What The Facebook IPO Could Mean To Consumers

Tomorrow, a very small group of people — many of them already incredibly wealthy — will be super incredibly wealthy when shares of Facebook start trading on Nasdaq. But while only a few folks will reap a direct, immediate benefit from the IPO, the decision to take Facebook public with such huge dollar amounts attached to the deal will definitely have a long-term impact on consumers.

From its infancy, venture capitalists have been pumping their cash into Facebook, and they will be paid back tomorrow when the company makes shares open to the public. Unfortunately, this now means that Facebook will now have a much larger group of investors, all of whom expect a return.

In order to keep that stock price up, Facebook will need earn more money. The current valuation is around 24 times the company’s sales for the last 12 months.

Unless Facebook suddenly changes to a paid subscription model — which it has said it will never do and which would decimate its audience — to us, this means it will have to resort to more ads on the site and more invasive marketing techniques.

Facebook has generally shied away from conventional advertising (i.e., banner ads, page wraps, video headers), but their unconventional ads don’t appear to be doing the trick for big-ticket advertisers. So we could easily see more standard types of online ads begin to creep their way onto the site. It’s an easy way to generate revenue, especially given the size of Facebook’s audience.

Beyond that, we expect to see more prominent “sponsored posts,” which currently highlight the fact that one of your Facebook friends “liked” a sponsor. Our crystal ball (really just clear plastic) sees these posts being moved into the news feed and presented in a way that makes them more appealing to paying advertisers.

There are already hundreds of millions of registered Facebook users and while that number is likely to continue growing in the foreseeable future, that growth rate will eventually have to flatten. At that point, the site won’t be able to tout its increasing audience size and will need to begin mining that audience for more revenue.

We predict changes to the privacy policy (or re-interpretations of existing policy) that would allow Facebook to skim through your posts and photos to allow advertisers to market directly to you.

So while you currently could like a retailer in order to get its daily deal posts, we would not be shocked if you suddenly started seeing e-mails from Facebook that say things like “We saw you mentioned Retailer X, here is a sale you might be interested in.”

Interestingly enough, over at PCmag.com, they polled staffers for a wish list of what they hope to see happen on a post-IPO Facebook and almost all of their ideas — getting rid of tagging, increased privacy, fewer social reader apps — would seem to have a negative impact on Facebook’s revenue.

Comments

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  1. Lyn Torden says:

    For everyone that makes a dollar without actually creating any value, someone else loses a dollar.

    • maxamus2 says:

      Actually, only the last one out loses a dollar. It’s like buying a painting then selling it for more, then the next person sells it for more, and so on. The only time a dollar is lost is if that painting ever loses its value (or is in a fire or stolen, etc…).

    • Nikephoros says:

      Thanks to fractional reserve banking, the economy is not a zero-sum game in the manner you’re describing.

  2. Labratt21 says:

    Firefox with adblock plus = facebook sans ads.

    • Derigiberble says:

      Chrome + adblock + catblock = kitties everywhere.

    • TasteyCat says:

      Congratulations for stealing from Facebook. Hope you are this happy when they go out of business in 2 years.

      • DrPizza says:

        Advertisers pay for the opportunity to have their ads viewed, not the guarantee. If I don’t open those ad-laden flyers in the Sunday paper, am I stealing from the Newpaper company? If I change the station on the radio during a commercial break, am I stealing? If I fast forward through commercials on the DVR, am I stealing? Of course not.

        • TasteyCat says:

          Companies accept advertisement as a revenue stream so they can survive. Eliminate that revenue stream deliberately and with no good reason, and don’t be surprised if they either don’t or do but switch to a pay model. People think they can get something for nothing, harming the content creators/enablers in the process. Great way to say thanks for all they do.

        • TasteyCat says:

          As far as comparisons to old media, newspapers get paid based on subscription base, regardless of whether you read the ad. Same with television. If you block ads on a website, that website does not get paid. Granted, I realize that most leeches don’t care that they are merely a waste of bandwidth, but at the end of the day, you are costing them resources while providing them nothing in return.

      • theblackdog says:

        Wait, so I should be upset because a company that I don’t even pay for goes out of business?

      • Illusio26 says:

        If you expect me to feel guilty that I use adblock then you are an idiot. And I suggest you look up what stealing actually means. I never agreed to click on an ad on facebook. ever.

    • ironflange says:

      Hold on a minute. Facebook has ads?

  3. Cat says:

    Increasing Facebook ads (and privacy issues) can be remedied by using FireFox, adblock +, and a number of these plugins:

    https://addons.mozilla.org/en-US/firefox/search/?q=facebook&appver=12.0&platform=windows

    Or, Just delete your account and dont make another one.

