Mobile Advertising Problems for Facebook; Use IPO Cash for Acquisitions?

By | May 27, 2012

Facebook is now public in one of the largest, and most hyped initial public offerings (IPO) in history. As a result of the IPO, the company now ranks as one of the most valuable firms in the world.

The IPO makes Mark Zuckerburg a billionaire 19 times over. Early investments in the company have produced billion dollar portfolio positions for a select few well-heeled investors, including Accel Partners, Goldman Sachs, Microsoft, and even rock star Bono.

But beyond the headlines and emerging IPO disclosure controversies, Zuckerburg and his team have larger operational concerns: mobile. The company revealed the issue in a Securities and Exchange Commission (SEC) filing. The document, called an S-1, or S-1/A when amended, requires that a company provide investors with insights, including potential risks, of investing.

According to the story at The Wall Street Journal, the S-1/A filing included the following language: "If users increasingly access Facebook mobile products [...] and if we are unable to successfully implement monetization strategies [...] or if we incur excessive expenses [...] our financial performance and ability to grow revenue would be negatively affected."

For astute investors, this was a red-flag warning sign of a potential significant weakness. For company executives, it is an important strategic challenge that they must address. The IPO provides the company with a fresh infusion of billions of dollars to make strategic investments to respond to this very public mobile advertising weakness.

IT and Business Challenges of Acquisitions

With billions to invest, the company has ample capital to consider a range of options to address its mobile advertising challenge.

Like any company pursuing expanding their product or services offerings, or addressing strategic or tactical weaknesses, Facebook has options. They can choose to pursue a strategy to develop or purchase the needed new functionality, often referred to as a make-buy decision. But while an acquisition strategy may reduce time-to-market, it brings with it a myriad of technical risks when compared to internally development efforts.

Acquisitions are challenging events for all parts of a business. Without regard to company size, acquisitions often add significant IT complexities that can give headaches to the best middle market or enterprise technology executive.

Successful acquisitions must meet the strategic, tactical, and financial needs of a business. Once an acquisition makes a selection "short list," technical homework referred to as "due diligence" is required to understand the critical facts of the challenges, risks, and costs that must be known and managed to successfully integrate the acquisition into the business. That includes the culture of the new team, as well as the technology, as either can doom the best plans and intentions.

The now public aspect of Zuckerburg's company will provide interesting insights and details as they make and then pursue their choice to respond to their mobile challenge. Lessons will be learned and magnified.

For companies that specialize in mobile advertising, get ready, as Mark Zuckerburg may be calling--and buying.

This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet. Like us on Facebook. Follow us on Twitter.

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