Patrick Salyer doesn't work at Facebook. He doesn't own any of its stock. But he's one of thousands of entrepreneurs in Silicon Valley and around the world who stand to make a lot of money when the Menlo Park social network goes public later this year.
Salyer, 30, is chief executive of Gigya, a Palo Alto startup that helps clients such as Nike and Home Depot reach customers via their Facebook accounts. He said Facebook's filing Wednesday to go public -- which unveiled a trove of data about the company's revenue and customer growth -- will be "a wake-up call for businesses" to step up spending on social media and benefit companies like his.
The number of startups that have sprung up in recent years to make money via Facebook's platform easily runs into the tens of thousands, said Steve Garrity, co-founder of Hearsay Social. The San Francisco company helps big brands like 24 Hour Fitness manage relationships with customers using social networks.
Garrity and others say the coming tsunami surrounding Facebook's initial public offering will impact that startup "ecosystem" in a number of ways. Facebook itself, flush with as much as $12 billion in post-IPO cash, could well go on a buying binge to plug holes in its offerings. And with as many as a third of Facebook's 3,000 employees expected to become millionaires, valley veterans say a new generation of startups will be seeded.
Valley saw a big wealth effect from the Google (GOOG) IPO," said David Sacks, CEO of social networking startup Yammer. "This could literally be 10 times bigger."
The Facebook ecosystem ranges from gaming giant Zynga, from which Facebook reaped more than $400 million last year, to the makers of some 7 million software applications, or "apps," that are now integrated with the social network's platform.
People can buy gifts, swap music or troll for job candidates, among a host of other things, on Facebook. And so many companies make money buying or selling goods -- real or virtual -- on the social network that the buzzword "f-commerce" has joined the more venerable "e-commerce" in the tech lexicon.
Sacks, whose company makes social networks for corporate clients including Yahoo (YHOO) and 7-Eleven, has more insight than most people on the opportunities and challenges awaiting Facebook and its CEO, Mark Zuckerberg.
Both companies were funded by PayPal co-founder Peter Thiel. Sean Parker, Facebook's larger-than-life first president, sits on Yammer's board. And as PayPal's former chief operating officer, Sacks has firsthand experience taking a hot Internet startup through a closely watched IPO.
He thinks Facebook, to stay creative and keep revenues churning, may get into the lucrative search market, currently dominated by Google. Others predict Zuckerberg will buy online advertising technology in an effort to take market share from Google, or mobile computing startups to better compete with Google and Apple (AAPL), or gaming studios to decrease Facebook's reliance on Zynga.
"All of a sudden, you've got an Internet monster with a huge number of zeros at their disposal. They just have so much ammunition," said Andrew Perlman, president of New York-based Vringo. The company's products include an app called FaceTones that displays photos of your Facebook friends when they call your mobile phone.
Perlman said the app has been downloaded close to 1 million times in the six months since it was introduced; he expects it to provide the bulk of his company's revenue this year, though he declined to offer specific numbers because Vringo, which is traded on the NYSE Amex exchange for small companies, hasn't yet reported its full 2011 revenues.
But the 6-year-old company has already reaped benefits from Facebook's IPO plans: Since news broke Friday that the filing was imminent, Vringo's share price has risen 68 percent on heavy volume, as it's one of relatively few public companies whose products are tightly tied to Facebook's.
While Vringo and Gigya have recast themselves in recent years to ride the Facebook wave (Gigya was founded in Israel in 2006 as a maker of MySpace apps), the lure of f-commerce might best be illustrated by Pleasanton-based Milyoni (pronounced million-eye). It helps entertainment companies distribute movies, including the Batman blockbuster "The Dark Knight," and live concerts on Facebook, and also lets them sell tickets and merchandise.
The company was launched three years ago by a group that's hardly the stereotypical Web 2.0 team: Its 40- and 50-something founders are former high-ranking executives of retail chains Mervyn's and Toys R Us.
"Our wives definitely thought we were crazy," laughed Dean Alms, the company's head of marketing. "But you've got to put your store where the people are."
Alms cited a recent report by Booz & Co. that predicted Facebook and other social media sites will help sell $30 billion worth of tangible goods by 2015, including electronics, clothing and movie tickets. That's more than triple this year's estimate.
And it doesn't include the digital items, like music and Zynga's in-game virtual goods, from which Facebook derived about 15 percent of its revenue last year. Facebook noted in its IPO filing that the worldwide market for virtual goods is expected to hit $15 billion by 2014.
"We're still in the first inning," Alms said of the social phenomenon. "When e-commerce was first invented, it didn't make untold millions for companies. But now it does."
Most Popular Stories
- Chobani Counters Competition With Expanded Lineup
- 'Beige Book' Federal Reserve Survey, April 2014: Full Text
- Jack White Records Songs, Releases Vinyl in Hours
- 420 Pot Holiday Tries To Go Mainstream
- Malaysia, Flight 370 Relatives Talk Financial Help
- GM Boosting China Production Capacity
- Automakers Turn to China to Fuel Sales Growth
- Easter morning delivery for space station
- Delay in Ferry Evacuation Puzzles Maritime Experts
- Pope Francis, Huge Crowd Joyously Celebrate Easter