BUSINESS

Facebook needs strategy to exploit Asia

TAGs: Asia, Facebook

facebook asiaFacebook grabbed the top position in the world of social networking some time back and once in their grasp they ran with it and in the process are on their way to a billion users. Advertising revenue is one of the factors that drive the company and for the first time in a year this quarter-on-quarter revenue was down – from $943 million in Q4 2011 to $872 million in Q1 2012.

Statista.com’s big chart of the day illustrates as well that year-over-year growth in the same vertical has slowed from well over 100 percent this time last year to little over 41 percent in Q1 2012.

Before we delve into anything and set off any panic alarms it’s worth comparing the Q-to-Q differential to the same period last year. Q4 2010 to Q1 2011 saw a similar small drop following huge growth and it won’t be until next month that we find out whether a similar thing has happened. Every company is going to hit saturation at some point and that could be exactly what has happened here.

In response to the slower growth Facebook comes back fighting. The latest uppercut to the chin of its doubters came with the huge $1 billion outlay on Instagram last month. It’s the company’s latest attempt to tap into new revenue streams and gives them an uber popular app for a price they won’t lose more than a couple of nights sleep over. Further afield it’s becoming clearer by the day their attention should be focused on one area the gaming industry is extremely familiar with – Asia.

Statista.com’s big chart of the day on Facebook shows that average revenue per user (ARPU) is just $0.52 per customer in Asia. It compares unfavorably with Facebook’s biggest market of North America ($2.86), Europe ($1.4) and the worldwide average of $1.21. From the figures you can tell that Facebook’s plans in Asia haven’t born any fruit so far and that may be due to caution on their side or not stumbling across the right strategy.

Much of their success is likely to depend on the attitude of the authorities in the more lucrative jurisdictions. China is obviously the apple they most want to start eating from but it was less than two weeks ago the country blocked all foreign-hosted sites and this could be where Facebook could slip up. It could also be where social gaming industry find some solace – especially if censorship laws are ever relaxed.

In other parts of the world any social gaming industry specialists looking to take advantage of Facebook will hit problems with gambling industry firms already in the area with an established brand presence. Some Asian countries won’t present the same problems and firms could find this an easy way to make big bucks in Asia. Conversely Facebook will benefit through the cut they take and the ARPU in Asia will rise as a result.

Unfortunately for Facebook there are other obstacles such as local competitors. RenRen is China’s largest and already has millions of users but it’s controlled by the government and as such will be far less open than Facebook.

For Facebook to continue its growth at the current rate it’s clear Asia is where their next big push should be – if viable. Whilst the slowing of growth isn’t going to send them the way of MySpace, the world in which they operate moves at a fast pace and they know this only too well after buying a company that wasn’t even here two years ago. It backs up the fact that Facebook has its finger in a number of pies and Asia should be the next pie for the social networking giant to take a piece of.

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