Key Points Facebook Needs to Hit for the IPO

So i had to write this for a Process Systems class and after it was done i figured since no one besides the class would see it, why let it go to waste. So i decided to add a few alterations and bring it to the HUB. Enjoy!

If we take a look back to 2004 when Mark Zuckerberg founded his social network site in his dorm room, never did he think it would come to this. Currently the social network site is in the process of filing their IPO and it has come with a lot of media attention. According to the Harvard Business Review, “its revenue was estimated to be $4.27 billion in 2011” (Harvard Business School 1). That is a big number for a social networking site and it came mostly from advertising revenue. According to the Wall Street Journal, the company had an 88% increase in revenue in 2011 (WSJ.com).

So with the current situation of the IPO, it raises a lot of questions about the company itself on whether or not it will be successful as fully public. One of the main challenges that the company faces is their management. Though they are very talented, they are not profit driven. Instead their CEO Mark Zuckerberg and other top officials just want to change the world. So in order for the company to be successful in the stock market I feel that many analysts will want to see a little shake up in the management area.

Another challenge that they face is that they lack a physical product, which would be a key revenue driver. Companies such as Google and Amazon who were once just Internet firms created their own products that have driven their sales a lot higher. Being that Facebook relies solely on their advertising for their revenue and growth, there is going to eventually be a dead end in the growth. With the money raised by the IPO they can definitely look into this issue very deeply. Finally, a growing concern with Facebook as well as many Internet sites is Privacy. Users need to be able to trust that the company wont let their personal information out of its own databases. If the company can instill confidence in their users, they will instill the same and higher levels of confidence in potential investors.

So if Facebook wants to stay on its successful track, it needs to alter its plans a little bit. If they employed a few Business Process Management Strategies they can push forward with a very positive résumé. In order for Facebook to continue this trend of revenue growth, they need to focus on the following:

Merger/Acquisitions: Facebook can become very successful if they could merge with a firm that could help them with a physical product. Firms such as Samsung, Nokia, or Research In Motion, could help the social network by designing a phone and its operating system around the site. Imagine a Facebook phone and how good it would sell.

Technology: At the same time as creating a phone or tablet they can be purchasing firms that design applications to further improve this area. With the estimated $5 billion that they would earn from the IPO (WSJ.com) they can invest in software and hardware that could allow the Facebook brand name to expand into other sectors besides their current situation. One could be a travel-integrated site such as Kayak.com. By upgrading their technology they could simplify their processes and set themselves ahead of the industry.

Management Shift: As I stated earlier, investors and analysts don’t feel the company’s current management is living up to its full potential. They wish to change the world while the investors want to make money. New managers will also adhere to the demands of the user base and create better privacy rules. Google released a statement two weeks ago saying that they were not protecting privacy anymore (news360.com), this would give Facebook a leg up on the competition if they made their users happier.

With these suggestions, Facebook can continue its positive revenue trend. If they can impress investors in the short run, they will have a successful long run. We could see Facebook entering new marketing and quickly gaining a lot of control just as Google has done with its Android Software, Phones and Tablets. The only difference here is unlike Google with Google Plus+, Facebook already has the established social network to drive their software. So with this new set of plans we aren’t just looking at an 88% increase in revenue, we are looking more towards 120% with proper implementation.