Facebook Inc. shares debuted on the Nasdaq Stock Market on Friday 18, 2012 at $38 per share; giving the world’s No. 1 online social network a whooping $104 billion valuation!
No matter what you may think of the IPO, there is no doubt that the frenzy of anticipation generated among Main Street and Wall Street investors, who waited desperately to get their hands on the stock, was unprecedented. This excitement and anticipation which heightened as Friday 18 approached, saw many pundits predicting a 15 to 20 percent pop for the shares on its debut!
Friday 18 has come and gone but looking back at all the excitement and anticipation one will want to ask,
>> > Why was Facebook a bride desired by every suitor on the block?
>>> Why was there such an excitement among Main Street and Wall Street investors who waited with desperation to get their hands on the stock?
>>> Are there any lessons we can learn from the IPO as entrepreneurs?
A Little Insight into the Initial Public Offering
Before attempting to answer these questions permit me to give a little insight into the IPO with the following facts:
1. Facebook’s IPO, valued at $38, was the highest valuation ever for an initial public offering of a tech company.
2. The buzz about the IPO was simply amazing. The Guardian called it “the Super Bowl for social media.”
“Not since Google’s initial public offering (IPO) has a share sale been as closely watched. It’s Super Bowl for social media: every commentator in the land has an opinion on whether the firm is really worth that sort of cash, and is lining up to share it.”
3. At $104bn, Facebook was valued at more than the combined value of Nike and Goldman Sachs not minding the fact that last year Facebook had revenues of $3.7bn while Goldman’s were 10 times that! Incredible, you would say!
4. Questions of over valuation raised by some economic experts who faulted the $38 per share offering did not deter potential investors. Even with the argument that with this valuation Facebook will need 100 years to generate enough profits to pay for itself (as against 15 years for any other typical big, public company), investors were still ready to bet on Facebook’s profits exploding a few years from now.
5. Reports of possible decline in profits as some companies, like General Motors have plans of discontinuing paid advertisement with Facebook Inc. after expressing doubts about the effectiveness of using Facebook Ads as an advertising option, did not in any way rub off on the excitement of the public offer.
6. On the first day of trading, Facebook’s shares recorded a trading volume of 565m shares on it first day – the highest ever for any IPO!
Consider the above facts for a moment. Can you imagine what your business can achieve if it has such a cult following?
Can you imagine your current and potential customers becoming so devoted to your business that they will be willing to overlook whatever negatives there is in you?
I’m sure this is something that every business person looks forward to, right?
Your Business’s Success Is All about Your Customers’ Perception
To many, the excitement and anticipation that greeted the announcement of the IPO was nothing but the popularity of Facebook as the best social media site on the planet today and the emotional attachment that many have with it.
As much as that may be true, one thing you must understand however is, in the market place there is nothing like the best work or the best product; there is only the perception of what is the best.
Of course, these factors may contribute but they do not determine your business success. The success of your business is determined by the number of its customers and how much they are willing to spend. And, it will interest you to know that this is determined by what the customer thinks, feel and believe about your business.
It’s all about the customer’s perception of your product or service.
Your success therefore as an entrepreneur is never determined by how hard you work, by your IQ, by the number of degrees you have or whom you know. You could do a great job, work hard, be brilliant, have great contacts, and still go broke!
Watching with keen interest at what happened with the Facebook IPO, I realized that Mark Zuckerberg and his team understood this very well and have over the years used different strategies to take advantage of incredible power of magnetic marketing.
2 Key Elements of Magnetic Marketing as Used by Facebook!
1. Marketing Research – This is the first element of successfully using magnetic marketing to grow your business. The purpose is to know who really is your customer, to know what he wants, what is value to him and how you can provide that value.
It’s all about abandoning your own views – no matter how wonderful your business idea is - and then taking up the mindset of your customer so you can look at your business from the customer’s eyes.
It’s definite that Mark Zuckerberg and his team knew this very well and over the years has been working on building a social media platform that has become a darling of both businesses wanting to use the platform to better reach their target audience and individual users who have become so addicted to the platform that many spend an average of 4hrs everyday interacting with their friends and acquaintances on the platform.
Over the past few years, Facebook has introduced series of innovative changes all borne out of tracking and researching the site users. The recent introduction of timelines in Facebook fanpages is a case in point. Why Facebook used it to encourage individual users to engage and interactive more with one another it was also aimed at encouraging businesses to spend more on Facebook Ads, e.g. using sponsored stories to reach fan with ease!
Lesson #1: Want to use magnetic marketing to build your online business? Research your market to better understand who your current and potential customers are, what they want and what is value to them so that you can provide it to them!
2. Create Visibility – This is another very important element in using magnetic marketing to your success. Knowing what your customers want so that you can provide it for them is not enough. They will need to know that you exist and that you have what they need.
Simply put, you will need to get the attention of your target audience and convince them that you have what they want and you’re the best person to buy it from.
To do this effectively, you must decide how you want your target customers to perceive your business and work hard to communicate that perception. For example, you may want your customers to know you for reliability, high quality products, fast service, unparalleled expertise in your field, customized solutions, etc. Once you have decided on this, your next job is to get this out to them in every of your communications.
Over the years Facebook Inc. has been able to build a social media platform which many businesses perceive as the bedrock of consumer engagement. It is this perception that have made more and more businesses to spend millions of dollars on hiring digital ad firms to stimulate buzz (likened to word-of-mouth marketing campaigns) on Facebook for their brands.
Efficient Frontier early this year released a Digital Marketing Performance Report for Q4 2011 wherein it said,
“Brands are continuing to invest in Facebook advertising and focusing on fan acquisition. Spend in social media advertising is now additive to existing budgets rather than subtracting from other digital media channels, demonstrating the growing investment in the medium. Brands continued to acquire Facebook fans at 9% per month. Facebook spend share reached 2.7% of biddable online advertising spend in Q4 2011 and is expected to increase fan base by 2x by the end of 2012.”
It was this same perception that was used in selling the IPO to potential investors. Mark Zuckerberg and his team were very much aware that marketers have always been enamored with the size of Facebook’s audience and they did all within their power to drum up this perception in all they did. They never took it for granted that everyone already know that Facebook is the biggest social media platform on the face of the earth. They went out there and drummed it to potential investors.
Lesson #2: Never assume that your current and potential customers have an idea of what your business can do for them. Decide on what you want them to know by and use everything within your means to reach them with that message until you become entrenched in their minds.
The cult-like following that the initial public offering of Facebook enjoyed is something you as an entrepreneur can learn from and apply in your business. You simply need to understand how to use the above two key elements of magnetic marketing – marketing research and creating visibility – to your advantage. If you’re able to use these magnetic marketing tactics effectively, you will be able to build a business that your customers will be enthusiastic and passionate about.
Over to you: Do you know what your customers are expecting of you? Are you putting these magnetic marketing tactics into play in your business? Share your views with us in your comments below.