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Investors “Like” Facebook Becoming Public

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Everyone has that one friend on Facebook who posts worthless statuses, which we all could do without reading. Soon, all those shenanigans are going to change. Unfortunately, I do not mean that Facebook is prohibiting the posting of worthless statuses. Instead, John Doe’s status, “OMG its raining,” though meaningless, will have a monetary value.

In early February, Mark Zuckerberg and his Facebook team started filing with the Securities and Exchange Commission for an IPO, an initial public offering. IPOs are given to private companies, new or old, who choose to become public where stock in that company is traded between the average trader and the firm. Companies choose to switch from a private firm to a public firm because it needs more funds to finance future projects.

In Facebook’s case, Zuckerberg had a different reason to make the move. The CEO expects to acquire around 500 investors. When that time happens, the Harvard dropout is then subject to “the five hundred rule,” which states that if a private enterprise contains more than five hundred investors, then the business must release financial information each quarter to the public. With precious business information out in the open, it only seems natural for the firm to go public as well.

Facebook, compared to most companies, has been gaining special notoriety in relation to its IPO. Facebook will be the highest price IPO in the computer/technology market and could be one of the largest in stock market history, just under Visa, General Motors and AT&T Wireless. Before the social network’s stock can be publicly traded, where it will be found under the symbol “FB,” it needs to raise about ten billion dollars with private investors. In terms of private investing, Morgan Stanley, JPMorgan, Goldman Sachs and others are the major players who have stake in this claim.

Before someone says, “Why would anyone invest in a business that imposes no price for their product?  Facebook does not charge users to have an account,” we must take a step back for a moment. For those of you who have a computer nearby, go to Google and search the phrase “Facebook page.”  For those of you who just clicked on the first link titled, “Create a Facebook Page | Facebook.com” you rediscovered that creating a Facebook profile is free and further affirm your belief that Facebook cannot make any money.

Another portion of readers is going to say, “Joey, that link is in a tan box which means it is an advertisement.  You never click on those unless you want to buy something.” All of you just fell into my trap. Google, just like Facebook, does not charge their users, but to counterbalance the deficit, they both charge companies to post advertisements on their websites.

Zynga, the company that features games like Farmville and Words With Friends, also accounts for a major source of revenue; twelve percent to be exact. Ironically, Zynga, as much as it helped Facebook, is one of Facebook’s biggest threats.  Zynga keeps people on Facebook for a half an hour or longer.  All that time, users are looking at advertisements. If Zynga were to leave for another website, or even make their games exclusive to their own website, all of those advertisements and purchases of Facebook currency would leave with them. The same concept applies to Zuckerberg or Sheryl Sandberg, the CEO more known for being the only “adult” of the company.  If they were to leave, the leadership is left with what many Facebook users feel is an irreplaceable void.

In addition to the possibility of people leaving, Facebook is also aware that it possibly cannot bring in as much new users as they did in previous years. Growth within the United States started to slow significantly while growth in China is non-existent altogether due to its censorship laws. Therefore, the name of the game for Facebook is to hold on to its users, which may prove to be tough in the future.

Google+, Google’s social networking site, threatens Zuckerberg to steal online users, especially since Google+ claims they can let users control their data more effectively, particularly sensitive personal data users do not want colleges, bosses or businesses to acquire, something Facebook does not do so well.

Soon, every picture, group, comment, status, “like,” game and any other interaction on Facebook will have a monetary value, but the user will not be able to make a profit off of their own profile. Who will? Zuckerberg is estimated to be worth twenty-four billion dollars. For all those pro-99%-er’s, do not gather your picket signs or start your chants just yet. Zuckerberg announced that he will have a salary of one dollar per year.

Best case scenario, Facebook’s stock booms for its investors and funds a better Facebook product for its clientele.  If only they could prevent John Doe’s statuses from hitting cyberspace.

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