Facebook’s IPO may have generated an extensive share of column inches but the interesting times are yet to come, warns Ovum analyst Eden Zoller.
The social network has been on a rollercoaster since its IPO, with the botched offering of stock a stark contrast to excitement that preceded it. But there could be more twists and turns to come.
Although the network is making money, there are tough challenges ahead including how to better monetise mobile and keep its user base engaged.
“Scale is important, but engaged users are vital if Facebook is to build the critical mass of advertisers and commercial content providers that is central to its future success,” she said.
Facebook’s IPO on May 18 raised $16bn and saw the social network valued at $104bn but share price started falling on the first day of trading, and continued to drop, resulting in a knock-on effect on other publicly-listed social media sites such as Zynga. As a result, the heat is on as to whether Facebook can live up to expectations, explained the analyst.
Additionally, the biggest challenges for the social network are increasing users and engaging its existing 900m users. According to Zoller: “Both are vital if it is to attract the advertisers and commercial content providers that are critical to its future success.”
Mobile presents both a major threat and opportunity to Facebook, she added. In terms of opportunity, the rise in mobile ownership sees a chance for the network to extend its reach and enagament with consumers. However, Facebook does not have a business model in place to monetise mobile, warned Zoller.
Facebook’s “ambiguous” attitude to privacy may also be a stumbling block.
The analyst explained: “Facebook is constantly pushing against acceptable limits on privacy. Facebook is loath to admit this, but the fact is that many of its users are increasingly uncomfortable with its control over and use of their personal data.
“Facebook is a mature business with 900 million customers, and in a post IPO world it will be treated as such, rather than in the often over-indulged way it has been in the past. Its high IPO price tag will mean investors are hungry for outstanding returns, which will put the social network’s performance under intense market scrutiny and pressure from shareholders.
“This could be a good thing, and give it the focus and discipline it needs to improve. However, if Facebook fails to live up to its promises then its share price will continue to slide as investors lose confidence in the business,” she concluded.