Social networking site Facebook filed for a stock market listing on Wednesday, lodging their application with the SEC with an aim to raise 10 billion dollars – valuing the company at around 100 billion dollars.
This decisive step in the evolution of Facebook was presented last weekend: the social network with more than 800 million members was preparing to file their stock market listing papers with the SEC, with their aim being to raise between 5 and 10 billion dollars which could provide the company with a market valuation of between 75 and 100 billion dollars.
They will now have to try and gain the interest of investors to pick up the stock. The social network has 845 million users, close to 40% more than last year, although their revenue sources are essentially based on online advertising.
The first financial details of the company were released with earnings being 3.7 billion dollars in 2011, an 88% increase compared to the previous year, with a net result of 1 billion dollars. This is not quite what was expected, with some forecasting earnings of closer to 4 billion dollars.
If they want to become a blue chip, they will surely have to develop their future earnings capabilities, with efforts until now being focussed on the user experience and services so as to increase the user population by as much as possible, and block their competition from getting the jump on them.
Interesting growth possibilities Besides the classic online advertising mechanisms, there are other methods that could be looked at to exploit the extraordinary database of user information that they have available to them – the element that provides the company with their real wealth.
Things can get complicated though as there are privacy concerns that have to be respected. One false step and users could move on to competing services while regulators take a closer look at Facebook, their size and influence.
This initial release of financial information reveals that Facebook has also seen a strong increase in their R&D costs, leading to more modest growth than other recently floated web companies for whom three digit growth has been recorded.
This slightly breaks the myths surrounding Facebook, although potential investors will nevertheless be confident in the immense opportunities the social network presents through the development of their ecosystem. This will assure that a very large user base is maintained, with a number of different options being available to maintain their current growth rate.
The only thing left to do now is list on the stock market, with this planned in the spring of 2012. Mark Zuckerberg and the management team have been actively working on this for a number of months.