Facebook wants to bring something new to your mobile Facebook page and it isn’t more “friends.” It’s advertising, and it will be part of the Social Network’s efforts to actually make money off of its’ reputed 420 to 425 million mobile users. That’s right Facebook wants to sell advertising space on your Smartphone or Tablet.
The reason for this development is obvious: Facebook simply needs the money. Even though it has vast numbers of users (and a seemingly endless stream of gullible investors) the company has few ways to actually generate income. That’s why it filed for an initial public offering or IPO on Wednesday it needs to bring in some cash and fast to keep going. Yes Facebook claims it generated $3.15 billion in revenue last year but it’s also burning through cash fast.
Once it starts issuing stock Facebook will have to do two things it hasn’t done before. First under US law it will have to start issuing something called a prospectus it will have to reveal its earnings in regular statements. It’ll also have to show investors and potential investors that it will actually make money and how it will make money. If Mr. Zuckerberg’s organization can’t do that well it’ll crash and burn on Wall Street and get gobbled up by Microsoft.
The fact that Facebook is not actually making any money off of its mobile service was actually pointed out in the IPO filing made public on Wednesday. Shortly after that an advertising website called Digiday.com published an article which revealed that Facebook has hired a company called Razorfish.com to create “mobile and cross platform rich media ads.” Note the name Razorfish.com it sounds like a gang of predators. In other words some sort of a pop up ad will pop up when you talk to your friends on Facebook.
Digiday predicts the ads will be disseminated across the social network as you well socialize. It’s easy to see where this will lead if you or a friend are chatting about going to lunch on Facebook an advertisement for Subway will pop up. It might even feature a coupon for a half price sub sandwich. Digiday predicts that the ads will feature animation, digital content and local content.
That means an animated Ronald McDonald could pop when you ask where to get a coffee in the
neighborhood and tell you where the nearest McDonald’s is. Ronald might even tell you about the great new coffee flavors at McDonalds. Ugh.
This sounds like a surefire way to drive people away from Facebook part of its appeal is that it is an advertising free environment. Well that’s obviously gone. Facebook is now showing us a new commercial side. The advertising is only the tip of the iceberg the company will ad advertising to its news feeds. The ads will take the form of “sponsored stories” in other words advertising disguised as news articles.
My prediction is that one of the most popular apps in the coming year will be one that blocks Facebook advertising. I also have to wonder if Facebook is really the future of the internet or a gigantic Ponzi scheme (a fraud in which a con artist uses investors’ money to pay off others’ investments) that’s starting to unravel. One thing is for sure I am not buying any Facebook stock or adding Facebook to my smartphone anytime soon.