What Facebook’s IPO will mean for users
Facebook finally filed for its initial public offering (IPO) earlier this week and by now everyone is familiar with the astronomical valuations that are being attached to the company and how many gazillionaires will be produced as a result.
Perhaps less attention has been paid to what the proposed listing is likely to mean for the average Facebook user. Certainly there is no immediate financial advantage – other than our own ability to buy Facebook stock and hope to turn a profit – but there are likely to be other changes. Let’s take a quick look at how our Facebook experience might be different once the IPO takes place later this spring.
Expect more advertising
Eighty-five percent of the $3.7 billion of revenue that Facebook generated in 2011 came from advertising. That sounds great until you realize that it amounts to less than $4 per Facebook user. Compare that to Google’s estimated revenue of $24 per user for 2011 and you can start to see why people are so excited about Facebook’s potential.
But to get to those numbers, Facebook needs to sell more advertising. One area that is ripe for development is Facebook’s mobile platform, which up to this point has been blissfully ad-free. It’s unlikely to stay that way for very long, given that Facebook’s mobile web site is accessed by over 400 million members every month.
And more apps too
Most of the Facebook’s non-advertising revenue comes from the 30 percent cut it takes from sales of apps and games and related in-app purchases. (Smurfberry anyone?) One only has to look at Apple’s recent results to understand how lucrative the app and in-app world can be. Expect Facebook to seriously ramp up its app offerings, particularly its Timeline apps, once everyone is converted over to the new format.
More privacy or less?
Facebook has already come under regulatory scrutiny for its hard-to-understand and frequently changing privacy policies. Opinions are mixed as to whether the additional attention that comes with a public stock listing will add to that scrutiny.
Skeptics suggest that the pressure to generate more targeted advertising (see above) will always outweigh efforts to restrict the amount of data that Facebook collects. The recent move to make the Timeline feature mandatory for all Facebook accounts is a perfect illustration of the ongoing quest to accumulate more and more personal information.
A more integrated Facebook experience
Facebook’s founder and CEO Mark Zuckerberg has made no secret of his desire to expand Facebook into other areas. While Facebook is a great communication tool, relatively few people use it for search, for example, or for video chat. (Facebook has one of the simplest and most efficient video chat apps on the Web.) The more Facebook can keep you within its ecosystem, the more advertising revenue it can divert from Google, Yahoo, AOL and the other portals.
The new cloud services offer another opportunity. Whether you want to stream music, watch movies, or just store your stuff in the cloud, Facebook can develop the integrated infrastructure to support it.
And then there is the e-commerce opportunity. If Facebook’s core competency is bringing people together on a personal level, it’s not unreasonable to think that they can bring people together for commercial purposes. Most savvy corporations already have a significant Facebook presence and it may not take much investment to turn that presence into a trading platform.
Whatever its ultimate valuation and however much money it raises from the upcoming IPO, don’t expect Facebook to stand pat. It may be playing by a slightly different set of rules, but it will be playing harder than ever.
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