Facebook's long-awaited filing Wednesday for
an initial public stock offering marked a new era on the Internet,
establishing the 8-year-old company as the platform to wrest the
Web revolution from the clutches of Google.
At least, that is the view of Facebook's cheerleaders, and it's
hard to argue with them. The company expects to go public at a
valuation as high as $100 billion, despite making a profit of
only $1.7 billion in 2011.
Using the same ratio, Apple the world's most profitable tech
company would be worth $2.2 trillion, or more than five times
its current value. Facebook's IPO is the largest in tech history,
dwarfing the $1.67 billion raised by Google in 2004, when the
company was valued at $23 billion.
Naysayers point to these facts to argue that the Facebook IPO is
far too expensive and destined to ignite a repeat of the dotcom
bubble that triggered a recession in 2000.
"It's difficult to avoid the overwhelming conclusion that
Facebook, at its IPO, will be way overpriced," said Mark Hulpert, a
widely quoted financial analyst.
But Silicon Valley insiders such as venture capitalist Rob
Coneybeer at Shasta Ventures maintain that Facebook is worth the
stratospheric valuation given its unassailable position as the
world's dominant social network.
Its 800 million members are so tied to the site, and use it so
much, that it functions as a utility, essential to the functioning of
modern society.
"Facebook is today what the telephone was 50 years ago," Coneybeer
told the Financial Times.
The counter argument is that modern tech history is filled with
fallen technology giants.
At the apogee of the first internet bubble in 2000, media
conglomerate Time Warner and AOL merged in a stunning
$350 billion deal based on AOL's apparently unassailable
position as an Internet service provider and web portal. AOL is now
worth just $1.5 billion and is seen as an also-ran on the
modern Web.
So far, Marc Zuckerberg, Facebook's billionaire founder and chief
executive, appears to have astutely dodged the pitfalls of dotcom
excess. He patiently resisted all attempts to cash in early, and will
likely spend his IPO billions to gird up for the defining battle of
Web 3.0: the tussle between Google and Facebook for the eyeballs of
the world.
"The cash that could flow into Facebook's coffers in the wake of
an IPO would hire a lot of developers, engineers and researchers and
buy a huge chunk of global-scale data centre and network
infrastructure," says tech analyst Carmi Levy. "This would allow
Facebook to bring sophisticated new services to market that in its
current, privately held form, it just doesn't have the heft to pull
off."
Yet Facebook's future is not just a question of great engineering.
Facebook will have to balance the need to innovate and sell ads with
the need to avoid feeling creepy to its millions of users. It already
has one of the largest customer bases in the world and knows more
about its users than their families do. Misuse of this information
could quickly turn away fickle Facebookers.
A good example of that is the soon to be mandatory Timeline, which
will allow users to easily see any posts their friends have made
since the dawn of Facebook history. Facebook does give members a week
to clean their Timeline before making it public - but has still taken
serious flak for the move.
Whether Facebook can manage the transition from privately held
start-up to publicly owned multinational utility will constitute one
of the most riveting tech narratives in the coming years.