  4. clippy2.1 says:

    “What The Facebook IPO Could Mean To Consumers”

    Not a damn thing?

  5. TuxMan says:

    The CIA has deep pockets. It never was about the ads.

  6. TuxMan says:

    The CIA has deep pockets. It never was about the ads.

    • u1itn0w2day says:

      Bingo!

      Instead of just free intelligence for big brother now it’s commericalized marketing information with corporate America benefiting the most.

    • bubblegoose says:

      And don’t forget divorce attorneys.

  7. Nobby says:

    Could it mean BOHICA as well?

  8. YamiNoSenshi says:

    I use FB Purity along with standard ad and flash blocking plugins to minimize the obtrusive ads I see.

  9. 420greg says:

    I predict it closes lower tomorrow than it opens.

  10. Blueskylaw says:

    A company whose founder wears jeans, sneakers and
    hoodies to black tie events, can’t possibly last that long.

    • axhandler1 says:

      “Homer, don’t give up. They laughed at me the first time I wore jeans with a sports coat. I was the first wealthy man in America to ever do that. Now they all do it!”

      • Lyn Torden says:

        If you are already wealthy, who cares what you wear … as long as you wear something.

    • MongoAngryMongoSmash says:

      As opposed to mock turtle necks, blue jeans, and sneakers?

  11. mavrick67 says:

    Facebook, the next My Space . . . soon to be just as DOA

  12. GreatWhiteNorth says:

    This is the time to look everywhere else in the market for good deals on solid companies. With the hype and hysteria around the FB IPO steer clear of it.

  13. MongoAngryMongoSmash says:

    People say Facebook doesn’t make anything…

    Of course they do, Facebook is people… and their data.

    • BorkBorkBork says:

      Yep! FB compiles demographic and psychographic data making it easy to directly target consumers w/ ads.

      Want to only target 18 year old guys who like nachos, baseball, and go to concerts…but don’t like cats? Done.

  14. YouDidWhatNow? says:

    If you’re using a “product” for free…it’s not that thing that’s the product – you are.

    Now they’ll have shareholders clamoring for more and more ways to make money off of you – their product. It’s all downhill from here.

  15. gman863 says:

    I now have a good idea of where Chase will lose its next twenty billion.

  16. ronbo97 says:

    Yes, adblock on FF and Chrome is awesome just about everywhere.

    So the bad news is, what fb will do is embed the ads in your news feed with no way of hiding it (like you can do now with auto-generated farmville posts). Think of it like trying to block product placement in a movie.

  17. AjariBonten says:

    UM ….. when it comes to FaceBook; we AREN’T the consumers … WE ARE THE PRODUCT!

    • BorkBorkBork says:

      We’re a large group of potential consumers who also happen to categorize ourselves (what we like, what we dislike, where we shop, what we do, etc).

      If a company straight up asked you for all the information we provide on FB, there’d be cries of privacy violation, etc.

      But on FB, we give it all away voluntarily. It’s a company’s wet dream!

  18. RandomHookup says:

    I’m soooooo happy that the Winkelvoss twins will finally get their much deserved ~$300 million.

    /s

  19. Cicadymn says:

    Google plus is licking their lips waiting for Facebook to stumble.

  20. Warren - aka The Piddler on the Roof says:

    I’m betting that every time someone logs in or wants to view anything an ad will pop up. As in, a video commercial. And you will have no choice but to view it. Unless maybe you pay a fee. This will be how they get around the ‘We’ll never charge a fee’ promise.

    Look at news sites lately: to watch a minute and a half news video you often have to sit through a 30-second advertisement first. Commercials ruined television, then cable, then the movies, and now they’re f*cking up the Internet.

    On cracked.com, every time I try to watch a video the same stupid f%$!!#% Old Spice commercial pops up. All this ad does is guarantee that I will NEVER buy an Old Spice product ever again. F*ckers.

  21. Shorebreak says:

    What if everyone tires of the phenomena?

  22. Captain Walker says:

    I’m a consumer, this will mean zero to me as I’m not a Facebook “member”

  23. kierzandax says:

    Besides adblock plus (which is also available for Chrome), I would include Ghostery. While there are no trackers nor bugs on Facebook today, I would assume they are coming and coming soon. It also disables the Facebook trackers and bugs other sites have (like Consumerist, for example.)

    If you are especially paranoid, use a different browser for Facebook. I do my normal surfing in Firefox, email in Opera and only Facebook in Chrome.

    Now, someone pass me my tin hat…