Place your bets! Facebook’s future

This is a guest post by Mark Trova. Read more about him at the bottom of the page, and make sure to follow him for great reporting on business and politics.

Facebook is the largest social network in history. With 800 million users and counting, Facebook claims over 1 in 8 of the world’s population as a user. In the past few days, news has stirred about Facebook going public. My first thought was, as a user, am I going to have to start paying for it?

The answer is no, as marketing created an astonishing $1.5 billion in profit in 2011, for the last three years growing at 127%. So in other words, Facebook is doing just fine without the PR nightmare that would ensue by charging users to use it. So, should we even care about this?

From a business perspective, this sale is massive. The 800 million users on Facebook are estimated to be worth $100 million, which, for some perspective, is the approximate value of McDonald’s corp. The deal would raise around $10 billion for the buyer, or in other words, the biggest IPO offer of a U.S. Internet company in history. The previous high was Google, which raised $1.9 billion after a valuation of $23 billion in 2003. This sale would make Facebook the fourth highest IPO in America, behind Visa, General Motors and AT&T Wireless, and would make Facebook worth more than 62 countries worldwide.

However, Facebook going public is not as huge of a deal as it might sound at first. For example, when Netscape got its IPO in 1995, it caused a mass amount of corporate spending because Netscape changed the entire landscape of the internet. Web consultants, to makers of web infrastructure invested and innovated from there. Facebook represents only about 1% of the total ad revenue on the web today, and that means corporate spending will not be altered very much.

People who are interested in Facebook stock have some glimmer of hope for it going up. P/E ratio, or price earnings ratio, is a ratio of price per share to total profit. Google’s P/E ratio was 84 in 2004, and Facebook’s in projected to be 80 when they get their IPO. Google’s price of $84 has risen to $580 today!

Potential bad news, but news that I find to be potentially misleading, is that of the 19 social media IPO’s, 82% of them are currently trading at or below their opening day prices. That being said, Facebook is not a normal social media outlet. It’s the main one, an absolute juggernaut that has absorbed users at a rate that is unprecedented. They are predicted to eventually exceed one billion members!

So, now that we see how the business of Facebook will be affected, the question remains: should users care?

I don’t think so. Like I said, users will not have to pay the way some have feared, and predicted, for a long time. In terms of creativity, its tough to predict how they will be changed. My guess however, is that with more public input, creativity and innovation will be quicker. Also, with a public interest in mind, users will have more of a say when it comes to changes made in the profile. My friends seem to take a personal offense to each and every change that is made.

I am a huge supporter of this sale. All in all, public ownership is good for the economy in my opinion. Whether it be Facebook, land or business, ownership by public individuals breeds growth and success. Facebook will continue to flourish, grow and dominate the social media world.

Mark Trova is a student at The College at Brockport, studying Business. Check out his blog at http://trova101.wordpress.com/, or follow him on Twitter at Mark_Trova

Advertisements

About Jim Mignano

Jim Mignano is a young professional practicing and learning Public Relations in Rochester, NY. He is passionate about the possibilities that digital media provide and loves utilizing new platforms for a variety of functions. James' blog is about people and the technology they use. It's about communication and persuasion... the old and the new ways of doing things... the struggle between sticking to the tried, true recipes and experimenting with intuitive, innovative ideas. It's an extension and reflection of James himself: the convergence of ambition & ability.
This entry was posted in Industry, Social Media, Uncategorized and tagged , , , . Bookmark the permalink.

2 Responses to Place your bets! Facebook’s future

  1. jmignano10 says:

    Thanks for writing, Mark!

    I have to admit, such a big change for a site that we all use so regularly is a bit scary. It’s hard to imagine my life as a college student without Facebook… It’s the only way I am able to stay connected to a lot of my friends. Luckily, you’ve put my mind at ease a bit and I’m more comfortable and confident that the world as we know it isn’t completely over!

    If Facebook does undergo ridiculous changes and ends up crashing, at least we’ll all know what the Mayans really meant when they said the world would end in 2012.

  2. Joe Mignano says:

    My only comments are Facebook will continue to flourish as long as actual innovators are in charge. I’ve seen the affects of decisions made by “business people” vs. visionaries and those who literally live and breathe a company.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s