More from the Guardian about Facebook. Up till now, shares in Facebook have been held privately, with hand-picked investors who have been funding the company in return for what they hope will be a huge payday when the shares are offered on the public stock exchange, so that anybody can buy them.
It’s always sobering to look back and wonder how rich you might be if you’d had $1000 to invest in Apple, or Microsoft, back when their shares were offered for sale. Mind you, Apple in particular has been a rollercoaster ride. Many shareholders will have bailed out in the mid-1990s, before the return of Jobs, and regretted it.
Is Facebook worth $100bn? Their problem is, they only have one product: you. And if you don’t click on ads, or stop using the service because you find something less intrusive, then you’re not worth anything. Is every user of Facebook potentially worth $100? Seems unlikely. Are half of Facebook’s users worth $200 each? Also unlikely.
The only way to make more money is to start aggressively targeting advertising in order to encourage more people to click on them. When MySpace started to be more commercial, people abandoned it. Will the same thing happen here?
Some analysts believe that Facebook’s reliance on advertising is a weakness. “I worry that the billions of dollars of revenue that they generated last year aren’t as solid as they need to be, because the advertisers who spent the money aren’t as thrilled with the results they got for it,” said Nate Elliott, an analyst with Forrester Research.
And Facebook is now wandering among giants – with one in particular eager to crush it. Google’s annual revenues in 2010 were $38bn, ten times larger than Facebook’s, and almost all of that comes from advertising. Google is setting up its own social network, Google+, and trying to tempt people away from Facebook through come-ons in its search results in the US which have pushed Facebook results down.