I am endlessly fascinated by the FaceBook phenomenon and have posted several times on everything ranging from privacy issues, to Goldman Sach's non-IPO "IPO" controversy, the questionable off-exchange "trading" of FaceBook shares, and the constant speculation as to a "real" IPO date.
Part of this fascination is undoubtedly due to the fact that everywhere we turn as "news consumers", there is a FaceBook connection...whether it be FaceBook playing a role in the organization of the MidEast "uprisings", instant news and player background on the NFL draft, the Obama/Trump "birther" feud and FaceBook 's use as a political tool, the "Social Network" nomination at the Academy Awards, SouthEast tornado victims reconnecting via FaceBook or posts about the Royal Wedding (74 mentions per second Friday on FaceBook by one estimate).
About the only cultural icon not totally connected to FaceBook is "American Idol". As a member of the FOX/NewsCorp family, "Idol" is unfortunately forced to affiliate exclusively with once darling but now also-ran social network MySpace.
Full credit to Mark Zuckerberg and company for creating and building a seemingly unstoppable internet machine with somewhere between 500-700 million worldwide users and a constantly innovating platform. However, the jury is still out on the ultimate outcome and value of e-commerce applications, with CTR's for ads (click-thru rates) and conversion significantly lower than search or e-mail, which has some reputable analysts questioning the commercial value of social networks. Forrester Research recently released a study of dozens of technology vendors, retailers and marketers and found they have received little benefit so far from FaceBook .
Others are more bullish on the prospects of FaceBook as an online-retailing platform and product promoter coming to fruition within the next 2-4 years. ChannelAdvisor, a company which helps merchants sell across a variety of e-commerce sites, says its impossible to ignore such a vast user base spending so much time on one website. (Personally, I have resisted the temptation to "like" CVS, Staples and Best Buy as recently invited).
Why does any of this matter? Obviously, FaceBook’s projected ability to produce future revenue streams will be directly related to valuations for the IPO anticipated to be coming in 2012. There has been a "market" created already for FaceBook "shares", whether it be through the stakes held by early investors or late-stage investments by major institutions like Goldman or T. Rowe Price. Recent investments such as Goldman's have suggested an IPO valuation of $50 billion, while "shares" trading on private markets like SharePost have recently suggested a valuation much lower, perhaps $25-30 billion.
Recently a group of FaceBook employees and early investors were trying to sell about $1 billion in stock at prices equating to a $90 billion valuation (!) but found no takers and have now lowered their asking price for the offering to the equivalent of $70 billion, according to Reuters.
"Once giddy investors have reason to be wary," it was stated, "with a report earlier this month showing just how frothy valuations have become for companies like FaceBook , Twitter, Zynga, and Groupon. The combined values for the top privately held social media companies are estimated to have jumped +377% in the past year."
In any event, when the formal IPO does finally come, it will certainly be the most highly scrutinized IPO since Google. Believe it or not, there are still some hardcore cynics who question whether or not FaceBook has an ultimately "forever" defensible and unique business model (see AOL, MySpace and GeoCities). The counter-argument is that with a user base of such size, an IPO which will grant huge financial resources, and the "first mover" mega-player status, no other social network site will ever again be a worthy rival to FaceBook.
(Footnote: Aside from some major privacy concerns, I do have one other pet peeve with FaceBook . Today's younger generation undoubtedly believes that the name "FaceBook " was originated with Mr. Zuckerberg and associates. We of a slightly older generation know it has been around "forever", at least 50 years, as printed college campus directories of students with photos and basic information was always known in slang terms as the "FaceBook "....used heavily by upperclassmen for checking out the incoming Freshman class.)
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