Facebook announced its intentions to go public on the stock market on Feb. 1. This announcement was met with a lot of questions as users and experts both wondered what this would mean for the Internet’s largest social media website.
Facebook has filed to share just a small portion of its stock on the public market. The company plans to make about $5 billion in stock sales. This is $3.1 billion more than when Google went public in 2004. This amount will likely vary based on the demand of consumers, causing the price to fluctuate. Going public is just one way a company can get an injection of cash. Facebook gets a large portion of their profits from advertising and charging fees to third parties who want to publish apps on the social network. Investors’ cash could give the company an additional revenue stream when ad and publisher revenue is low.
Facebook going public really shouldn’t affect its users at all. Facebook is not offering up enough shares to give anyone a controlling interest in the company; to do that they would have to release two-thirds of their total shares onto the market and then someone would have to buy all of the shares. Due to this recent change, Facebook is going to have more money to spend for improvements or to implement new ideas.
While the filing doesn’t mean essentially anything to the public, it does give them an insight into the profits and workings of Facebook. The filing requires that Facebook makes its assets known to the FEC and make them public. The filings showed that Facebook’s gross profits for 2011 were $3.7 billion. The filing also included information on their membership. The social network has 845 million users, about half of whom access the website through mobile devices or apps. Facebook gets 19% of the profits from any money users spend on Zynga digital products, the creator of Words With Friends and other popular games.
Those looking to invest in Facebook better have deep pockets. There is likely to be a rush of investors attempting to buy up as much Facebook stock as possible; this will drive the price of stock way up. This may not be the wisest investment, as Facebook is expecting slowing growth in the next few years until a new user market can be found.
For users, this news means nothing. For investors, Facebook may be a riskier purchase than many would think. Overall, Facebook going public is a big thing, but not nearly as big as people expect. The one thing users and investors will gain from Facebook going public is greater transparency in their earnings and assets.