Facebook's IPO and the Market Research Effects
Much has been made of Facebook’s planned IPO, and many have picked over the carcass that is the filing paperwork, seeking hidden rot among the reams of comment and figures. There’s little doubt the Securities and Exchange Commission will have its questions and comments given that Facebook’s public debut is the most anticipated since Google’s bow, but Facebook is no Groupon, and lessons learned from that companies filing mistakes surely informed the actions of the Facebook bean counters and lawyers. I predict fair winds as Facebook’s stock sails towards its first trading day.
As I reviewed the Facebook filings, and in particular, Mark Zuckerbergs 2100 plus word letter to investors, (longer even than typical for that most anticipated of annual letters, Warren Buffett’s) I was struck by how little attention the founder paid to advertising, the very heart (and muscle and nervous system) of Facebook’s business model. He only mentioned it once, and frankly, that concerns me. Vision and speed and dedication to his proudly pronounced “hackers way” is all well and good, but when the man controls some 57 percent of what will probably be one of the most valuable companies ever to go public, one hope for a little focus on where the dollars are coming from.
Still, I expect the public launch will be a success, and the transparency required in being publically traded will force Facebook to look beyond its core to find and develop other services and sources of revenue. I mean, Google is designing cars that drive themselves for crying out loud. What does that have to do with search? Nothing. Why are they doing it? Because they can. What Magic will the Zuck be asked to conjure as he very publically marches forward? Time will tell, but one thing we do know is that Facebook’s Magic will be born from a different market research methodology than we’re used to.
When asked about what market research was done on the iPad, Steve Jobs famously replied, “None. It’s not the consumers’ job to know what they want”. (Of course, the Apple employee directory lists a whole slew of individuals who are market research types, and no doubt they've been hired to do something, but I digress...) Its been argured that Facebook as a concept would have never passed muster if its creation relied on the opinion of consumers and yet, every Facebook update and new tool or application is designed based on their very use. Facebook has taken a very “bite sized” and incremental approach, but its still market research
Sean Bruich, head of measurement research at Facebook, says the company wants to know about only a couple of things: first, the world in general and how Facebook user’s lives change over time and second, how consumers interact with each other and with the advertising on Facebook. Those answers come from the data Facebook is already collecting, so they claim their need for external surveys and other market research is limited.
As more and more companies become “Socially Embedded” and as ever increasing amounts of data are collected by individual companies and services many of them will rely on their own data to answer their own questions. But when you are public, particularly when you are as hugely public as Facebook seems it is going to be, you suddenly have a new group of stakeholders that are far more demanding, traditionally far more conservative and likely far more inquisitive that your users and customers: the investors. What will their expectations be, and will reliance on internal sources of data be sufficient to defend the vast sums of their capital that no doubt will soon to be spent by Facebook on one venture or another? I think not. Detailed and thorough research will be an important component of their business and product planning model, and like Apple, dispite Mr. Jobs iPad quip, one can expect the ranks of Facebook's inhouse research professionals and a reliance on other experts in our field to grow. Over time, the share price will be the barometer of investors satisifaction with the results. I for one will be thankful for the transparency a publically traded Facebook brings. Our ability to look behind the curtain will be good for everyone.