Peckin’ On Facebook’s IPO

Facebook announced its mammoth initial public offering (IPO) last Wednesday. For those who are unfamiliar with IPOs, it’s the initial value of a private company’s stock announced to the general public. Companies looking to increase capital do so by opening up their stocks for the public to trade and release IPOs.
The $5 billion offering has set up the social media company to enter the stock market with one of the highest values in history. Some of the other companies that have made fashionably expensive offers to the public have been General Motors, AT&T Wireless and Visa Inc., with over $10 billion IPOs; these are companies that have a central role in generating huge sums of capital into the U.S. economy. Facebook is now among these multinational titans of the business world in terms of value and importance. By opening up to the public, Facebook is not only showing that it has acknowledged its fame, but it’s also accepting to take the traditional path toward becoming a global business entity. Facebook has already been enjoying the type of profit that global businesses make: it made $1 billion in profit last year and has been able to marionette its users to instigate massive social movements. So why not make it official by going public?
The flip side of going public contains the not-so-positive changes it brings into the business culture of any company who decides to release its IPO. At this point, Facebook has to find a way to juggle between maintaining its social media quality and its profitability. Facebook is the preeminent social media outlet the world over; citizens in every country share photos, thoughts, articles and basically their lives with the people they connect with on Facebook. Therefore one of the most crucial capitals Facebook holds is our personal information. Facebook is valued at $5 billion because it has made itself a popular stock in the last eight years, while making high annual revenue throughout those years. However, we shouldn’t overlook the fact that Facebook generates most of its revenue from online advertisements. In 2011, 85% of its revenue came from ads. Ads are crucial for Facebook’s livelihood because the company has designed the website to react directly to our consumption habits and interests. By using (and abusing) our personal information, Facebook has been able to generate ads that appeal to our online behavior. For example, the right side of my profile page is filled with advertisements about graduate school and pictures of puppies because I have been voraciously researching post-college opportunities, and after I get nervous about the future I resort to looking at cute animals for a while to cool off. Facebook knows that and pollutes my page with this knowledge by trying to market things to me related to grad school and adorable doggies.
Zuckerberg has been famously reluctant about having Facebook go public. His fear was that the focus of the company would shift from excelling in social media products to focusing on stock value. It seems like his fears are founded in truth. Immediately, the company has to find ways to maintain the value of the IPO and its ability to generate high revenues. This means that they have to be looking at ways to utilize their best source of revenue—advertisements—in a better way. In order to maintain and bring about more than 85% of the revenue from ads, Facebook has to change the way it monitors and utilizes user interface. One other option for Facebook is to reserve more than just the side columns for ads. Facebook has already been habitually fine-tuning privacy settings in order to gain more information from its users. Further intervention into user profiles might change the personality and the objective of the company for the worse.
It seems like there are more issues to “poke” at than there are to “like” about Facebook’s IPO. Facebook does not hold eternal fame and user loyalty the way we may sometimes think it does. Yahoo! once seemed unstoppable, until a couple dudes came up with the idea for something called Google. IPO is a potentially great business step, especially if its initial value is at a jaw-dropping $5 billion. However, it also changes the game for Facebook. The steps that Facebook will decide to take should be curiously appointed by all of us, not just the stockholders. Facebook’s stock value might seem irrelevant to us, but it will indirectly affect the privacy we may hold on the social networking site. •