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Fashion World Mulls Facebook IPO’s Impact

As the social-networking site’s initial public offering takes off today, all eyes are on the future, and Facebook's long-term potential.

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with contributions from Vicki M. Young, Erik Maza
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It is also unclear as of yet how the value of advertising on Facebook versus traditional media is different, and so it’s likely that for the near future marketers won’t reallocate their advertising budgets wholesale to the social network.

“Every client is going to have a different objective,” Steinberg said. Some clients find the long periods of time consumers spend on the site to be highly valuable. For others, traditional media yields other dividends, she added. “[Facebook and traditional media] deliver different experiences and therefore deliver different values,” said Steinberg.

Publishers say this is what sets them apart from Facebook. Marketers know exactly what they’re getting in return for their ad dollars, and they can track a campaign’s performance.

“We know that some of those dollars went to Facebook without some of the usual digital efficacy metrics as part of a broader experimentation agenda,” the Journal’s Fishkin said. “We have heard anecdotally that some clients are now looking carefully at their Facebook investments, and, in the case of GM, pulling.”

Said the Times’ Murphy, “We offer premium and highly differentiated content, and we believe our advertisers recognize the value in reaching our engaged and affluent audience.”

For now, the approach to take is two-pronged and cautious.

“Like most media companies today, we have a multidimensional relationship with Facebook,” Murphy said. “We collaborate with them and we compete with them.”

The Times, in addition to having a strong social-media presence, has also experimented for the past year with advertising on Facebook “on a very limited basis,” Murphy said, and intends to continue doing so. As a matter of policy, it did not disclose the results of the campaign.

A spokeswoman for Condé Nast declined to comment for this story.

Advertising aside, James Gardner, founder and chief executive officer of Createthe Group, believes Facebook’s historic IPO will give a lot more money to implement site-wide changes with the potential to affect the fashion and luxury sectors.

For Gardner, one of the biggest challenges with Facebook thus far has been a lack of transparency from the platform, and he hopes that, going forward, the company will provide more guidance before major changes are released, for brand pages specifically. He also expects Facebook to “really up their resources” in terms of client account management, as well as other strategic development investments that will allow them to leverage and sell their data outside the confines of Facebook.

“With all of the pressure from investors to monetize and increase revenues, we believe Facebook will start to add more innovative ad products that increase profitability, continuing to expand with new ads outside of Facebook — which will focus on new types of content-driven ad units,” Gardner said. “This will present a major opportunity for fashion brands to spread their content through more innovative types of ad products.”

Wade Gerten, co-founder and ceo of technology solution provider 8thBridge, anticipates that there will be three major Facebook investment areas with the potential to dramatically impact the fashion industry: the open-graph platform, mobile and payments.

On the platform front, Facebook is opening itself up to be used as a development or technology platform, and instead of being solely a destination Web site, it will offer social shopping functionalities on thousands of other sites outside of Facebook.

“This looks more like Microsoft than it looks like Twitter. Companies like us are building software [such as Graphite] on top of the Facebook platform just like how 15 years ago companies were building software on top of the Microsoft platform,” Gerten said, noting that this will provide fashion brands with a way to inherently improve the shopping experience by making them more social and by more deeply integrating social into their business models.

Gerten contends that because such a high percentage of Facebook users operate the platform from a mobile device — 488 million of 900 million users logged into Facebook from both a computer and a mobile device in March — that funds from the IPO will go toward significant investments in the category. This includes finding innovative ways to drive foot traffic in-store through a Facebook offer.

With respect to the payment aspect (the platform generated $557 million from payments, primarily from social gaming), Facebook will likely make this aspect more ubiquitous and “friendly” toward all merchandise. Gerten explained that the current model, with a 30 percent fee on purchases, has made sense economically for virtual goods (which have virtually no overhead costs), but this would be too high of a percentage for fashion brands to sell anything.

“What gets me the most excited is the potential for integrating all three. In the future, a brand might incentivize a Facebook user to visit a store and make a purchase through Facebook Offers. The customer could use Facebook to buy the merchandise and then easily share their purchase to their Facebook Timeline via the open-graph platform. Their friends would then see the purchased item in their Facebook in their news feed and ticker,” Gerten said. “That’s a whole closed loop social shopping experience. That’s where things could go, and the IPO will help fuel innovations towards more integrated experiences like that.”

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