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Policy

11:25pm February 1, 2012

Facebook IPO: Will You Still “Like” It?

facebookIPO

Since February 2004, Facebook has managed to leverage content voluntarily provided by millions of subscribers.  It essentially provides a reverse media experience while attracting billions of dollars in advertisement.

So, why am I calling the experience “reverse media?”

In the case of Facebook, the company does not produce any of the content we see on the pages of our friends and family. The information is collected from 800 million subscribers around the world; 200 million of them here in the United States. In exchange, subscribers get to renew or maintain connections with loved ones, friends, classmates, and colleagues.

There is nothing like free content, and with advertisers waiting to get their product in front of 800 million pairs of eyes, revenues must be a monster.

And the content is voluminous. It is estimated that subscribers place 30 billion pieces of content on their Facebook pages a month. The iconic “Like” button is pressed 2 billion times a month and 250 million photos are uploaded during the same time period.

Facebook does a good job paying attention to a subscriber’s comments and the links a subscriber provides to his favorite what you comment on as well. Just look at the right hand margin of your page, and you will see sponsor ads based on your tastes and what you may have “Liked” or commented on seconds earlier.

The company is now – it says – a few months away from issuing an initial public offering so investors can own a piece of the world’s largest social media firm. It’s value is estimated in the range of $75 to $100 billion.

Facebook says it’s happy to raise just $5 billion. Talk about setting low expectations.

That’s still a lot of cash.  And, in our case, African Americans and Latinos are the raw material subscribers driving that success.

An analysis done by BlackWeb 2.0 in December 2009 found that the proportion of Americans on Facebook that were African American mirrored the proportion of the American population that is African American. In 2009, BlackWeb 2.0 found that 11% of Facebook’s users were African American. Latino representation on Facebook did not come as close to mirroring their representation in the American population, with only 9% of Facebook users being Hispanic American.

The percentage of Facebook users who are African American may have fallen off over the last two years, however. In June 2011, the Pew Research Council reported that while the percentage of Facebook that are Latino still held at 9%, the percentage of the social network’s users that were African American fell to 9%.

The impact of the IPO will not be on the percentage of users that are minority. Participation may be driven by hardware being used to access the Internet. Instead, the impact the IPO may have on minority subscribers may be based more on what Facebook is doing to prepare for the stock issue.

Just like you prepare your house to show to potential buyers, Facebook must prepare its house for potential purchasers of its stock. This may be part of the reason behind its new “Timeline” format for presenting subscriber pages. The Timeline is scheduled for full launch around February 6. All subscribers will see their pages eventually going to this format.

Unlike Linkedin, another popular social network that issued its IPO last year, Facebook may not be offering a premium tier for its subscribers. Linkedin gears its service toward professionals that want to network with other professionals for a myriad of different reasons, from conducting business to securing employment. Some of these subscribers pay for special access to other subscribers.

Facebook, on the other hand, has always been a free service to subscribers and it appears that aspect will remain. Why pay to talk to an old law school classmate when they are only one alumni reunion party away from you?

The IPO is not expected to have an impact on subscriber privacy either. Facebook entered into a settlement with the Federal Trade Commission in November 2011 where the company agreed to get subscriber consent before changing the way it uses personal data. The company also agreed to subject itself to periodic independent third-party audits of its privacy practices for the next twenty years.

It appears then that at least in the short run, unless you or a relative gets a share of the stock when the IPO takes effect – and you can turn around and sell it quickly – there won’t be much of an impact on you as a subscriber.

However, as pressure is placed on the company to perform and make a profit over the next few years, a question arises: Will the company create tier accounts? Will it add other fee services that facilitate connectivity between its subscribers? Will under-served and minority communities be able to afford it if that happens? And will Facebook push the privacy envelope by giving advertisers even greater access to data about subscribers so that it can sell more ads?



About the Author

Alton Drew
Alton Drew provides advocacy, legal and legislative analysis, and legislative monitoring services for not-for-profit associations and foundations with a particular emphasis on broadband adoption, spectrum acquisition, and capital accumulation. Using various social media platforms, Mr. Drew amplifies messages for not-for-profit associations and foundations as part of their online media campaigns. Follow him on Twitter @altondrew; Facebook at http://www.facebook.com/alton.drew.5; or visit him at www.lawandpoliticsofbroadband.com or www.lawandpoliticsofcapital.com.




 
 

 
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One Comment


  1. vectorash

    With 845 million users generating 2.7 billion Likes and comments a day, last year alone Facebook made over $3.71 billions

    It's entire secret is based on the fact that people are easily fooled and Zuckerberg is really a con artist! http://www.vectorash.ro/facebook-secrets-ipo/



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