Facebook is on course for the biggest internet stock flotation after announcing plans to sell shares to the public, but founder Mark Zuckerberg says he does not wake up with the goal of making money.
The social networking giant is hoping to raise $5bn (£3.2bn) in what is widely expected to be the biggest initial public offering (IPO) from an internet company, with experts suggesting its market value could be as much as $100bn ((£63bn).
Mr Zuckerberg emphasised that Facebook’s “social mission” was to “make the world more open and connected”.
He said: “We don’t wake up in the morning with the primary goal of making money, but we understand that the best way to achieve our mission is to build a strong and valuable company.”
“This is how we think about our IPO as well. We’re going public for our employees and our investors. We made a commitment to them when we gave them equity that we’d work hard to make it worth a lot and make it liquid, and this IPO is fulfilling our commitment.
The new space between economic and social value is still developing, and it is not always going to be easy to separate motives out. Prof Cathy Pharaoh
“As we become a public company, we’re making a similar commitment to our new investors and we will work just as hard to fulfil it.”
Since its inception in 2004, Facebook has attracted 845 million monthly users worldwide and last year made a profit of $1bn dollars (£630m). Registration documents reveal that founder and CEO Mark Zuckerberg, 27, owns 28.4 per cent of Facebook.
Previously, Google held the record for an internet company flotation, raising $1.9bn ((£1.1bn) when it went public in 2004.
Mr Zuckerberg’s comments about making money may seem out of place in the world of massive stock market flotations. But Professor Cathy Pharaoh from Cass Business School told Channel 4 News she is less surprised that the remarks have come from Facebook’s founder.
“If it’s a huge flotation as this one is, it’s highly unusual for someone to say this about what they’re aiming to do,” she says.
“But then again, Facebook is unusual. It’s a company which offers people the opportunity to participate and mould the product, not just consume it. Its product is a social vehicle.”
Prof Pharaoh believes Facebook is part of a larger trend: “I think Mark Zuckerberg genuinely believes in the social value of his product, but he’s an unusual individual and it’s an unusual product.
“I work in the not-for-profit sector and I think more and more companies are learning from that sector and stating their social values, claiming the social value territory.
But it seems the line is blurring between companies which are set up with the aim of making a profit and those promoting more socially conscious agenda.
Prof Pharaoh points to ice cream makers Ben and Jerry’s as an example of where social value was a big part of its asset value when it was sold off.
We don’t wake up in the morning with the primary goal of making money. Mark Zuckerberg
She says: “Social business networks, like the Social Venture Network in the US, have been emerging, whose members combine for-profit and non-profit companies around values of sustainability, social value, and whose products have additional social value, such as the Body Shop, Belu Water.
“Many social businesses are still small, like CafeDirect and Fairtrade, but there are also major green energy companies like Statkraft. These businesses aim to create social value while making a profit. The new space between economic and social value is still developing, and it is not always going to be easy to separate motives out.”
The flotation documents make clear it clear Mr Zuckerberg will enjoy almost complete control over the company, to the tune of 56.9 per cent of the voting shares.
Facebook’s revenue last year was $3.7bn (£2.3bn), up from $153m ((£97m) in 2007, with the majority earned through advertising.
Facebook in numbers
845 million – The number of active users of the site
483 million – The number of these social networkers who log on every day
130 – The average amount of friends per user
250 million – The average number of photos uploaded each day
70 – the number of languages on the site
3,000 plus – The number of Facebook employees
1 billion – In dollars, the profit Facebook made in 2011
3.71 billion – In dollars, Facebook’s revenue in 2011
In order for Facebook to build on its current success after taking to the market, it needs to mine users’ data for better ad targeting via location information, writes Geoff White, Channel 4 News technology producer:
“The map view is a major feature of the new site redesign. Updates and pictures will be located according to where they happened in the world.
Another example of online companies getting into “real world” ideas can bee seen on Google Maps, Foursquare and Grindr.
But how will this location data be used for targeted ads?
Take an example – if Facebook already knows a user is a biker, and it then sees lots of motorbike-related updates and pictures of London, then a couple of snaps taken in France and a couple in Spain, it might assume that user probably lives or works in London and is keen on biking holidays abroad. It can then take this information and generate ads for biking holidays in Europe and ads for motorcycle spares in London. Advertisers will pay a lot for that kind of detail.
For the moment Facebook has held back on such tactics, indeed every other move it has made to sacrifice users’ privacy for profit has been met with howls of indignation from Facebook users. But with shareholders involved, it’s going to be harder and harder to resist invading users’ experience to increase the bottom line.
The moment Facebook puts ads on the mobile app for users who haven’t so far been used to them, they may leave the site and never come back. The website has gone as far as it can in offering free hosting, blog and FTP software with limited advertising presence, and 800 million people isn’t a bad quantity to convince investors you’re a sound bet.
The big question is whether Facebook can hit the right balance: subtly upping the advertising aimed at advertising-phobic users, while not frightening them off. If the latter happens the site will reach a tipping point where the user interactions so precious to marketers will go into terminal decline.
Perhaps the bigger question is; with billions of post-float dollars in the bank, will Facebook co-founder Mark Zuckerberg be bothered to do the balancing act?”