Facebook’s $100 Billion IPO

Back in February, I posted about the value of Facebook and Twitter.  This was at a time where a big investment from Goldman Sachs had put them at around the $50 billion mark.  Back then, with just (!) 600 million users, the value of each user was about $83.  The current figure places the per user value at around $125 given the current user numbers of 800 million.

That’s a big increase in value.

One of the key things I noted back in February was the fact that although the value of each user was  high, the revenue from each user was a lot lower – last year, Facebook made about $4 for every user, although it did make a profit.

Over the past 9 months, the amount of advertising on Facebook has increased, both in terms of the competition for eyeballs, and the amount of different opportunities that advertisers have.  It’s probably fair to assume that when Facebook  publish their revenue / profit figures this year, they’ll be hitting more than $10 per user in revenue, and, they have more than a third as many users now as they did back at the beginning of the year:

Growth of Facebook
Facebook Users Over Time

Earlier this year, it looked as though Growth for Facebook was tailing off a little, but it’s actually increased over the course of 2011, and given that they announced their 800 million user landmark in late September, they should be hitting the 900 million figure early in the new year.

Given that the rumours around Facebook’s IPO put it around April time, it’s highly likely that if user growth continues at the current level, they’ll be around the 1 billion user mark.  I’d expect an announcement to that effect around the date that they ultimately set – in fact, given the amount of data that Facebook collect, I would expect that they might engineer a coincidence of the two events.

In April, I blogged about how the big challenge for Facebook would be turning those users into income post IPO when they start having to maximise profit for investors.  It’s going to be a massive challenge.

More Advertising

They’ll almost certainly roll out advertising through the mobile versions of the site – That’s actually likely to be really useful for both members and businesses:  think events near you, special offers at shops based on geo-location tech in your smartphone.  It’s also an untapped market for them at the moment – according to Facebook’s stats page, around 350 million users access the service through their mobile.

Advertising rates will almost certainly rise.  A lot of cash is already getting spent on Facebook adverts and sponsored stories.  The auctions will intensify, and the CPCs will rise.  We’ve seen it with Google, we’ll see the same from Facebook.

Premium Features

Facebook is not going to start charging for memberships.  That is simply not going to happen.  It’s also highly unlikely that they would ever charge for businesses to have a presence on the site – Facebook would not risk the amount of ancillary promotion that they get from other people’s advertising campaigns – “visit our Facebook page”.

However there are plenty of things that businesses would pay for – additional analytical data about how people access their content is one thing.

Making “Organic” Social Harder

This would be controversial.  Right now, a lot of businesses run their Facebook activity for the cost of the time it takes to manage their profile page and the amount of time they spend engaging with users.  Getting likes and commentary is organic and based on the amount of content that you can share that resonates with your audience and what they feel comfortable sharing.

Given that Facebook own their platform in the same way as Google own their search results and can manipulate the EdgeRank algorithm in the same way as Google manipulate theirs, it can make organic social media much harder and push paid engagement as a better option.

Is that likely?