Internet entrepreneurs, venture capitalists and stock market traders alike are waiting with baited breath for one of the tech industry’s largest ever entrants to begin trading on the stock market; on 1st of February Facebook officially filed to go public.
Facebook began life, as many are aware, with Mark Zuckerburg in a small Harvard dormitory. It launched in 2004 and has seen unprecedented growth ever since. Yet few seem aware of what Facebook has since become and, indeed, what it intends to be. After filing its Initial Public Offering (IPO) with the United States Securities and Exchange Commission, one of the biggest since Google in 2004, Facebook has sought to ‘sell itself’ to potential share buyers. It has, as a result, laid itself bare for them and the figures are quite incredible.
The filing shows that as of December 31st 2011 Facebook can proudly state it has 845million active users. It also proudly states that, on average, there are more than 483million active users per day. That, in perspective, is the population of the United Kingdom 7.7 times over, logging into one single website on one single day.
But so what? Facebook has a lot of users, we knew that. What makes that a business? Facebook doesn’t really sell anything – there’s no membership, no optional pay-as-you-go extras, so what does it have to offer? Well, quite simply, Facebook offers what Facebook has. And what Facebook has, is information.
As it happens, this information is gold. Facebook’s revenue for 2011 totals, according to their filing, $3.7billion Of that, $3.154billion, or approximately 85%, came from advertising. Advertising on Facebook is so popular because of how specific the ads can be – there’s nothing companies love more than to get their product in the faces of the people they’re targeting and the information Facebook has on you, location, gender, age, etc, allows them to do exactly that.
As Facebook’s user base has grown, however, so too has the criticism. Many critics are quick to point out privacy issues with the website, although Facebook has reacted after a number of stories began hitting the headlines. Other critics have an issue with the concept of a company having control over the ‘private’ information of almost a billion people. Conspiracy theorists perhaps, but maybe they have a point.
Despite this deep-seated criticism, users continue to flock to the well known social network. As Facebook indicates, its mission is to grow further and it will be looking to expand into countries relatively under represented on its site at present. Countries such as Brazil, Germany, India, Japan, Russia and South Korea are all acknowledged as a target for growth by the filing.
More users easily translates into more profit, something potential investors will be keen to hear. But unusually Facebook, via Mark Zuckerberg’s personal letter to investors, continually reiterates its ‘social agenda’ avoiding any direct reference to profit, or to profit-maximising methods. “Facebook was not originally created to be a company” he begins, “It was built to accomplish a social mission.” He also continues this message further, stating “We don’t build services to make money; we make money to build better services.”
Such claims feel like they’re coming from a social enterprise rather than a soon-to-be publicly traded company on Wall Street. Whether such claims will scare off or reassure investors that Facebook knows what it’s doing will remain to be seen one thing’s for certain though, there’s a lot of excitement surrounding this filing and a lot of people are set to make a lot of money.