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.
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