Facebook is expected to have its Initial Public Offering (IPO) this Friday, May 18th, and everyone’s wondering what a post-IPO Facebook will be like.
Quick background: an IPO (or “going public,” as it’s commonly called) means that shares in the Facebook company will be sold on the Nasdaq Stock Market. For most regular people, this sale won’t mean a thing: only wealthy investors will have a chance to buy in. Facebook is rumored to set its valuation at $90-95 billion, or about $28-$35 per share.
After the IPO, Facebook will have to take its shareholders’ wishes into consideration, and it will be under pressure to meet revenue and profitability goals. Some analysts say that Facebook will have to increase revenues by 41% over the next 5 years to meet its high valuation.
How might Facebook increase advertising revenue? In two broad ways: (1), get more members, perhaps by expanding their user base into new countries and appealing to a broader age range; and (2), find new and more effective ways of making money off current users. We have some specific predictions on how Facebook will seek to do this.
#1: Facebook will launch an ad network
They may launch their own ad network to compete with Google, so you’ll start seeing Facebook ads off of Facebook. Facebook has long been able to track both members and non-members off of Facebook through its Social Plugins, including its Like and Connect buttons. Even if you never click these buttons, they can tell Facebook which sites you’re visiting, what you’re clicking, your IP address, and more. If Facebook launches an ad network, it will have a much more noticeable presence across the Internet.
Facebook revised its Data Use Policy this past Friday, May 11th, to include language that supports this ad network prediction. In fact, Facebook’s Chief Privacy Officer Erin Egan echoed this in a live Q&A video session on Monday, stating, “We may serve you an ad off Facebook. We have nothing to announce yet, but there was some language in the data use policy that indicated that we may show an ad with a social context or any kind of ad without a social context.”
#2: Expect to see Facebook login (Facebook Connect) on more sites and apps
You won’t be able to use a growing list of sites and apps unless you’re willing to sign in with Facebook, similar to how Spotify is today. Even though logging in with Facebook Connect is fast and easy, be aware that its system often shares far more than your login information between Facebook and the site you’re logging into. And if you’re not a Facebook user, then you won’t be able to use these apps or sites at all. Expect to see more partner sites, like Rotten Tomatoes, Scribd, and Pandora, that are deeply integrated with Facebook.
#3: More pre-selected sharing options
You may see more pre-selected sharing options on Facebook. Although Facebook has historically encouraged sharing anything you want, it’s easier for data collection and analysis (and thus advertiser use) to have users share pre-set things. Think of the difference between typing what you’re reading into your status bar compared to using an app like Yahoo’s Social Reader to automatically broadcast what you’re reading, or the difference between sharing “I’m now an organ donor” in your status compared to choosing a “Life Event” to announce the same thing.
Some experts, ourselves included, believe that users’ privacy concerns will affect Facebook’s valuation. If you acknowledge that increasing Facebook’s revenues requires increased use and sale of its customer data, then you must consider users’ privacy concerns.
Facebook’s going public, but you don’t have to.
Join us this week and begin to use Facebook more privately. Try our Facebook Val-You calculator to see how much money you’re worth to Facebook in a given year. Check out PrivacyWatch, an email alert system that tell you when Facebook changes its privacy policies and gives you exclusive, step-by-step instructions from our experts on what you should do to protect your personal information. You can also find our list of the top 7 Facebook privacy settings you need to make, and follow our blog for Facebook privacy news and tips.