Technology-investor darling Facebook filed offer documents in its first step towards a highly anticipated initial public offering which could see the company raise $5 billion.
The valuation did not come as a surprise to market observers. But the public listing will expose the company's financials, behaviour on privacy issues and most importantly social-advertisement model to much higher levels of scrutiny. What will it mean for people like you and me and other 845 million users around the world?
The ads popping up next to your wall posts till now tried to catch your attention with a new sedan or high-heeled shoes. There's a chance that these suggestions could now be based not only on what communities or pages you ‘like' on Facebook, but also on the conversation your friends are having on their walls! While this could just be one example of how they drive up accuracy, their methods might end up testing the boundaries of privacy on the Internet. In a business where the biggest chunk of revenue is derived from ads, tracking user behaviour, their choices and interests accurately becomes increasingly vital for social-networking companies.
Experiments vs earnings
Facebook will not only have to prove its mettle in terms of expanding revenues and profits from its online advertising strategy but will also have to start luring users from new countries such as China (where the challenge of appeasing the Government trumps pleasing the user).
Reports indicate that while Facebook's current display advertising product has been grabbing market share, results in terms of actual clicks translating into transactions have been limited. For Mr Mark Zuckerberg and his lieutenant, Ms Sheryl Sandberg, this could mean taking lower risks and experimenting a lot less than the company now does. At the same time, they'll have to deliver a consistently satisfying (if not addictive) experience and create an environment where people are more comfortable with online transactions.
But apart from paranoia over how far Facebook could go with digging into user information to enhance its revenue model, the public-offer proceeds could prove useful in snapping up smaller companies to augment the range of content and entertainment available on Facebook. In case this happens, Facebook-addicts and shareholders alike will have more reason to rejoice.