What Facebook's IPO Means for Users
Facebook's decision to become a public company is seen as a bellwether for Web 2.0 stock offerings, but what will it mean for the social networking giant's 800 million users, and for the companies that build third-party apps for the site?
Facebook filed for its initial public offering (IPO) Wednesday afternoon, a move expected to raise it between US$5 billion and $10 billion. But it also means Facebook will come under greater public scrutiny, and it's likely to face intense pressure from investors to keep growing its business each quarter.
Industry analysts point to a few key areas where Facebook will seek to expand, through either in-house development or acquisitions. The changes could appear in what users are able to do on its site, and in how Facebook uses their data to make money.
Facebook will almost certainly improve the mobile experience for users. It has been explicit about its intention to "invest in new technologies so you have a great Facebook experience no matter where you go," as one company blog post put it.
Users can expect to see changes in the mobile experience sooner rather than later, said Brian Blau, a technology analyst at Gartner. "Facebook right now is a company that really has two experiences: desktop and mobile. Those experiences just in the past couple of months have started to look similar. You can see the direction Facebook is going."
The money raised through the IPO will also empower Facebook to mount a more serious challenge to its wealthy competitor, Google. Facebook could look to improve its search function in particular.
Patrick Moorhead, the founder of Moor Insights & Strategy and a former executive at AltaVista, put it this way: "If Facebook had one of the better searches, why would you have to leave Facebook?"
The company already gets one in four page views on the Web, but it garners just 10 percent of Internet ad revenue, said David Greenbaum, the CEO of BoostCTR, a marketing firm that specializes in search and social media platforms.
A better search function could help increase its share of advertising dollars. Greg Sterling, of Sterling Market Intelligence, said the utilitarian nature of search platforms helps account for the greater success of their advertisements.
"Facebook is a great communication tool," he said, "but in some ways it's not useful like search." When users go to a search site, he said, "they have tasks and they accomplish them. They're making reservations; they're buying things."
Facebook will almost certainly continue to make itself a friendlier ecosystem for third-party apps, several industry analysts said. In August, the company earned the dubious honor of "worst API" in a developer survey conducted by Trove, a photo aggregation service. In September, Facebook started pushing its new open-graph API (application programming interface), linked to its new Timeline feature. For users, that could mean a spate of new apps, for desktop and especially for mobile.
The hundreds of thousands of companies that rely on Facebook's APIs will see mostly upsides from the IPO, industry observers said.
"The money raised will be beneficial to the whole Facebook ecosystem," says Rebecca Lieb, a digital advertising and media analyst at the Altimeter Group. Facebook will also likely try to secure more partnerships to ensure revenue growth, according to some analysts. Several analysts think Facebook will need to make its APIs more stable; otherwise, as a public company, it may have to disclose execution problems that in the past it might have been able to conceal.
Facebook has made fledgling moves into commerce, and some analysts predict it will move more deeply into that area to sustain future growth.
In advertising, Facebook's chief selling point is matching sellers with potential buyers based on personal data. Facebook's culture is "to push the envelope on privacy," Sterling said, and as it looks to maximize ad revenue and offer new services, that tendency may intensify, he said. "But it's kind of an Achilles' heel for them, in that if they go too far they risk alienating users," Sterling said.
Others think users may get a bit of a reprieve from Facebook eroding their privacy. Colin Zick, a partner at Foley Hoag, suggests the greater public scrutiny afforded public companies could force Facebook to play nicer with its users. The SEC requires risks of data breaches be reported, for example.
"Facebook already takes advantage of users way beyond what I'd consider acceptable," said Gartner's Blau. But, he said, "they're in the business of making money, and they do that by exploiting all the private data that you and I dump into Facebook every day. I don't think there's any difference if they're public or private."
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