Almost eight years ago Facebook was in its beginnings stages being developed and nurtured by CEO Mark Zuckerburg. Despite its humble beginnings in a Harvard dormitory room, Facebook soon exploded past everyone’s expectations and has become an integral part of people’s social lives.
Facebook has made news and headlines many times before and it is doing it again – albeit for somewhat different reasons. Facebook is filing to become a publicly traded company and will allow people to buy shares on the stock market as of Wednesday. Since Facebook literally represents the social network for this era, its initial public offering(IPO) will be historical and astonishing to say the least.
With the FB symbol as its identifying mark for the stock market, Facebook will have more than 845 million users and, some say, is looking to get at least $5 billion during this initial offer. There are other reports that are claiming Facebook is seeking a much higher amount: between $75-$100 billion in fact! If Facebook were to receive that high of an amount it would put it well above many other companies that have been around for many years – companies such as Ford Motor, Kraft Foods, Goldman Sachs, and more.
The company makes a large portion of its profits off of the advertising and selling that goes on throughout the Facebook network and last year it made $3.7 billion in revenue (increasing 88% from the year before). The ads on Facebook are highly targeted towards individual users since Facebook utilizes the information and recorded actions of users to collect data. Much like a data processor, Facebook archives everything – from interests, locations, articles, links, and “likes”. This data is then used to help better target and understand users so that more efficient ads can be displayed.
Facebook has changed not only how advertisers work, but it has also led to the rise of a variety of other companies such as Spotify and Zynga – Facebook actually is responsible for 90% of the profits Zynga gets. Having this in mind, the next logical step for Facebook was this historical IPO.
Despite all of the current profits Facebook is making off of advertising, it actually is a meager amount compared to what it should be making. For example, last year Facebook only made about $1 per user which is such a small amount especially since Facebook has the capacity to utilize all of that user information and display targeted ads.
Indeed, Facebook is still seeking to learn how to properly use all of that user data and generate more profits without damaging the sensitive social ecosystem. If Facebook moves too quickly or makes too many drastic changes to its structure then users protest however Facebook is gradually making more and more changes. For instance, Facebook recently introduced the new Timeline which allows users to scroll through and see an overview of people’s activity in a timeline format. On top of that there are also reports that Facebook is designing its own mobile phone which will give it even more of a foothold into people’s lives.
Unfortunately as Facebook’s presence in people’s lives continues to grow, so does the ever mounting scrutiny that is being directed at it from Washington. With privacy issue concerns and more, Washington is doing its best to protect user’s private data from being misused by the social giant.
Facebook is still young, however its part in millions of lives worldwide. As it continues to grow and develop innovative new ways to connect with other users, its value to both advertisers and consumers grows exponentially as well. There are only estimations at how much Facebook will get during its historical IPO, however it is amazing to see this Internet phenomenon, developed from such humble roots, expand and grow with each and every year.