The Facebook float

May 19, 2012

Talat Zaki Hafiz




The world’s largest social networking site Facebook has partially floated on the US stock exchange with the company valuing itself, in total, at $100 billion. Facebook’s offering is indeed historic. This is more than just another initial public offering. It’s the largest ever for an Internet company and among the largest for any US company in history.

It is unprecedented for a company just eight years old to receive a market cap of $100 billion. But Facebook is no ordinary corporation; it is one of the biggest business success stories in history. The site had one million users by the end of 2004, the year wonder boy Mark Zuckerberg started it in his Harvard dorm room. Two years later, it had 12 million. Facebook had 500 million by the summer of 2010 and right now has 901 million members.

And there’s plenty of room left for Facebook, particularly in developing countries where people are only starting to get Internet access. As it is, about 80 percent of its users are outside the US and Canada.

This staggering rise in popularity is one reason why Facebook Inc.’s initial public offering is one of the biggest in years, making it worth more than Ford or Disney.

But if Facebook is to live up to its IPO hype and reward the investors who are clamoring for its stock, it needs to persuade some of the resisters to join. For all the millions on Facebook, millions elsewhere are Facebook holdouts. Two out of every five American adults have not joined Facebook. Among those who are not on Facebook, surveys find a third cite a lack of interest or need. They say they don’t want Facebook and insist they don’t need it. Some people don’t join the social network because they don’t have a computer or Internet access, are concerned about privacy, or generally dislike Facebook. While more than half of those under 35 use it every day, about three-quarters 50-64 years old are not on Facebook.

The resistors or those without the means — those without a college education are less likely to be on Facebook, as are those with lower incomes — suggest fewer opportunities for Facebook to sell the all-important ads. Fifty-seven percent of Facebook users reported that they never click on Facebook ads, and 54 percent said they wouldn’t feel safe buying things through Facebook. And as more users come to rely on mobile devices rather than computers to access Facebook, it becomes harder, not easier, for Facebook to use ads effectively without congesting the tiny screens with bothersome promos. When that happens the system isn’t as useful.

Facebook had its critics from the start. Some say they’re living life just fine without connecting to the long-forgotten acquaintances that Facebook became famously associated with. Some deem the site as too much of a frivolous waste of time, what with its endless FarmVille requests from so-called friends. But Facebook is undoubtedly one of the most successful and significant companies of the past 100 years and its IPO valuation proves it.


May 19, 2012
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