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Facebook will be rolling out its new "Facebook at Work" platform in the coming months, and it will begin to compete in the workplace more directly with a host of enterprise communications providers.
With the rollout, Facebook will be entering a workplace communications market that research firm Frost & Sullivan recently estimated at $11.67 billion. That's a sizable new market for a company that posted $12.5 billion in revenue last fiscal year.
But is competing for eventual monthly subscription fees for office software as a service Facebook's primary aim with this new venture into the enterprise?
The company hasn't said much about that just yet. But there's a second -- and much larger -- market that Facebook at Work can help the company reach over the coming years. And that larger market is one that also seems a better fit for Facebook's current business model.
Before we get into that, let's stop to recognize that Facebook at Work is a significant departure for the company for a number of reasons. Facebook has always been a platform built to encourage and facilitate interaction, but the professional workplace is much different territory in that regard.
Facebook at Work is also no doubt a major financial undertaking for the social network. It is a move that requires employees with different skills, a shift in sales strategy, and a modified business model. That's meant building out a new workforce, both in terms of product development and sales.
Free now, pay later? The company will reportedly be releasing Facebook at Work as a free feature for businesses, but it expects to "eventually charge for additional support, analytics and integration with other enterprise collaboration tools, such as Microsoft Azure, Office 365, Google Apps, Box, Dropbox and others," a company executive recently told CIO.
What Facebook will be able to charge for its enterprise services remains to be seen. There are a growing number of entrants into the market, but Frost & Sullivan sees the overall size of the enterprise communications market remaining largely stagnant through 2021. A growing number of companies operating in a stagnant market usually does not bode well for pricing.
Of course, a company with as deep a pool of resources -- and unmatched name recognition -- as Facebook could change that by drawing greater interest to a tepid market. If Facebook at Work is a hit, enjoying heavy adoption of a more comprehensive, paid subscription service, the company could develop a significant new income stream.
But that's a big if.
But that's not the only place money can be made There's also a second revenue stream this endeavor will tap, and that one may be even more intriguing for a couple reasons.
One of the fastest-growing areas of Facebook's revenue is business-to-business, or B2B, advertising. A recent study from marketing firm AdRoll pegged the B2B growth rate in retargeting ads through Facebook at more than 60%. That's twice the rate of growth of Facebook's advertising aimed at consumers, AdRoll reported. And there's a long runway in this area.
Simply put, the B2B ad market is huge; estimates from Outsell peg the digital B2B ad market at $77 billion.
This area is doubly interesting for Facebook, because the company's forte is not in providing fee-based software as a service. It's in providing a free platform that encourages people to share and connect, then using the data to effectively serve advertisements that work. As users, we've all come to see Facebook as a near-utility for social interaction. Financially speaking, however, Facebook is all about advertising.
That makes going after the B2B ad market right up Facebook's alley.
Not a new market for the social networkThe company has already been making headway on that front. Spending on retargeting ads on Facebook-- the ones that serve up a link for a product you'd previously looked at or mentioned in a social media conversation -- was up 31% year over year, according to AdRoll. But growth in spending by companies dealing in business-to-business sales was up by nearly twice that (at 61%) over the prior year.
AdRoll President Adam Berke told AdWeek's Inside Facebook recently that B2B is a big area of growth for Facebook in part because it's so difficult for B2B companies to find people in charge of purchasing decisions inside companies.
Facebook provides a platform that helps them to make those connections. Facebook at Work should do a significantly better job.
So, the company has been seeing some early success in going after B2B advertising, even without a service that's dedicated to enterprise. Facebook at Work should provide a new platform for the company to push even more aggressively into the $77 billion B2B ad market.
The article How Facebook at Work Will Help the Social Network Tap a Fast-Growing Market originally appeared on Fool.com.
John-Erik Koslosky owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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