Facebook makes its hotly anticipated stock market
debut this week in a history-making move promising wealth for insiders
and change for users of the online social network.
Hot interest in Facebook stock reportedly
prompted the company to bump the opening price range to $34 to $38 for
its shares, which would value the firm at between $93 billion and $104
billion.
The Menlo Park, California-company will nail
down the initial public offering (IPO) share price before it begins
trading as a public company.
The IPO is expected to happen Friday although the timetable has not been confirmed.
Facebook watchers said users of the social network should expect changes -- though not overnight.
"The only reason a company goes public is to raise cash to expand," said Creative Strategies principal analyst Tim Bajarin.
"So, the general public at least knows the IPO means Facebook will be able to do more things.
"Facebook is not extremely specific on what
they will do with the money; they say they want to be creative, expand,
and do new things."
Facebook will keep the lion's share of the
potentially $14.7 billion raised by selling stock. The rest of the cash
is to stuff pockets of company founders and investors including rock
star Bono.
Mark Zuckerberg, who founded Facebook eight
years ago from his Harvard dorm room, will retain 57.3 percent of the
voting power of the shares and the IPO was structured to allow him to
retain a firm grip on the company.
Graphic charting the rising number of
Facebook users. The Internet giant is expected to debut on the
tech-heavy Nasdaq stock market on May 18.
"He really wants to create an open social
network," Bajarin said of Zuckerberg, who turned 28 on Monday. "One that
allows Facebook to get more aggressive in the way they connect and
provide services to people."
Some analysts predicted Facebook's stock price will jump quickly to $44 a share and climb much higher in the long term.
At the heart of the debate about the wisdom of owning a piece of Facebook is how much revenue it takes in.
Revenue vaulted to $1.06 billion in the
quarter which ended March 31 -- an improvement year-over-year, but down
about six percent from the previous quarter. Eighty-five percent of the
total came from ad sales.
As one analyst noted, however, Facebook only
bills a scant half-percent of the $600 billion spent each year on all
kinds of advertising -- even though at least one of every seven minutes
spent online around the world is at Facebook.
There is wide margin for improvement, seeing as Facebook has more than 900 million users and membership is expanding.
The leading social network is unabashedly
working to follow members onto smartphones and tablet computers, and the
IPO windfall would provide plenty of cash to partner with a hardware
maker on a long-rumored "Facebook phone."
Facebook founder Mark Zuckerberg speaks to
reporters at Harvard Universityin November 2011. Zuckerberg will retain
57.3% of the voting power of the shares and the IPO was structured to
allow him to retain a firm grip on the company.
Morningstar analysts concluded that optimism
regarding Facebook's prospects was warranted and considered its
popularity on mobile devices "impressive."
"Although the company has not actively
developed its mobile advertising capabilities, we expect a substantial
bulk of mobile advertising dollars to flow to Facebook within the next
couple of years," Morningstar said.
Recent Facebook moves have included letting
people store digital files in the Internet "cloud" and allowing
Microsoft to weave social network feedback into results of Bing-powered
searches.
"We've rarely seen a company borrow from its
competition as quickly or as well as Facebook," Forrester analysts Nate
Elliott and Melissa Parrish said in a blog post on Monday. "And that
focus on better serving end users has seen Facebook grow quickly over
the years, even in the face of consistent privacy concerns.
"But as good as Facebook has been at evolving to serve consumers, that's how bad it's been at serving marketers."
Facebook has "lurched" from one advertising model to another during the past five years, according to the analysts.
A report over the weekend indicated that
Facebook was dabbling with a scheme where advertisers would pay to
promote posts at the service in a manner similar to a Twitter model of
charging to give "tweets" high profiles.
"We wish we could predict this IPO would
serve as a new beginning for Facebook's marketing offering, and that a
new focus on becoming a grown-up business would inspire the company to
put even half the energy into serving advertisers that it does into
serving users," Elliott and Parrish said.
"But we doubt Zuckerberg's going to wake up
any day soon having acquired a taste for advertising, or even a proper
understanding of it."
Still, there will be no shortage of people
snapping up Facebook shares. Even Apple co-founder Steve Wozniak has
gone public saying he plans to invest.
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