The social networking titan Facebook might step into trouble soon. People who invested on Facebook IPO were concerned about the revenue issues. Facebook share price has fallen down by 29% from its debut price of $38. The recent share price is trading at nearly $26.9 in NASDAQ. Indeed, such variation in share price is already creating a lot of stir for the Facebook CEO Mark Zukerburg. New startup companies are in trouble due to the down fall in Facebook share prices in just 3 weeks since the IPO launch. In this tensed situation, Salesforce latest Buddy Media acquisition could be another disaster which might shake the Facebook base indirectly.
Salesforce.com is going to acquire Buddy Media for $689 million soon. Salesforce will pay $467 million in cash and will invest $184 million in Salesforce.com as common stocks (United States). The remaining $38 million will be reserved for Salesforce.com options and restricted stock units. All dealings will be concluded before the end of the third fiscal quarter year, which will end at 31 October 2012.
Salesforce.com Chairman and CEO Marc Benioff explained:
“Salesforce.com now has the No. 1 players in social listening and marketing — Radian6 and Buddy Media. With chief marketing officers surpassing chief information officers in spend on technology within the next five years, our Marketing Cloud leadership will allow us to capitalize on this massive opportunity.“
- Salesforce.com and Buddy Media
Buddy Media and Facebook relationship:
Buddy Media is one of the major Ad management providers for Facebook. Earlier, Buddy Media acquired Facebook’s advertisement development company “Brighter Option”. With in the past one year of relationship, Buddy Media has become the most important ‘indirect-asset’ for Facebook by enhancing Facebook advertisements in global platform. With the acquisition of Buddy Media by Salesforce, Facebook will undoubtedly loose the grip over Buddy Media in future. This could trouble Facebook for managing and maintaining its advertisement revenue that could possible dive down. After Buddy Media’s commercialization, Salesforce might not be willing to give the similar comfort-cushion, which Facebook is already gaining from Buddy Media for one year.
Why Facebook is more concern about its Ad revenue ?
According to a study, users are spending an average 441 minutes of their time on Facebook every month. There are more than 83 million users who are accessing Facebook trough their mobile devices. It is a matter of consideration that such a significant percentage of users are using Social networking users on mobile. Till now, Facebook has been failed to set any revenue model for mobile application sector. There is no other way, besides desktop users, for Facebook to generate such a large amount of revenue and the company is somehow more dependent on Buddy Media for generating more revenue from their ads.
How Salesforce can create trouble for Facebook?
From the above facts and figure it is clear that Facebook is dependent on Buddy Media for its ads revenue model. The down fall of Facebook IPO is the biggest challenge for its share holders to keep their faith on Facebook. In this scenario, it is uncertain whether Salesforce will keep the same relationship up which Buddy Media was maintaining with Facebook for last one year. Salesforce could change its priorities which may hurt Facebook in long run. However, there is no diplomatic conclusion, as we know that all social networking websites are largely depending on online advertisements for their revenue.
Now, the biggest challenge for Facebook is to keep Buddy Media intact and engaged. Interestingly, one could only imagine about the strategy that should be in place to make its ‘Revenue Driver’ happy? The other competitors of Facebook – like Twitter, Google+, LinkedIn – are constantly eyeing the pit fall of it. At this stage a single mistake by social giant could make a significant damage in its revenue arm.
Now it is a challenge for Facebook to improve its shares price and to keep its revenue appreciation intact. Additionally, Facebook also need to monetize its mobile traffic through one more acquisition of any mobile ad network provider. And, Facebook just can’t afford to turn its back towards this as the company could generate more than $2 billion as revenue from its mobile app, potentially.