Facebook: One billion friends and counting ...

Facebook is taking over the world, one 'like' at a time. The woman who oversees the tech giant's operations on three continents, Nicola Mendelsohn, talks power, prospects and privacy
By Courtney Trenwith
Fri 29 Aug 2014 10:12 AM

One billion people. Only centuries-old religions can lay claim to as many subscribers as Facebook, a corporate phenomenon that’s only ten years old.

Users have become so addicted to its connectivity, they are permitting access to their photos, contacts and in some cases personal information in exchange for a profile on the social media website. The places they’ve been to, the feelings they’ve shared, the relationships they’ve started and ended are plastered on a wall for their “friends” to view and, hopefully, “like”.

It is an advertiser’s wonderland. A playground in which to propagate their message, while simultaneously gathering a wealth of data enabling them to narrow in on the most lucrative targets.

Nicola Mendelsohn, Facebook’s vice-president for Europe, the Middle East and Africa, knows how it works. Before crossing over to Facebook last year, she was heading up two ad agencies and represented the industry as president of its trade association, the Institute of Practitioners in Advertising (IPA), for two years.

Now she is in charge of ensuring the firm makes more money through advertising, the single largest revenue generator for the NASDAQ-listed company, already raking in well over $2bn quarterly.

And yet there is nothing persuasive nor forbidding about this powerhouse mother-of-four when we meet in the swanky presidential suite of the Burj Al Arab in Dubai — a gift for a few hours, the firm’s public relations team says with shareholders in mind.

Mendelsohn has just hosted a breakfast meeting with big business CEOs (we can only guess she was warming them up to become advertising friends) and surprisingly she is running on time. Exhibiting her trademark smile, she welcomes Arabian Business into the palatial suite, which she is as much in awe of as anyone else.

She is relatively new to the company and is perhaps not yet accustomed to the way the other half live.

But Facebook is swimming in cash — and all predictions are that it will only grow exponentially.

In the second quarter of 2014, Facebook reported revenue of $2.9bn, up from $1.8bn during the same quarter in 2013. Net income came to $1.4bn. No wonder its share price has almost doubled from $38 when it floated in May 2012.

Ad revenues are growing enormously, and with ease. New York-based marketing researcher eMarketer estimates global mobile ad spend will be up 120 percent this year to $9.6bn. The growth is expected to continue through 2017, when mobile ad spend, at $35.6bn, is expected to exceed the $27.2bn to be spent on desktop advertising.

Facebook is expected to account for a significant chunk of that share. In 2013, it had 18 percent of global mobile advertising and eMarketer expects that to grow to 22.3 percent this year.

Facebook is apparently raking in so much cash that founder and CEO Mark Zuckerberg recently paid $2bn, in a mix of cash, shares and incentives, for virtual reality platform Oculus, a start-up still in the development stage.

The company also still hasn’t worked out how it will make up the staggering $19bn it paid in February for micro-messaging service WhatsApp, nor the $300m (plus $415m worth of shares) it forked out in April 2012 for photo sharing app Instagram, which could be the most lucrative social media site due to its high connectivity between brands and users, but remains free.

Zuckerberg has said he is still working out the best way to monetise the apps. But it seems advertising would be inevitable down the track.

It is Facebook’s main source of revenue, and mobile ads make up 62 percent of that.

Mendelsohn says mobile has helped take digital advertising — and Facebook’s income — “to a whole new level”.

In July, the firm introduced video ads in newsfeeds, which could generate an initial $1.5m of new revenue per day and doubling in no time.

“Video is going to continue to get bigger,” Mendelsohn says. “Advertising is all about how people tell stories, how businesses tell stories, and [video] is a very engaging, emotive way.

“Especially when you think of how people are watching television now, they’re watching with a second screen and Facebook is the natural default second screen. That’s why we see the video becoming such an increasing part — businesses can build on top of what they’re having on TV and have it on Facebook as well and get that incremental reach.”

But the crucial element of digital advertising going forward is what Mendelsohn calls “people-based marketing”. Facebook collates users’ online activity, including the pages they like, ads they click on and other sites they visit, to customise the ads that appear in their newsfeed.

The method is supposed to keep users happy by limiting ads to something that may actually interest them, while also attracting advertisers because of the effectiveness of the spending.

“So people can get relationships with brands in a very personal way that maybe they haven’t had before,” Mendelsohn says. “We see this as a whole new, exciting trend.

“You can take people and present them businesses and brands in a way that hasn’t been possible before, through a much more personalised, tailored approach.

“If we look at the region, we know there are 240,000 women in the UAE that are interested in make-up, therefore if you’re a make-up company you can go and target those women specifically, so it’s not wasteful; it’s useful, it’s really relevant and really specific to that group of people and we’ve not been able to do that before, and we’re just at the beginning.

“It’s almost like the new phase of marketing, the new future of marketing. And mobile in many ways has changed all of that.”

Facebook also is spending, in a bid to prove its worth to advertisers.

“We’re obsessed with effectiveness and ROI [return on investment],” Mendelsohn says. “We have so many case studies, we’ve put huge amount of investment into this area in terms of resources, in terms of partnering with different research companies…this matters to us hugely.”

But not everyone is convinced the company is entirely honest about its collection of data. Or more precisely, information on users.

The new Facebook Messenger app, now compulsory for those who want to send a private — or perhaps “non-public” is a better description — Facebook message on their mobile phone, caused a stir when it launched earlier this year. Its terms of service (TOS) for Android phones require giving Facebook access to photos and contacts stored on the phone, as well as use of the microphone and video camera and even the power to make calls from the device without prior approval.

The number of blog posts, forum discussions and commentary on the site itself shows the TOS are alarming to many, although Facebook argues they are hardly more intrusive than other apps and are necessary to operate.

