Tech Watch: Facebook IPO, is it really that big of a deal?

Category:  Tech Watch
Friday, February 3rd, 2012 at 12:19 PM
Tech Watch: Facebook IPO, is it really that big of a deal? by David Hunter, Epic Web Studios

The rumor mill has been buzzing since last week with nothing but talk about Facebook’s IPO. It has been said that Facebook could begin selling shares to the public in an IPO, or Initial Public Offering, which would value the social network from $75 billion to $100 billion. If valued at $100 billion, Facebook would be worth almost the same as McDonald’s Corp.

Their public offer is history’s largest Internet IPO events, so when could this proposal occur and what does it mean for Facebook?

It’s possible that Facebook will go public with their shares sometime between April and June because a stock usually begins trading three to four months after the filing.   Facebook  dropped from $10 billion in equity to $5 billion, compared to their previous estimates. A $5 billion IPO can still put Facebook at the top of the stats box on money raised in tech IPOs, even though it is a small amount given the company's estimated value is at $100 billion. In 2004, Google raised $1.9 billion and more recently, Zynga, a social network game developer, raised $1 billion. Following close behind is Groupon, having raised $700 million and the social network, LinkedIn, raised $353 million. Although these recent initial public offerings in the past year have been in the technology sector, with strong debuts from Zynga and Groupon, they have all fallen to the wayside rapidly.

So what is to be said about the company that turned the word “friend” from a noun into a verb? With 800 million users on Facebook, including me, it’s true to say that the company is profitable. Using advertising directed specifically to their users has generated revenue at a 127 percent annual rate, according to the BusinessInsider. Determining the value of Facebook will be influenced by many varieties of factors such as the IPO market, the strength of the European economy and the investor demand for social media.

Contrary to Google, the most-used search engine on the World Wide Web, Facebook is not a necessary service, but a desired service. Since Facebook is not tangible, it’s challenging to sell the idea. Yes, it’s true that Facebook is used across many spectrum from connecting old friends to marketing new business, but Facebook users can survive without checking up on their friends and sharing baby pictures. Many others would argue that Facebook has transformed itself from a luxury into a necessity. With the way social media is changing our communication, several users see it as a first form of communication and a source of information.

Does this mean that basic users can buy these shares and strike gold? Not likely, because those shares are most likely spoken for. Will Facebook's IPO boost our economy and save the US from plummeting into a recession? Negative. What it will do is this: open the global market to invest in a social platform.

One other thing that the IPO will do for Facebook is give it a long-term vision. There is a large market of Internet users in the world, more than 2 billion globally, and Facebook is taking aim to connect to all of them. Facebook has barely hit the tip of the iceberg  in mobile marketing and apps. This IPO is another step to increase their desire in mobile, because it is another area to make money and have people invest.

Mark Zuckerberg, the company's founder and CEO, stated on Wednesday, “We think a more open and connected world will help create a stronger economy with more authentic businesses that build better products and services.”

All we can do is sit back and watch how this will unfold. Perhaps Facebook's IPO is a bigger deal than the average Facebook user thinks.

-Angela Kelly, project manager

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