Facebook's long-awaited filing Wednesday for an initial
public stock offering marked a new era on the internet, establishing the
eight-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 dollars, 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-dollar 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.
