’s Best Days Ahead or Behind?
For investors that’s the only question that matters. With more than $10 billion of cash on the balance sheet they’ve got quite the war chest to buy or build what’s necessary to ensure their best days are still to come. If they can convince you to answer the first two questions with a resounding yes and be as open with them about that third question as you are with your personal life on through their platform then their best days are yet to come.
latimerburned owns shares of LinkedIn and Apple and has the following options: Apple. The Motley Fool owns shares of Apple, Amazon.com, Facebook, and LinkedIn and has the following options: short OCT 2012 $40.00 calls on OpenTable and long OCT 2012 $40.00 puts on OpenTable. Motley Fool newsletter services recommend Amazon.com, Apple, Facebook, LinkedIn, and OpenTable. 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.
