Sunday, December 2, 2012

How Facebook Was Changed By Its IPO

On the afternoon of Thursday, 17th May 2012, Facebook CEO Mark Zuckerberg officially opened the Facebook IPO, making it one of the biggest publicly traded companies. The company priced the IPO at $38 per share, making its market value just over $100 billion. However, the staying power of Facebook remains to be seen and how the IPO (initial public offering) will affect the company and its future.

Although the IPO will make Zuckerberg and FB investors and employee’s billionaires and millionaires, what happens to the public? Will a publicly listed company affect the average person who wants to know what is happening with their family and friends?

If anyone asked me whether I would invest in Facebook, my answer would be in the negative, because it just is too risky. Although they may have a fantastically smart man on top, at the end of the day it is just another techie company. Because you never know what can happen with such techie companies, it’s either up or down, there are no middle levels and hence I just wouldn’t risk and put any money on them. Perhaps, for a short-term investment, it might turn out good.

Personally, I feel that here are a few ways that users may experience the change firsthand.

Less privacy and more ad revenue: In order to increase its ad revenue, FB would have to compromise on its user privacy and improve its ad platform. If done correctly, ads should not overwhelm the content and the potential is virtually unlimited. Alternately, if taken too far, the results could be disastrous. They have to figure out a way to advertise without compromising privacy.

The mobile platform: Currently the mobile users account nearly for 50% of the Facebook user base. However, FB is unable to generate any revenue from its mobile platform. In other words, it has to monetize it. If not done properly, it could end up with a lot of annoying adverts instead of enhancing user interaction.

Facebook-generated content: If done properly, Facebook-generated content has tremendous potential than the current user-generated content. Facebook has the possibility to enter markets that are dominated by the likes of Craigslist and Groupon.

Then there are others who are dead convinced that Facebook will crash and may not be able to reinvent themselves. Their only USP seems to be gathering control of someone else’s web presence. As a result, this could lead to them being alienated. Another factor is that Facebook does not have a tangible product and hence there is no prospect of a long-term revenue model. Of course, Facebook has solid hidden potential, which they have not used. Having private information of nearly 1 billion is not a joke. In other words, it has the private information of 14% of the people who habitat this planet.

Now being public, Facebook has to develop new products to generate revenue from those potential 1 billion users. In my view, Facebook is not a bubble, but $100 Billion valuation is a bubble. As stated by experts, I feel that the Facebook stock will continue to go down. Once the dust settles on the Facebook IPO, I reckon that their stock would possibly range around $12 to $25 per share. This is of course if the world does not end by 2012.