The Facebook IPO
You may have noticed there has been a lot of talk lately about the Facebook initial public offering (IPO).
An initial public offering or stock market launch, is the initial sale of stock to the public by a private company. This basically means before the IPO, Facebook only had a limited amount of stock holders (with founder Mark Zuckerberg owning just over a fifth of the company) and the public wasn’t able to buy any stock in the company. The IPO is about to change all that and one of the reasons it’s been such a hot topic is because the major way Facebook will be making money for stock holders is by compiling and using our personal information. Don’t stress though, Facebook has been doing this for years through Facebook advertising which is targeted depending on your personal information.
Facebook is seeking to raise $5 billion in the IPO which is the largest by a web company, even outdoing Google’s $1.9 billion IPO in 2004, and could potentially place Facebook’s value at $100 billion.
The public company break-down released this week shows a very well established company with robust revenues thanks to all us users. It also reveals Mark Zuckerberg earns $500,000 per year (more than triple the salary of Google co-founders Larry Page and Sergey Brin when Google filed for its IPO, according to the Huffington Post), and if you don’t think that sounds like a lot then maybe it’s because he spent some of his money on a private plane. The company break-down also revealed Facebook has been profitable for the past three years with reported revenues of $3.7 billion last year, with $1 billion of that being profit which is more than Google’s total revenue when it went on the public market.
Facebook also revealed it had 845 million members and more than half, or 483 million, use the social network daily. These hundreds of millions of users produced an average of 2.7 billion “likes” and comments every day over the last three months of 2011. However, Facebook also said they expected the growth to slow down.
“We anticipate that our active user growth rate will decline over time as the size of our active user base increases, and as we achieve higher market penetration rates,” Facebook wrote. “To the extent our active user growth rate slows, our business performance will become increasingly dependent on our ability to increase levels of user engagement in current and new markets.”
It’s expected the public will be able to invest in the social network in May this year and will be listed under the ‘FB’ ticker symbol on the New York Stock Exchange or Nasdaq Stock Market.
Graffiti artist David Choe made a very wise move when he in 2005 was asked whether he wanted a few thousand dollars cash or the equivalent in Facebook shares for decorating the Facebook offices with his signature “dirty” style murals. After the IPO, Choe’s stock could be worth upward of $200 million and it’s speculated he received about 0.1 to 0.25 per cent of the company.
So what will all this mean for you?
At the moment you probably won’t notice any difference on your Facebook profile or business page. Later down the track it has been speculated that not as many design and layout changes will occur but no one can be sure at the moment.