Like me if you can! – How Facebook’s IPO will affect the lives of all of us
Jeans, shirt and hoodie.
That (and we were not surprised) was what Mark Zuckerberg was wearing when he rang in Facebook’s first stock market launch in Silicon Valley yesterday. He may not appear like your typical businessman, but his business is currently one of the most successful internet corporations in the world. Since its foundation in 2004 the social network has attracted users and investors almost as fast as lightning. Every single milestone starting from when Zuckerberg had his idea in 2003, up to launching the website in 2005, acquiring funding from companies like Microsoft and Digital Sky Technologies, implementing the timeline in 2011 or buying Star-Ups like Instagram have led to yesterday’s events: Facebook’s initial public offering (IPO).
Facebook’s move has officially made Zuckerberg a multi-billionaire due to his share that is now worth more than $18 billion. And it will continue to make even more people richer than they probably already are: the investors and shareholders. But what about its users? The stock market launch is such a radical and historical decision and that has to affect the consumer somehow, doesn’t it? Will we and if yes, to wich extent, feel any differences when using Facebook?
IPO – Money is a three-letter word
In order to understand the consequences of Facebook’s IPO it’s essential to know why the company decided to offer shares. In February this year, Mark Zuckerberg himself published an open letter which explains the motives behind that move:
Facebook was not originally created to be a company. It was built to accomplish a social mission — to make the world more open and connected.
We think it’s important that everyone who invests in Facebook understands what this mission means to us […].
We don’t wake up in the morning with the primary goal of making money, but we understand that the best way to achieve our mission is to build a strong and valuable company. (Read the complete letter)
What the former Harvard student states is that Facebook’s primary reason for debuting on NASDAQ is not of monetary, but rather social. As a matter of fact the CEO has pointed out multiple times how the main goal of management is connecting the world and not making profit. So Facebook’s intention behind the IPO is just a quest of worldwide communication and building social value?
I don’t think so Mr. Zuckerberg.
If you ask me there is only one cause which lead to this Saturday’s events: finally cashing in all the users’ data that Facebook has been collecting for eight years.
The social network has been growing steadily in the past years, however there is one problem – the lack of ways to make profit. The company is still miles away from what YouTube has already achieved. They have failed to figure out how to generate advertising income without flooding the user’s profiles with commercial ads. Indeed Facebook is making some money with ads on the sidebar and online games such as “Farmville”, however that number is still insignificant compared to profits other internet companies earn. What it desperately needs right now is an increase in market value and that is exactly what Zuckerberg hopes the IPO will result in.
104 billion dollar – just Smoke and Mirrors?
Against all speculations the launch of the Facebook IPO ended in a rather disappointing realization. Even if the whole company has a worth of 104 billion dollar, after raising rapidly up to $43, the stock price fell back to the initial $38 at the end of Friday. So investors who bought stocks at a price of $43 already made losses. Todd Wassermann, writer on Mashable Business listed six reasons why the IPO fell flat. He claims for example that the stock was overvalued and that there was way too much hype about it. Above that the advertising strategy is definitely one oft the company’s weakest spots, which is the reason why it still falls short in comparison with Google.
How will the consumer be affected?
What will change for us, the ordinary Facebook users, after this weekend? Definitely a lot because now Zuckerberg needs to satisfy shareholders and increase the value of the shares. That can only be achieved if Facebook keeps generating more and more profit in the future. Right now the only option is advertisement so look out for even more annoying commercial campaigns on your sites! I have no doubts that users will be further monetized and personal data sold to other companies in order to increase profit margins. Consumers will be bombarded with invasive marketing techniques including banners, headers, maybe even videos and sound. Keep your eyes open for sponsored posts, which are highlighted when one of your friends likes a company which sponsors Facebook.
Another essential medium to make money is the timeline. You might not have thought about it but the design of it is way more convenient for product display and advertising banners. The huge cover photo is just another kind of advertising space. So if you thought that Facebook introduced it solely to “connect the people” even better or to enhance user’s experience, than you’re just partly correct. The timeline is a clear approach to a more business-oriented web design which allows companies to promote their products. Here is for example what Fanta did:
If you’re curious, here’s a nice blog post about how the timeline enhances marketing.
Privacy settings is also an issue which has been highly controversial. Ever since Facebook introduced the facial recognition and the tagging of photos, many users feel exposed and roped of privacy. That is reasonable however the company has no intention of changing that since they collect user’s data and sell them to companies. Whenever you like a certain product or share a song, you are automatically put into a certain target group that is defined by aspects like age, marital status or nationality. And since Facebook has to impress shareholders even more now, you can expect more of that in the future.
So to sum it up: What you should expect in the coming months
- more business focused and ad-soaked design of Facebook
- more “recommended” products or company’s Facebook profiles
- less privacy
- more sponsored posts
Where does it leave us?
Facebook is a website that people cannot live without today and it definitely has its advantages,too. However we have to be aware of the traps and tricks Facebook uses because at the end of the day it’s just like any other company that has to pay taxes, salaries and somehow finance itself. Profit is always one of the main objectives in business. We have to understand the impacts the actions we do on social networks. That with every “like” some kind of personal data of us will be saved somewhere. Every video we like on YouTube, every picture we like in Flickr, everything is connected. We create our own second version of ourselves on the web.
Facebook’s decision to debut on NASDAQ is not just a small move. In fact it changes everything since money (a lot of money!) is involved now and there is a certain responsibility which the social network has. Increasing shareholder value has become a main objective of management. How far will Facebook go to reach that goal? Nobody knows that.
But I know that Facebook has collected tons of personal data from more than 900 million users worldwide.
And that, that is something to think about.
- Facebook 2012 Infograph
- For your readings: “The Intelligent Investor“
- Enterprise to Consumer with Love: How Facebook could make more money with e-commerce