We published this a couple weeks ago at CNBC. Although Facebook's IPO has been widely panned, it's important to keep in mind that the company still has a market cap of over $65 billion - that's pretty big. And that valuation has meaningful implications for social business.
Originally published by CNBC on May 16, 2012
When Facebook becomes a publicly traded company in the very near future, the financial event will be remembered for many reasons, but we view it as a watershed moment in the evolution of social business.
Six years ago, we took an industry analyst briefing from Mark Zuckerberg to discuss some “big news”: Facebook had secured $25 million in funding; mobile access was now available, and “Facebook Alumni” was being launched acknowledging that many users would soon graduate college. At the time, the site had 7 million registered users, and some wondered if the company would survive the shift from being a niche community for students to an open-registration social network for the general public, moving into direct competition with the industry-leading juggernaut: MySpace.
Today, Facebook has over 900 million active registered users globally, and has thrived at the expense of MySpace and other social networks worldwide. Facebook mobile now has over 425 million active users. And some of the world’s largest brands are spending in the range of $25 million each to create consumer engagement opportunities through Facebook. With this, a newfound sense of maturity has arrived as about half of all companies that invest in social media now see positive ROI according to industry analyst firm Gartner. Most of the rest will soon find their way.
As part of this exploration of potent new forms of global communication, brands have learned that an investment in the Facebook ecosystem isn’t like a traditional media buy. Consumers expect direct, rapid contact with companies, and the resulting volume and pace of conversations can quickly overwhelm brands that are unprepared. As a result, companies must evolve traditional approaches to marketing communications, customer service, and measurement in order to engage at scale.
We characterize this emerging mode of operations as “social business” -- harnessing fundamental tendencies in human behavior via emerging technology to improve strategic and tactical outcomes. Using Facebook effectively comes from a deliberate, holistic approach to strategy and operations -- that is, approaching the Facebook platform by design. We have identified 10 key tenets to social business success, and these three below are key for the Facebook ecosystem:
- While participation is self-organizing, the focus is on business outcomes. Businesses may not be able to control how consumers respond to messages, but they create the experiences to engage consumers and drive business results. Those brand experiences influence the future of Facebook -- the IPO signals the importance of advertising revenue to the platform. That revenue comes from large advertisers like Procter & Gamble, which announced earlier this year that it would make major shifts in its massive advertising budget from traditional to digital channels. One of the first launches after this announcement was the global “Thank You, Mom” campaign, the biggest in P&G’s history. The campaign was launched in digital channels 100 days prior to the start of the 2012 London Olympics, and is integrated across all media channels, using Facebook as a centralized engagement hub.
- Listen and engage continuously. Participation and engagement require a full-time focus on community engagement. A brand doing this particularly well is Red Bull, an early adopter of the Facebook platform -- little surprise, given the overlap in usage by college students. In 2007, Red Bull launched the first branded game on Facebook called “Roshambull” -- an adaptation of the classic rock-paper-scissors game long before the first crops were ever planted in Farmville. Another Red Bull program called “Stash” utilized Facebook as a CRM backbone, connecting online and offline activities in a massive field marketing program. Red Bull was one of the first brands to convert its fan page to the new Timeline format, and continuous innovation keeps it consistently ranked as one of the largest brand communities on Facebook, with over 28 million brand advocates ready to respond.
- Integrate deeply into the flow of work. Businesses need to change the way they operate in order to maximize return on Facebook opportunities. At wireless service provider US Cellular, the first corporate use of Facebook was as part of an integrated marketing campaign. Consumer responses were handled by a volunteer force of 55 associates with plenty of enthusiasm, but ultimately not enough hours in the day in addition to their full-time jobs to sustain ad-hoc engagement at a service level acceptable to USCC standards. The company has since created a dedicated social media management team, armed with tools, policies, and process to engage at scale and drive customer acquisition and retention.
Some bystanders may downplay the Facebook IPO as a mere financing event, but it’s an undeniable milestone for social business. The multi-billion dollar public market validation of Facebook should leave no doubt in even the most skeptical manager’s mind that social business is real and has changed the way that companies think about consumer relationships and public positioning. Social business is here to stay as a fundamental new way of working. We now clearly see that success with it requires a strategy crafted by design.
Peter Kim and Dion Hinchcliffe are co-authors of “Social Business By Design: Transformative Social Media Strategies for the Connected Company.” Peter is chief strategy officer and Dion is EVP strategy at Dachis Group, a provider of SaaS-based products and services. Dachis Group is a Facebook Preferred Developer Consultant and Preferred Marketing Developer; P&G, Red Bull, and USCC are clients.