GLOBAL, FEBRUARY 2012: Early this month, social networking giant Facebook has filed for an initial public offering, which could amount from at least $75bn to as much as $100bn. Should this valuation push through, the Palo Alto-based company will be post one of the biggest U.S. stock market launches.
In a mere eight years, Facebook has become the world’s premier social network, with its 845 million users around the world getting to know more friends, sharing gossip and stories, playing games, and posting photos within minutes. It has also evolved to become a platform for advertising and marketing, branding and communications, even a political tool to encourage voters or topple regimes.
Through the gradual additions of features and applications, Facebook has proved its mettle in the world wide web as a heavily influential site as well as its capability of pulling in the income. Just last year, the company gained $1bn in profits from $3.71bn in revenues, derived mostly from advertising. Social gaming is another income-generator for Facebook, contributing $557mn in revenue last year. Along with the increasing profitability, however, costs have also gone up. Research and development expenses rose astronimically to $114mn in 20111 compared to 2010’s $9mn, influenced by the increasing employee count, for one.
The company said in its filing with the United States’ Securities and Exchange Commission that it aims to raise at least $5bn when it begins selling its shares. However, the value is said to be a variable and could ultimately reach $10bn, surpassing Google’s stock market launch in 2004. “FB” has been selected as the company’s ticker symbol, but the decision has yet to be made whether it will trade on the New York Stock Exchange or Nasdaq Stock Market.
Facebook’s 27-year-old founder and CEO Mark Zuckerberg was previously hesitant to file for an IPO, saying that it may affect the company culture of making great products instead of focusing on sales growth. However, as the number of shareholders began to creep upward, Zuckerberg decided to push for an IPO and gain financial benefits if it is going to be required to report its financial status anyway.
The bigger question, however, is how Facebook will manage its evolution from a simple social platform to a money-spinning global venture. A balance between the needs and wants of subscribers and advertisers is essential, maintaining a sturdy privacy policy but still be able to churn out the profits. Privacy has always been a big concern for Facebook, which has steadily hounded the social network as it continued to implement changes in its interface and options. Zuckerberg has continuously emphasized his commitment to protecting the privacy of all user data.
