Facebook has filed the paperwork to go public and will begin an initial sale of stocks this spring, perhaps as early as May. This is an interesting intersection of business and social networking, and the sheer numbers involved in terms of both people and money has caught the attention of the media.
I am not an expert on stocks, but as a casual Facebook user I am curious about the whole thing and asked my pals about it. We came up with a few questions that I think are worth addressing for both potential investors and Facebook users.
How will this affect my use of Facebook? How will Facebook make money? Can I get in on the stock sale? Did Facebook wait too long?
The first two questions are linked. Because one of the key ways Facebook makes money is through advertising, and advertising may affect the way you see and use Facebook. An article in the Huffington Post has an informative breakdown of how some Internet-dependent companies make money through advertising, based on how much money they generate per user.
Yahoo makes $7 per user, AOL makes $10, Google makes $30 to $35, and Facebook (FB) makes $4.39. Now the data may be skewed by the fact that FB has 845 million users, but even so, it would seem they'd need to raise that 'per user' number. And since most (about 85%) of their money is made from advertising, I suspect FB users are going to see more ads, and better-targeted ads.
Before we freak out too much, consider Google and their services. Google does a lot of advertising, and their algorithms are pretty good at targeting the ads. So it's possible FB's new ads won't be too obtrusive, or will at least be useful.
Remember, we've all been using this service for free since 2004, and that's 8 years of data collection. It's possible this data may be manipulated in ways users are not happy with. After all, businesses are in the business of making money, and investors expect dividends.
Can I get in on the stock sale? I have no idea. Perhaps FB will find a way to get users involved by offering us a chance to buy shares. The Internet is busy with rumors and advice on this, but I don't think anyone outside of FB knows for sure.
Did Facebook wait too long? Remember MySpace? Know anyone who still uses it? It seems like everyone moved to FB. Now it feels like everyone is over on Twitter. Twitter isn't the same as FB, but FB has a more similar competitor in Google's new social network Google+. Twitter has 383 million users and is growing fast, especially in countries like Brazil and Indonesia. However, FB is growing fast in India, which is a huge market.
So I don't know if FB waited too long, but it certainly gave its competition like Twitter and Google+ time to grab large shares of the market. However, it's useful to remember that the groups may overlap since a user might be active on both Twitter and FB or Google+.
At this point, the Earth has about 7 billion people and some 2 billion Internet users. So there is plenty of room for growth for all the social networks. Facebook users can probably expect to see a lot more advertising, but maybe they won't mind if FB lets them in on the stock purchase.