Hey, who can blame BIA/Kelsey for jumping on the train that is the Facebook IPO Express? Here is the picture version of this predicted US social media spend through 2016.
Let’s consider the whole Facebook IPO thingy in light of these numbers. In 2011, Facebook did somewhere in the neighborhood of $3 billion in revenue. That revenue is in total, not just in the US. What percentage of revenue is international I don’t know. Right now US users number somewhere in the neighborhood of 150 million which would be about 17% of Facebook’s total user base.
It is likely that the US market spends more than most, however, and it is fair to think that the US proportion of revenue contribution is higher than that 17% of total users. With the US numbers for ad spend which are projected here, one wonders where all the revenue will come from in the future to support the reported valuation Facebook will receive this Friday.
Let’s compare this to Google whose market cap sits just below $200B but did just under $38B in revenue last year and is tracking to go well north of $40B this year. Does anyone else see a disconnect with valuing Facebook at 50% of Google’s market cap while only currently generating less than 8% of Google’s total revenue? Marry that with the Kelsey numbers that caps the social media advertising spend potential at $10B annual in TOTAL for the US (remember all that spend won’t be just for Facebook) 4 years from now and you have to scratch your head just a little.
Facebook will need to do something other than advertising especially if that facet of their business is being called out by some as ineffective.
The other side of the Kelsey data shows that Facebook’s idea that their advertising value is best for big brands could be right on point as much of the ad spend will be on a national level.
But wait. If national big brands will be the bulk of ad spend in social media in the next four years (according to this study only mind you) but Facebook is being outed as being ineffective by some big brands (which could be turned around to also read that said big brands and their agencies are clueless as to what they are doing in social media advertising) then where is all the revenue for Facebook going to come from to support what is supposed to be an earth shattering IPO?
One assumes that it would have to be the international market that Facebook is banking on but with a shaky world economy and very different approaches to media and advertising in different areas of the world (as well as China currently being a walled garden of sorts) how reliable will that be for Facebook?
I am not a financial analyst. I have not done any type of in depth analysis here. I am just looking at some numbers that are being thrown around and wondering if Facebook math is creating a “1 + 1 = 3 or more” scenario.
I have no skin in this game and I, like the rest of us, would figure out a way to carry on in this world if Facebook were to do a MySpace. I’m not saying that will happen at all but anyone who can add 1 + 1 and get the correct answer should have a few questions here, don’t ya think? I would also be just fine if Facebook hit a grand slam and killed this thing. It will be what it will be.
So what do you think it will be?