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4 ways the IPO will change Facebook

Even if you didn't buy shares on Friday, if you use Facebook, the social network company's IPO will affect you.

By MSN Money Partner May 18, 2012 3:35PM

This post comes from Rob Berger at partner site U.S. News & World Report.

 

Facebook's debut on the Nasdaq on Friday wasn't quite the feeding frenzy that was anticipated, but it still set an IPO stock record with more than 460 million shares traded. On Thursday afternoon, Facebook had priced its initial public offering at $38 a share, giving it a market value of $104 billion. The stock began trading at $42.05, and rose -- less than expected -- to as much as $45 before falling to close at $38.23.

 

Image: Woman with laptop (© Mike Watson Images/Corbis)Still, the result for Mark Zuckerberg, Facebook employees and early investors is clear. The IPO will make many billionaires and countless others millionaires.

 

But what about the rest of us? How will Facebook as a publicly traded company affect everyday users who just want to know what's going on with their friends and family? While any answer to these questions involves speculation, it's a good bet that Facebook's IPO will change Facebook.

 

Here are four ways users may experience this change firsthand:

 

1. More ads

Facebook makes most of its revenue through advertisements. As a public company, management will experience pressure from the media and investors to meet quarterly numbers. More than that, its hefty IPO valuation will demand phenomenal growth of both revenue and net income. While Facebook would do well to diversify its income streams, it's a sure bet that part of its strategy will involve enhanced ad revenues.

 

Google offers a good history lesson. Anyone who has used the search giant is probably aware that Google inserts paid advertisements above the search results and to the right of the search results. What you may not have noticed is that the number of those ads has steadily increased over the years as Google looks for more growth. In fact, in the last year or so, Google has even started inserting ads promoting its own content in highly sought-after verticals such as credit cards, banking and mortgages.

 

Exactly how this ad growth may affect Facebook users is unclear. But we are likely to see more commercialization of our Facebook pages.

 

2. New mobile

Mobile users of Facebook account for nearly 50% of its user base. According to its S-1 filing with the SEC, Facebook had 488 million mobile users in March. With the growth of the smartphone and tablet markets, more Internet users are going mobile than ever before. So why is that a problem for Facebook? (Post continues below video.)

The problem comes in the form of revenue: Facebook doesn't make any from mobile. Some have predicted that Facebook will introduce ads into its mobile platform. That's certainly a possibility. What is certain is that Facebook will be looking to monetize its mobile platform in one way or another. If done right, it should enhance the user experience. If done wrong, it could mean just more annoying ads.

 

3. Less privacy

A lot has been written about Facebook's IPO and user privacy. What we haven't seen is much in the way of specifics. Exactly how or why would going public have any effect on privacy?

 

The answer is simple: ad revenue. Google gets the benefit of our searches to present us with relevant ads. If you are looking for "Nike Zoom Ja Fly" running shoes, Google can present paid ads for exactly that. But Google is a search engine; Facebook is not. Google has the benefit of knowing in real-time exactly what we are looking for.

 

Perhaps that's why Google generates about seven times more revenue per user than Facebook does. Google generates about $9.52 per monthly user, while Facebook generates just $1.32. And that's a big problem for Facebook.

 

One solution would be to improve its ad platform. To do that, it may turn to more user data. If done correctly, the result could be positive for users. Relevant ads that don't overwhelm the content can be helpful. Taken too far, however, the results could be disastrous.

 

4. Facebook-generated content

If the above potential changes at Facebook are speculation, this one can safely be categorized as wild speculation. But it seems that Facebook-generated content, in contrast to the user-generated content that dominates now, has tremendous potential if executed correctly.

 

Currently, Facebook has a wealth of data that is largely untapped. Putting aside privacy concerns for a moment, one wonders if Facebook could enter markets now dominated by the likes of Groupon, Craigslist and Yelp in ways no other company could.

 

Facebook would need to leverage the information already tucked away in more than 900 million Facebook pages. But if it could do so in a way that made our lives better without compromising privacy, the potential is virtually unlimited.

Imagine Facebook-created content about local events powered in part by user-generated content stripped of any data that would give rise to privacy concerns. In some cases, Facebook could choose to generate its own content; in other instances, it may choose to partner with existing technologies and brands. But either way, the income potential makes me wonder if this isn't in Facebook's future. Time will tell.

