The True Value of Facebook

May 21, 2012 7:59 pm Published by Jamie Horton

Facebook made a splash last week, as it finally entered the stock market with its $104 billion IPO. Over the past several months there has been constant chatter about the true monetary value of the social network. Talking heads that think the company is overvalued and commentators calling the massive sum an appropriate price have been duking it out in the blogosphere. What gets lost in these huge numbers is the qualitative value of Facebook to individual users and businesses.

Real World Connections Virtualized
While Facebook has been used to do some pretty extraordinary things like improving disaster response, it is the more fundamental online social architecture that has made it a truely revolutionary tool. By mapping out individuals’ interests and social networks on the internet, Facebook has created a virtual identity that can navigate the net the way you would interact with the real world. As Facebook has progressed from simple website plugins to the Open Graph, they have transformed all sites from static points of consumption to dynamic social hubs. This social revolution has of course been accompanied by a boom in business opportunities on the network.

Connecting With Your Fans
How do you put a dollar value on increased commercial transparency and endless new marketing possibilities? Well apparently the Wall Street gurus have to the tune of over $100 billion. But how does that affect the relationship between businesses and their consumers? Now, Facebook Timelines act as a new customer service outlet that double as a public platform for fans to sound off about the brand. This open format encourages businesses to improve their product and keep their customers happy.

Reaching Customers, Regardless of Product
Now, this aspect of Facebook goes to the heart of its IPO. Advertising. The social network’s 2011 revenue of $3.7 billion was comprised of 85% advertising dollars. But, this doesn’t tell the full story of how much individuals are getting out of their advertisements on the site. With the wealth of information users put on Facebook, businesses can reach potential customers with greater accuracy. Rather than paying for air time on a popular television show or website and their general demographic, businesses can reach targeted individuals with articulated interests in their product or mission with Facebook job ads. This practice saves companies ad dollars and ensures that users interact with relevant content.

The astronomical amount of money involved in the Facebook IPO has many people seeing dollar signs. More important than the $100 billion figure getting thrown around is the everyday utility of the social network. The connections made between businesses and consumers can make or break a company, its employees, and its fans. Now how can you put a price on that?

This post was written by Jamie Horton

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