Thinking About Facebook’s IPO
Who does not know about Facebook? Who does not have any idea about Facebook? Even children aged 7 already have a Facebook account. The popularity of this social media site has grown immensely since its conception. In fact, its income has grown 77-fold since the year 2006. And very soon, it is going to go public as it looks to raise $10 billion shares in its Initial Public Offering (IPO). This amount will value the company at around $75 billion to $100 billion.
This amount has posed a question as to whether Facebook is really valued this much. This amount, in fact, surpasses the value of Disney which is only priced at $70 billion. If Facebook is priced lower than the said amount, this would reflect a major setback in Wall Street. With 850 million users, an amount greater than the populations of Mexico, Brazil, and the US combined, and claiming 16.3 percent share in online advertising revenues, Facebook undeniably is a very powerful company especially when its internal slogan is considered—“Facebook is only 1% finished”. “We will continue to see changes in Facebook between now and when they go public – and after. I don’t think any of those changes will be a function of the IPO,” says Nate Elliot, a principal analyst.
In the next few months, advertising on Facebook will become more targeted where ads posted on walls will depend on the person’s likes and interests.
Facebook’s going public will definitely raise issues on privacy among its users. It will have to be more transparent about its operations. It may be recalled that it had just settled in November some issues with the Federal Trade Commission.
“Facebook is probably going to face some difficult balancing issues, in terms of meeting its new shareholders’ expressed desire to exploit the data they have with the fact that if they exploit the data too much it can drag down the effectiveness of advertising,” says Catherine Tucker, a marketing and IT professor.
Facebook is definitely a lucrative company. However, trends change and so do people’s taste for it. This kind of popularity will not last forever.
Source : DAILYRECKONING