“Keep in mind that Android controls the way the permissions are named, and the way they’re named doesn’t necessarily reflect the way the Messenger app and other apps use them,” the company said on its own Facebook page in response.

Mendelsohn denies the furore over the Messenger app. “I’m not seeing that information hugely coming through; I’m not,” she says. “People are using Facebook, people are enjoying Facebook, people are finding out things that they care about on Facebook. That’s what I see, that’s what I’m responding to.”

Mendelsohn says users themselves called for a stand-alone messaging app and insists trust between Facebook and its users is “the single most important thing”.

“We wouldn’t do anything that would damage that trust; why would we do that?” she says.

Indeed, it would not be in Facebook’s interest to lose users. That would reduce its advertising power, and therefore its revenue.

“We’ve put more and more things in place over the years in terms of making people in control of all of their information; it’s up to them, they’re in control of who they share it with, who sees what and how private or public they are,” she says.

“People are also in control of what advertising they see or don’t see and if they don’t like advertising there’s a button that they can cross out and they won’t see that ad again. But we don’t see that very often because people are seeing the advertisements that they want to see and that are relevant and useful for them.”

The introduction of videos does appear to have been carefully handled. While the clips play automatically when they come onscreen, the sound does not turn on unless a user clicks play. The videos also won’t download to mobile devices unless they are connected to wi-fi to ensure they do not eat up users’ data plans.

“I think [Facebook] has been a new learning curve for people over the last decade; everything that we’re talking about is new — the whole platform is only ten years old — so it has been a continuous journey of education and I think it’s becoming more and more relevant, and better and better, for people in terms of the experience that they have as a result,” Mendelsohn says.

The number of users perhaps speaks in her favour. There are now 1.32 billion people who log into Facebook each month, according to the company’s second-quarter results. Daily users increased 19 percent year-on-year to 829 million, with 654 million on mobile.

“People are checking their Facebook 14 times a day, they’re spending a lot of time on it; that shows that it’s useful to people, it’s relevant, and our numbers are continuing to grow as well,” Mendelsohn says.

“But we don’t take it for granted, it’s important to us that that trust is strong and we put a lot of work and a lot of effort into that.

“The most important thing that we care about is the trust that users have with Facebook and what they share. People love Facebook, people enjoy Facebook and that’s not a surprise because it’s got everything that matters to them: you’re a real person on Facebook [and] you share things with your friends.”

While the number of Facebook users in the Middle East and North Africa is growing at more than 10 percent each quarter, to 71 million in July, it has still attracted only one quarter of the region’s population.

The company is doubling its presence at its MENA headquarters in Dubai to boost not only its profile but its advertising stream.

The social media site also is hoping to play a significant role in helping Arab entrepreneurs. With the International Monetary Fund estimating 1.5 million more Arab youth will become unemployed by 2018, entrepreneurship and the power of connection through social media is becoming ever more important. “I think there’s a massive role to be played [by Facebook] in developing businesses, and small businesses in particular,” Mendelsohn says. “We see this all over the world.

“The thing that’s going to help generate economic growth isn’t big business, it’s lots and lots of small business. I think there’s an amazing opportunity for this region and for the youth in this region, where there is high youth unemployment, to become more entrepreneurial and to use platforms like Facebook to create businesses here and take them out to the world and establish what it means to be part of the Middle East, what it means to be part of Africa, with all the cultures and new products and different services that it has and how that can go out to the world.

“So I hope Facebook can play a small part in helping to generate and stimulate economies of the future in the region.”

With the business prowess of Zuckerberg and company on their side, that may well be a comforting thought for entrepreneurs.

The age debate

Facebook has occasionally been blamed for school bullying, teenage depression and even suicide, raising the question of whether the social networking site’s self-imposed age restriction of 13 is too young?

Vice-president Europe, Middle East and North Africa Nicola Mendelsohn, who has four children including two old enough to have their own Facebook profile, says not.

“That’s the rule, that’s the age that we put out there,” she tells Arabian Business. “It feels like that’s the right time in terms of it’s a natural time when children are moving into secondary school all around the world, it’s a time when children are coming into adulthood in terms of becoming more grown up and more responsible and it’s a time when I think people do want to share and want to engage.

“People can speculate in terms of is this better, is that better; this is the age, these are the rules that we’ve set down and these are the rules that people are observing all over the world. And they feel right.

“Certainly as a mum, it feels good that someone has told me when is the right time that your children should come online and get really involved in Facebook. It’s served our family well and serves other families well, as well.”

Mendelsohn is preparing for the “big moment” when her nearly-13-year-old son will be allowed to create his own Facebook profile, “and keep in touch with his mum more”.

“How amazing to grow up as child today with all the access to information that they have and all at their fingertips,” she says. “I will always be, I guess, not a native to this world in the way that [Generation Y] are, so the concerns that maybe my generation has about the next generation were always concerns that the next generation would have had about the next generation.”

Facebook’s legacy

Facebook has helped more than 1 billion people reconnect, keep in touch and find new friends. But it also has faced its fair share of criticism, including spying on members and using them in a psychology experiment – for which it has apologised.

Similarly to the television, it has been a phenomenon in human history. Just 10 years old, what legacy will the company have left at the end of the century?

“We’ll have helped and played a part to connect everyone on the planet and the opportunities for some of the people that don’t have access to the things we have,” vice-president Europe, Middle East and North Africa Nicola Mendelsohn says.

“And what the implications for people globally will be I think are going to be quite extraordinary. Facebook and mobile are pretty profound things together and I think mobile will be the thing that will be the biggest disrupter and Facebook will have played a small part alongside mobile in helping that change globally. It’s exciting.”

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