 

More from U.S. News & World Report and MSN Money:

   
18Comments
May 19, 2012 1:51PM
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There is no privacy. Besides, Zuckerberg got what he wanted, he can forget what happens next.
May 21, 2012 10:32AM
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So, FB is now down over 11% from its IPO price, proving beyond any doubt how Wall Street distributors were propping up the price on Friday with a false $38 floor. You know the Wall Street I’m talking about, the ones who are supposedly now bound not to take positions under the Volker Rule.

Um, I’m just curious Mary Schapiro, how exactly does the SEC define stock price manipulation?

I think the best way to protest Wall Street today is to close your Facebook account. Those of you who can't survive the DT's of life without Facebook (poor bastards) can always reopen one in a few days.

May 21, 2012 1:23PM
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FB Letting Out All The HOT AIR leaving Investors Wallets FLAT !

May 18, 2012 10:31PM
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Zuckerberg's biggest change will be using the equity to diversify his company. He will buy other profitable companies guaranteed. Even if Facebook were a break even empire the other enterprises he can get his hands on will all but secure a very profitable future.
May 22, 2012 12:33PM
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FACEBOOK WILL START FADING INTO OBLIVION AS THE FOLLOWING MONTHS GO BY. DOWN WITH FACEBOOK, FINALLY!!!

 

ZUCKERDICK IS A THIEF AND ALL THE PEOPLE WHO BOUGHT SHARES ARE F*CKING IDIOTS

May 22, 2012 11:48AM
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The reason why MySpace failed was because it was too clunky and obnoxious to use.  It took too long for stuff to load and to do anything useful.  Facebook became the natural alternative because it was much lighter  and refreshing.

 

The way this article describes Facebook, it's going the way of MySpace.  Facebook is already getting less user-friendly, and I don't especially want ads IN MY FACE that more and more are reminding me of my shortcomings.

 

And point #4?  Give me a f****** break.  This is exactly the hype that causes people to lose their shirts by investing on vague and empty promises and YES, I'm speaking from experience here.  Point #4 says NOTHING.  Full stop.

 

 

May 22, 2012 1:25PM
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Facebook will go the way of MySpace.  All the users will port over to the newest "venture-funded" social site that isn't making money nor advertising, but just building popularity.  Facebooks' only money making prospect is its popularity.  The only reason it got popularity was that it was an ads-free MySpace.  Commercialization and popularity don't go together well in america.
May 22, 2012 8:32PM
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I, in no way need Facebook. I get by just fine without it. But if you take Ebay, google or Craigslist away my life will be affected greatly. They are tools. Facebook is in no way a tool. FB will crash just like Myspace. Myspace just sold for 35mill. It was huge at one time, just like FB. Just a matter of time.
May 22, 2012 8:23PM
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I think an  R  should be added for a more appropriate name... FARCEBOOK!    so over the top!! :)
May 23, 2012 9:25AM
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i thought zuckerburg said there would never be live nude girls.WELL THERE NOT NUDE BUT THE CLOSEST THING TO IT CALLED THE FACE BOOK GIRLS JUST TO GET THE YOUNG BOYS TO LOG ON HE'S NOTHING BUT A LIAR AND A COMMON THIEF.AND CAN'T WAIT TILL HE GETS WHAT HE DESERVES.
May 22, 2012 6:40PM
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Facebook is become the hula hoop of the 1950's
May 23, 2012 9:45AM
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hey all u brain dead facebook users.how about get a life,or heres a thought do your job instead of wasting time on the bosses computer.losers.facebook shares will end up a pennystock.there is no real valur in the company.
May 20, 2012 8:02AM
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when the Occupy wall st. bunch gets wind of facebook as a Billion dollar Co. from their trivial facebook pages.....they will be having some conniption fits.....especially when they got NOTHING out of it...

LOL....

May 23, 2012 10:18AM
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Another way that the big money guys take your money.  Have I got a deal for you ... invest in FaceBroke !

 

May 23, 2012 9:30AM
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EDWARDO IS STILL LAUGHING ALL THE WAY TO THE BANK.
May 22, 2012 6:39PM
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As soon as another type of facebook page pops up FB will probably buy them out if they are a threat.
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