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WSD Blog

7 Ways Facebook Could Expand Its Social Foothold

By Chandra Steele / Feb 21, 2012 / Comments

Facebook's Timeline of the FutureFacebook has 845 million users worldwide. Like Apple's nearly $100 billion in cash, the number invites speculation about how it will be used. Following a $5 billion IPO, shareholders will be among those asking.

One of the key areas it needs to monetize is mobile. The New York Times reported that Facebook will be holding an event next week for advertisers, which many expect will introduce mobile advertisng. In its F-1 filing, Facebook notes the ever-increasing number of its monthly active users worldwide, now at over 425 million, and the consequences for its bottom line. "We do not currently display ads to users who access Facebook via mobile apps or our mobile website," it says. "To the extent that increasing usage of Facebook through mobile apps or our mobile website substitutes for the use of Facebook through personal computers where we do show ads, the number of ads that we deliver to users and our revenue may be negatively affected unless and until we include ads or sponsored stories on our mobile apps and mobile website." Ad dollars are the lifeblood of the company.

Today, Facebook is an advertising company masquerading as a social network. Last year it pulled in revenue approaching $4 billion and that wasn't from the 2.7 billion likes and comments or 250 million photos uploaded per day; it was from the advertising that surrounded it all, plus a little help from FarmVille and Mafia Wars. In its S-1 filing, the company said, "The substantial majority of our revenue is currently generated from third parties advertising on Facebook. In 2009, 2010, and 2011, advertising accounted for 98%, 95%, and 85%, respectively, of our revenue." Zynga accounts for another 12 percent. Facebook has managed to make more cash per user; from 2010 to 2011, it saw 39 percent growth in monthly active users accompanied by an 88 percent increase in revenue.

Even though Facebook has gone from a dorm room project by a few friends to a social network responsible for 100 billion "friendships," it hasn't yet reached its potential. There are existing and undiscovered markets that it can and may be planning to enter. Facebook has already taken on Gmail and Gchat. There are businesses Facebook was rumored to be diving into, but it only dipped a toe in, partnering with existing services, such as its music alliance with Spotify, MOG, and Rdio and movie streaming with Warner Bros. and Miramax.

As shareholders look for a return on their investment, here are some ways Facebook may expand to deliver.

Jobs

JobsPlenty of people have lost their jobs because of Facebook, but they've also found them there, too. Fifty percent of job hunters in 2011 used Facebook to look for a job, compared to 26 percent for LinkedIn, which has 700 million fewer users, according to Jobvite. Facebook more directly got into the job-hunt business in October when it partnered with the U.S. Department of Labor and related agencies to demystify social-based job search for job seekers and recruiters alike. The Social Jobs Partnership has career resources for those looking for a job and will develop free solutions for employers to virally target potential employees. CNN reported that LinkedIn Co-founder (and Facebook investor) Reid Hoffman dismissed the idea when asked at the Web 2.0 Summit in San Francisco if the two companies would go head to head. "No," Hoffman said. "Facebook is obviously an amazing product that's gotten big. But I'm not sure everything is social." While Facebook hasn't made any statements regarding intentions to become a job site, Silicon Alley Insider published emails and IMs that document the falling out between Facebook Co-Founders Mark Zuckerberg and Eduardo Saverin. In them, Zuckerberg chastises Saverin for starting the job site Joboozle. "You developed Joboozle knowing that at some point Facebook would probably want to do something with jobs," Zuckerberg wrote. "This was pretty surprising to us, because you basically made something on the side that will end up competing with Facebook."

News

NewsFacebook's news feed may soon be producing more news than baby photos and musings on the weather. Last month, it hired a managing editor, Dan Fletcher, the 24-year-old social media director for Bloomberg News and member of Forbes' 30 Under 30 list for the media industry. Though the company says that Fletcher will be managing communications, not producing news, the title has caused conjecture. Last year, it also hired Mashable's Vadim Lavrusik to head its outreach program to journalists, which encourages them to use Facebook for gathering and sharing content. Two people does not yet make a news team, but Facebook has nevertheless purchased URLs around "Facebook newsroom." Given the depth of data it has about each user, if Facebook were to assume the role of news aggregator, it could create a highly customized news feed for each one, narrowing a topic of interest down to a specific story. In a letter appended to the S-1 filing, Zuckerberg said, "Each person's experience on Facebook is unique and completely personalized—akin to reading a real-time newspaper of stories compiled just for them that they can carry with them wherever they go." This next step in personalized news would be in keeping with the statement in the filing itself that, "Facebook aspires to build the services that give people the power to share and help them once again transform many of our core institutions and industries."

