If you are conversant with top tech blog sites like Techcrunch and Mashable then you already know the gist about Facebook’s new ambition of becoming a public company. In other words, Facebook is filing for an Initial Public Offering that is set to break the previous record of the highest IPO value. In case you are wondering, the previous record was set by Google in 2004. Facebook’s value when they go public is set to be close to $100bn. That’s already close to or a little over quadruple the worth of Google’s $23billion market cap at their IPO. For more on this please check this link.
In the wake of this, so many things are expected and bound to happen – a lot of these things we don’t know for now. One of the notable things that have already happened is Eduardo Saverin (popularized by Hollywood in “The Social Network” movie) renouncing his US citizenship probably because of future increase of his personal tax. Also Mark Zuckerberg – the current CEO has also announced that he’s reducing his salary to $1/month post-IPO. This is not surprising because this could also be seen as a perfectly legal tax evasion strategy but more importantly it shows his long term commitment to Facebook’s vision.
No doubt Facebook over the years has grown to be a really strong company but the question on a lot of investors and enthusiast’s mind is this “Is Facebook in for the long term or just here for some while?” Even the man who once became the wealthiest man off investing in the person of Warren Buffet has chosen to snob Facebook’s stock offering. This however does not really matter to Facebook because of the other numerous eager investors ready to buy pieces of the giant pie Facebook has grown to be.
However there are still a couple of questions to be asked about Facebook’s future. These questions are stated below with my thoughts and answers below each question.
1) Will Mark Zuckerberg remain as CEO after IPO?
As we all know Mark Zuckerberg was a college student when he founded Facebook and with Facebook’s early adoption within Harvard, he had to drop out of Harvard to face Facebook squarely. This means he doesn’t really have any business training, a MBA degree and other certifications other business executives are proud to flaunt. However what Zuck has is probably more valuable than any certification which is his ability to have created and grown Facebook up to this point. This bring to mind his popular quote from the movie ‘Social Network’ when he was referring to Winklevoss twin brothers’ claim that he stole their idea “If you could invent Facebook then you would have invented it” #winning. Even though he started out as a developer, Mark Zuckerberg has shown some really good business instincts and also is a good power player which already ensures that he has the highest voting power in Facebook. This means Mark Zuckerberg mainly controls Facebook’s future direction. What a smart guy! In short, Mark Zuckerberg in the past had already signaled that he’s more interested in the control of Facebook rather than money so I believe he’s still going to fight his way to be the top man at Facebook even post-IPO.
2) Will Facebook conquer mobile?
Facebook has already acknowledged that over 250 millions of it users access the service through its mobile version. Even with this figure, Facebook knows that mobile is one of its Achilles’ heel because of a few reasons. One of the reasons is that to some degree Facebook hasn’t been able to replicate its awesome web experience on the different mobile platforms available now. Facebook’s direct competitor Google+ is however catching up on the Facebook’s web experience and also disrupting the mobile by releasing a really cool version of Google+ for iPhone recently. Another reason why mobile might be Facebook’s Achilles’ heel for now is that mobile hasn’t been a money maker for Facebook. Facebook makes most of its money by serving relevant ads to its users; they have however found that serving ads could disrupt the mobile experience for its mobile users thereby causing adverse effects so they has desisted from doing this. Facebook is not the only company facing this kind of conundrum and the fact that one of their recent investments in mobile “Instagram” has made zero revenue is reflective of this fact. Needless to say, its acquisition of Instagram (which has been compared to the acquisition of YouTube by Google) shows it is concerned about its fate in the mobile world. However to ensure Facebook’s long term success, it has to disrupt and reinvent its mobile experience especially the mobile web and find a way to create a successful business model for its mobile strategy.
3) Is Facebook in for the long term?
Facebook’s long term success is an issue to be concerned with especially for its potential investors. For a company to remain in business it has to keep making at least enough money to keep it running. Like I noted earlier Facebook currently makes most of its money by serving relevant ads, this means it has to make sure its users keep using Facebook or its related products regularly and actively. This gives Facebook the task of continually finding ways of engaging it users to ensure a continuous inflow of revenue. Facebook has notably done a really good job at this and should be commended but apparently this might not be enough for a notable savvy investor like Warren Buffet. One of his fears and others is whether Facebook can successfully keep its users active for a really long time. This is a tricky one for Facebook because Facebook solely depends on users’ engagement for now so it will be hard to predict when user engagement will continue to be good enough for Facebook to continually generate revenue. In other words, active user engagement is Facebook’s oil and how of much this can they get?
4) Will Facebook be able to keep its rivals off its user base?
When Twitter started out 2007 (4 years after Facebook), I am sure a lot of people laughed it off as a Facebook subset clone meaning it was just a mini feature copied from Facebook – Facebook’s status feed. Now 5 years has passed and since then Twitter has grown to be much more valuable than Facebook’s status feed as some critics suggested earlier. In fact Twitter is already becoming a concern to Mark Zuck and his friends. They attempted buying Twitter out but Twitter’s management had other ideas and therefore ignored their offer. Also another really interesting social network around is Pinterest. Pinterest is a social service that makes web antiquing very easy and fun. Pinterest is growing at incredible rate and is no doubt going to be a force latter on. However Facebook knows that it is offering something inherently different from what Twitter and Pinterest has in stock. Twitter and Pinterest are interest based social networks/services, Facebook is a people based social network i.e. while Twitter and Pinterest are interested in connecting different people with similar interests, Facebook is more interested in connecting people with people they already know. Then again why should Facebook worry since Twitter could be ‘inaccurately’ seen as a sub-set or mini-feature and Pinterest’s core feature could be built into Facebook if need be? #winning
So if these two can’t stop Facebook then what/who will? Now introducing the heavy weight competitor heavily backed by one of Facebook’s biggest rivals Google, needless to say Google+! In case you didn’t get the memo, Google isn’t happy with Facebook stealing away a percentage of its ad revenue and current indications show Facebook has just started. This has cause Google to see Facebook as a threat and knew it had to do something about it. Google had already forayed into the social network scene with Orkut but it suffered a relapse and retreated. Now Google is back like a wounded lion that has learnt from his mistakes and ready to take its rightful place as the king. I think it is fair to say Google is not doing badly with Google+ too. Google+ with its recent upgrade has taken a user interface that looks similar to Facebook and also with a comparable experience. Google+ also comes with a really cool feature called “Hangouts” which is simply a multi-person video chat service which was built directly on Google+ and also with an API released to developers. Google is also finding innovative ways of integrating Google+ with other existing killer products it has already. This is a simple but smart strategy considering how they have make products like Gmail social with simple Google+ integrations so far. Really, the talk about Facebook and Google+’s rivalry could go on and on but I will save that for another post and for your comments below.
5) Will Mark Zuckerberg drop his hoodie for a business suit?
Since the inception of Facebook, Mark Zuckerberg has always kept to his causal dressing style which usually is a T-shirt, jeans, trainers and/or a hoodie. This however happens not to be a popular dressing style amongst other top executives at other companies on the Wall Street. Now that Mark Zuck has to compete with the executives on the Wall Street will he adopt their style or choose to remain odd in his appearance? Anyway it will be interesting to see what Mark will decide to do about his appearance in the Wall Street circles.
As the clock ticks we are getting close to these questions getting answered. It will be interesting to see what happens to Facebook post-IPO and also importantly whether Mark Zuck will drop his hoodie. I won’t be surprised to see the release of the Social Network 2 soon lol.