Facebook could grow even more valuable to luxury brands as the company bolsters its marketing-related offerings following a major investment that increased its valuation to $50 billion and generated speculation of an initial public offering.
The $500 million investment came by way of Goldman Sachs and a Russian investor that makes Facebook one of the most valuable media companies in the world. Some believe that Facebook will beef up its advertising and marketing options to increase its value leading up to an IPO.
“I think the biggest thing is that it seems like it’s a move made in anticipation that they are going to go public very soon,” said Charlene Li, partner at Altimeter Group, San Mateo, CA. “More than anything else, this is about solidifying the services that they offer to advertisers.
“I could see them taking money to invest in both better advertising experiences and in deeper experience across the board,” she said. “The companies that are going to benefit the most are the luxury brands, [whose customers] want a deeper and richer experience.”
Investing in the future
The $50 billion price tag makes Facebook more valuable than companies such as eBay, Yahoo and Time Warner.
The new investments and boosted valuation gives privately-owned Facebook the opportunity to increase its human capital and develop new products to appeal to advertisers without having to make an IPO.
Whether or not Facebook does eventually open the company up to public ownership, it seems likely that it will use the new investments to create a more immersive experience that brands could tap into to reach consumers.
As such, speculation has abounded concerning how Facebook will implement new technologies to make itself even more attractive to advertisers.
While individual Facebook fan pages already foster deep brand engagement, other in-site experiences such as the news feed could use some improvement, according to Ms. Li.
Additionally, Facebook makes no money for its fan pages, so it is likely that the company will monetize its new offerings.
Ms. Li said that Facebook could work to improve the platform for brands in a number of ways.
First, the social media company could further refine its advertising throughout the entire site, bolstering the analytics and improving the units to create richer ad experiences.
Additionally, Facebook could work to improve its news feed functionality, which Ms. Li said is bare bones and static at present.
Even when consumers decide to follow particular brands on Facebook, they are not usually visiting the fan page on a daily basis.
However, brands can foster daily engagement by using status updates, which appear in users’ news feeds.
If Facebook updates the feed functionality to allow for more interactive experiences, luxury brands could conceivably foster deep brand engagement on a far more regular basis.
“There are two kinds of buyers – people who buy and those who aspire to buy,” Ms. Li said. “In Facebook, because there is such a social aspect, social commerce activities that allow people to take part in the branded experience are much bigger than on a regular Web site.
“Right now you’re fairly limited, but for the majority of brands its good enough,” she said. “But, for luxury brands in particular, you want a richer experience.”
Prestige brands have started to understand the unique value of a platform such as Facebook.
Because these brand relish word-of-mouth, and because social Facebook can provide a more personal touch compared to unidirectional modes of communication, the platform has opened up a uniquely powerful marketing channel.
Branded Facebook fan pages are already tools used by many luxury brands to foster consumer engagement.
Marketers can use the basic status-update functionality to update consumers about news and campaigns, while brands can add new sections to the page accessible using tabs that let users interact with rich-media content.
Such tactics allow luxury companies to give their advocates an inside look a brand and encourage consumers to opt-in as fans.
In fact, some luxury brands boast Facebook followings that number in the millions of consumers.
For example, Burberry (3.7 million fans), Gucci (3.5 million fans), Chanel (2.8 million fans) and Louis Vuitton (1.8 million fans) have all garnered accolades for their deft use of the platform.
“Taking a look at Millward Brown’s ranking of the ten most powerful luxury brands in the world, these brands collectively have over 9.8 million Facebook fans,” said David Berkowitz, senior director of emerging media and innovation at 360i, New York. “The most successful marketers in this group are using Facebook to continually engage their fans and make their brands relevant on an ongoing basis.
“These fans want to be the first to hear about new products, store openings, ad campaigns and other brand updates, and these fans will be especially likely to share the news with their peers,” he said.
“In 2011, expect luxury brands to focus more on activating their fans to show up for launch events, engage with online experiences and take specific actions to further those brands’ goals.”