Facebook starts to charge for Offers, woos Wall Street
- 21 September, 2012 20:19
Facebook plans to start charging businesses to run targeted ads in its Facebook Offers daily deals service.
The social network also is allowing businesses to add unique codes to their ads for better tracking of ad results. Facebook also noted in an email to Computerworld that the service will remain free to the users who claim the deals.
Facebook Offers is a service that enables businesses to post an offer, such as a restaurant or movie discount, on their Facebook page. While the service has been available for some time, businesses that want to push those offers to other Facebook users will now have to pay a fee.
Industry analysts say the move is good news from the company, which has been tarnished since its troubled initial public offering in May. After industry and financial analysts had widely speculated that the social network's stock price would skyrocket from an opening number of $38 per share to upwards of $70 or $90, Facebook's stock sank to below $20 a share.
As of 2:45 p.m. ET on Friday, Facebook's stock price was $22.89.
Since the IPO, Facebook has lost some of its luster and some industry observers have even talked about Facebook co-founder and CEO Mark Zuckerberg stepping down to let an experienced business person lead the company.
Patrick Moorhead, an analyst with Moor Insights & Strategy, said taking a step like this could bring in solid revenue and appease Wall Street all in one move.
"It is vitally important for Facebook to make forward momentum on initiatives that drive revenue and profit," said Moorhead. "Any move that Facebook makes to higher future revenue and profits will appeal to Wall Street. This is a nice start but Wall Street needs to see end-of-quarter profits to really be confident in Facebook."
Rob Enderle, an analyst with the Enderle Group, said this is a good time for Facebook to start charging businesses for daily deals service.
"It's not a bad idea really, and it is about time they started collecting money for targeting ads," said Enderle. "It looks to be a solid idea, but with Facebook, execution has been really poor largely because of what appears to be massive inexperience with how advertising works. I don't think this is fixed yet and I expect investors will be watching to see if Facebook can execute before getting too excited."
Moorhead, though, said Facebook was smart to let businesses use Offers before they started to charge for the ads, giving them a chance to see how well the deals service works.
"This approach makes total sense," he added. "Before they can start charging businesses, they had to make sure that the advertising was effective... This is a very low-risk and high-return move by Facebook. I consider this low-hanging revenue fruit."
Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, on Google+ or subscribe to Sharon's RSS feed. Her email address is email@example.com.
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