Posting: 4
Topic: Technology
Author: Somini Sengupta
Publication: The New York Times
Date of publication: 5/14
Article length: 1481
As Facebook nears its public offering, set to be the biggest ever for an Internet company, pressure on Zuckerberg and the rest of the company to do a aggressive business is set to sharply increase. Facebook's primary asset is its large collection of user data, but it remains be seen if they can turn that data to profit to justify its high valuation at $104 billion.
Facebook's future business strategies remain unclear. Unlike Google, Facebook has “built an incredibly valuable asset — as opposed to a business they have executed well,” says an anonymous investor.
One of Facebook's main problems is how it can use that data to match ads to people without violating their users' sense of privacy. Facebook already faces audits in Europe on whether the company is living up to promises made to consumers about how it uses their data — and now, a stringent new data protection law. In India, it has been sued for spreading offensive content, and in the United States, it faces privacy audits by the Federal Trade Commission for the next 20 years.
Facebook's future business strategies remain unclear. Unlike Google, Facebook has “built an incredibly valuable asset — as opposed to a business they have executed well,” says an anonymous investor.
One of Facebook's main problems is how it can use that data to match ads to people without violating their users' sense of privacy. Facebook already faces audits in Europe on whether the company is living up to promises made to consumers about how it uses their data — and now, a stringent new data protection law. In India, it has been sued for spreading offensive content, and in the United States, it faces privacy audits by the Federal Trade Commission for the next 20 years.
Potential shareholders are also concerned if Facebook can diversify and make money through other means, especially on mobile devices. Facebook makes most of its money through advertising, but Facebook acknowledges that mobile devices remain a tough platform for making serious ad revenue. One of Zuckerberg's plans to increase revenue is through Facebook Credits, an online currency backed by Facebook.
Tim Chang, a managing director at Mayfield Fund, notices, “there is no consumer-facing Internet brand or site that ever keeps consumers’ attention for more than 10 years,” and is concerned about how relevant Facebook will be in 10 years time. Zuckerberg's answer to the ticking clock are ambitious intentions to make Facebook as central as possible to the internet, for example by using Facebook to log on to other sites.
The culture and methods of the company could also potentially change once it goes public. One of Facebook's primary strengths has been its ability to change and "break things," as well as willingness of the company to try new things. Some fear this ability may be constrained once investors get involved as they may try to restrain the company from making risky decisions.
The culture and methods of the company could also potentially change once it goes public. One of Facebook's primary strengths has been its ability to change and "break things," as well as willingness of the company to try new things. Some fear this ability may be constrained once investors get involved as they may try to restrain the company from making risky decisions.
In conclusion, despite these questions, Facebook is still set to sell extremely well to investors in its public offering. Brian Wieser of Pivotal Research Group notes that “it’s a risky asset,” but still thinks that Facebook is worth $83 billion and will grow its ad revenue by at least 3% for the next five years. Facebook has a lot of problems related to their business strategy, but so far it seems as though Zuckerberg is still full of fresh ideas. Facebook promises to continue to be a company to watch, even after it goes public.
Great information Dan! Facebook is definitely a prominent technology company that investors have been interested in for a long time. Though it's marketing strategy remains unclear, it will in no way fade away anytime soon, since its wide user base makes it incredibly valuable even if it is not profitable. In terms of Facebook becoming outdated, it is unlikely in the near future. There are no serious contenders that have the potential to overthrow it's reign on social networking, and it is hardly technologically behind.
ReplyDeleteThough it's initial offerings fell short of expectations, Facebook will continue to be a popular pick for investors. There is no doubt that it will continue to grow in value as it's popularity, and thus power, rises. It will be interesting to see how Facebook attempts to harness the profitability of mobile devices, and adapts to the future. With the proper moves, it has the potential of becoming the next Google or Apple.