Social Shopping

Social ShoppingOf all the social trends, the one trending the most is social shopping. Pinterest and its brethren are proliferating. Garnering less attention but gaining momentum is Facebook Shopping Mall. The mall is operated by social ecommerce provider Payvment, which has taken in nearly $8 million in funding since its founding two and a half years ago. Using Payvment, sellers can add ecommerce directly to their Facebook pages and shoppers can let their friends know what they own and what they want via their Timelines. The mall had more than 1 million sales in December in its 150,000 stores, from small boutiques to storefronts for major brands. Payvment is conveniently located across the street from Facebook, making relocation easier should it be one of the companies Facebook hints at in its S-1 filing, "As part of our business strategy, we have made and intend to make acquisitions to add specialized employees, complementary companies, products, or technologies."

Games

GamesGames are an ever-widening part of Facebook's dual-pathed revenue stream. The source of those games is Zynga, maker of FarmVille, Mafia Wars, and Words with Friends, among others. Facebook derives income not just from its 30 percent portion of the sales of virtual goods and ads Zynga purchases, but advertising from others on Zynga-related pages. "We currently generate significant revenue as a result of our relationship with Zynga, and, if we are unable to successfully maintain this relationship, our financial results could be harmed," Facebook warns potential investors in its S-1 filing. Zynga is mutually dependent on Facebook, a concern that investors took into account in the Zynga IPO in December that resulted in a less-than-impressive stock market debut. The two companies have signed an agreement that keeps them in a relationship until 2015, but should they go their own way after that, it would require Facebook to build games with as devoted a following as Zynga's and Zynga to find an entirely new platform. The lasting union of an acquisition would seem favorable to both parties.

Dating

DatingZuckerberg's letter in the SEC filing has a passage that could be the intro to any dating site: "Even if our mission sounds big, it starts small—with the relationship between two people. Personal relationships are the fundamental unit of our society. Relationships are how we discover new ideas, understand our world and ultimately derive long-term happiness."

It's often said that the best way to meet a mate is to be introduced through friends. For the same reasons that a gathering of friends is a perfect setting, so is Facebook: People use their real identities, it's a natural place to discuss interests, and there's little pressure. Apps like AreYouInterested.com are already built around this and, should Facebook hook up with them or go it alone, it might be able to dispel its bad-boy image of being cited in a third of divorces in the United Kingdom.

Mobile Wallet

Several companies have been trying to snatch the mobile wallet out of their competitors' hands. Google, Isis (an initiative of AT&T and T-Mobile), and PayPal are the suspects at large. So far Google Wallet is the only one that's started to pay up, but it's had some issues. Facebook could take advantage of this by introducing a mobile wallet of its own. The S-1 filing makes plain the necessity for it to monetize mobile, "[I]f we are unable to successfully implement monetization strategies for our mobile users, our revenue and financial results may be negatively affected." Facebook already has financial experience with Credits and Payments and has taken steps toward expanding their use. According to the filing, "To increase flexibility in how our use of Payments may evolve and to mitigate regulatory uncertainty, we have applied or expect to apply through a subsidiary for certain money transmitter licenses in the United States." Connecting that with its app could be the path to profit. The company would have an added advantage if it takes on the next item.

Image courtesy of Etsy seller Richard Lossing

Phones

PhonesIf the game of telephone illustrates how rumors get started, then the ultimate version of that game would be called "Facebook phone." Many phones have been built around Facebook, and Zuckerberg has maintained that's the business model the company wants to continue to follow. That still hasn't stopped speculation and conversation that Facebook may develop a handset of its own. There'd be good cases to do so, for reasons Facebook itself puts forward in its S-1 filing. In it, Facebook stresses, many times over, that mobile is both the future and its weakness. "Improving our mobile products and increasing mobile usage of Facebook are key company priorities that we believe are critical to help us maintain and grow our user base and engagement over the long term," it says. Though, the company acknowledges, "such usage does not currently directly generate any meaningful revenue."

More worrying to Facebook is the fact that its social networking rival, Google, with its Android operating system, has control of a large portion of the handset market, 47 percent, according to NPD Group. "There is no guarantee that popular mobile devices will continue to feature Facebook, or that mobile device users will continue to use Facebook rather than competing products," Facebooks says in its S-1 filing. Given that 425 million monthly active users accessed Facebook from mobile devices in December, such an occurrence would be devastating to the company. A true Facebook phone would be a gamble—carrying with it the risks of the marketplace and possibly putting in jeopardy the smooth OS integration it's so far enjoyed—but the payoff could be worth it.

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Originally published on pcmag.com. Click here to read the original story.

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