Yesterday, one of the most anticipated days of the year, Facebook filed for its initial public offering (IPO) with the SEC. Employees of Facebook and potential investors have cause for excitement when the day comes, in just a few months, as many will become millionaires.
More than just the future owners have reason to be ecstatic in the Silicon Valley area. When Facebook hits the stock market and hundreds and potentially thousands of millionaires are made overnight, these newly rich are going to look to spend some of that cash. Real estate prices have already begun to rise in the Menlo Park area, the neighborhood surrounding Facebook headquarters. Not only real estate companies relish in this rare opportunity of a sudden boom, but so do all the industries revolving around a sudden burst in population growth to a given area. Anyone from construction firms to retail firms will surely grow with a large influx of customers with disposable income.
Google comes to mind whenever a huge technology company is set to go public because Google claimed such a successful IPO. Facebook's $5B listing is the world's largest ever for an Internet company. One of the reasons for such a high listing is because of the success Google has become, giving Facebook a lot of confidence in what the company can achieve. With a user base of over 800 million, Facebook has been dominant in social media attracting nearly one out of every eight people in the world! Some also believe Facebook to have a higher listing than Google because of the intimacy Facebook presents. Google is a search platform that users tend to get in and get out, whereas with Facebook, the user tends to be more invested in the website with the ability to have an impact on their experience within the site. Facebook has grown its user base at a steady rate, making it very attractive for advertisers.
An IPO is just what many competitors, reporters, and investors were hoping for. The secrets about much of what Facebook has done since 2004 will be available for the public to dissect. Facebook ended 2011 with $3.9 in cash, which sounds like a lot until one finds Google to have $45B in its possession. Currently, Google receives more than $30 in revenue for every user to Facebook receiving a mere $4.39. Some evidence of this can be documented that while Facebook users are browsing around looking at friends with no real purpose, Google users are mostly on the search engine to fulfill a need whether that's to buy something or answer a question. Facebook users are advertised to on many different qualities presented on their page, where Google users are advertised to on one quality that is exactly what they are looking for at that given time. These differences present a large degree of separation in the effectiveness of advertising, in turn revenue, created by each site.
The documents created by Facebook have shown that if the user base continues to grow at the same steady rate, 1 billion users will be on Facebook by this summer. This can only be helped by its hopes to land in China with their website. If Facebook can get around the government controls and regulations in China, they will be a large step ahead of Google, as Google has already pulled out of the country due to disagreements with the Chinese Government.
It will sure be a long awaited few months before Facebook takes to the market this spring. Can it top the $100 billion mark?