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ANALYSIS: Bubble or bonanza? Facebook IPO raises intriguing questionsFeb 01, 2012 (dpa - McClatchy-Tribune Information Services via COMTEX) -- SAN FRANCISCO -- Facebook's long-awaited filing Wednesday for an initial public stock offering marked a new era on the internet, establishing the eight-year-old company as the platform to wrest the web revolution from the clutches of Google. At least, that is the view of Facebook's cheerleaders, and it's hard to argue with them. The company expects to go public at a valuation as high as 100 billion dollars, despite making a profit of only 1.7 billion dollars in 2011. Using the same ratio, Apple the world's most profitable tech company would be worth 2.2 trillion dollars, or more than five times its current value. Facebook's IPO is the largest in tech history, dwarfing the 1.67 billion dollars raised by Google in 2004, when the company was valued at 23 billion dollars. Naysayers point to these facts to argue that the Facebook IPO is far too expensive and destined to ignite a repeat of the dotcom bubble that triggered a recession in 2000. "It's difficult to avoid the overwhelming conclusion that Facebook, at its IPO, will be way overpriced," said Mark Hulpert, a widely quoted financial analyst. But Silicon Valley insiders such as venture capitalist Rob Coneybeer at Shasta Ventures maintain that Facebook is worth the stratospheric valuation given its unassailable position as the world's dominant social network. Its 800 million members are so tied to the site, and use it so much, that it functions as a utility, essential to the functioning of modern society. "Facebook is today what the telephone was 50 years ago," Coneybeer told the Financial Times. The counter argument is that modern tech history is filled with fallen technology giants. At the apogee of the first internet bubble in 2000, media conglomerate Time Warner and AOL merged in a stunning 350-billion-dollar deal based on AOL's apparently unassailable position as an internet service provider and web portal. AOL is now worth just 1.5 billion dollars and is seen as an also-ran on the modern web. So far, Marc Zuckerberg, Facebook's billionaire founder and chief executive, appears to have astutely dodged the pitfalls of dotcom excess. He patiently resisted all attempts to cash in early, and will likely spend his IPO billions to gird up for the defining battle of Web 3.0: the tussle between Google and Facebook for the eyeballs of the world. "The cash that could flow into Facebook's coffers in the wake of an IPO would hire a lot of developers, engineers and researchers and buy a huge chunk of global-scale data centre and network infrastructure," says tech analyst Carmi Levy. "This would allow Facebook to bring sophisticated new services to market that in its current, privately held form, it just doesn't have the heft to pull off." Yet Facebook's future is not just a question of great engineering. Facebook will have to balance the need to innovate and sell ads with the need to avoid feeling creepy to its millions of users. It already has one of the largest customer bases in the world and knows more about its users than their families do. Misuse of this information could quickly turn away fickle Facebookers. A good example of that is the soon to be mandatory Timeline, which will allow users to easily see any posts their friends have made since the dawn of Facebook history. Facebook does give members a week to clean their Timeline before making it public -- but has still taken serious flak for the move. Whether Facebook can manage the transition from privately held start-up to publicly owned multinational utility will constitute one of the most riveting tech narratives in the coming years. ___ (c)2012 Deutsche Presse-Agentur GmbH (Hamburg, Germany) Visit Deutsche Presse-Agentur GmbH (Hamburg, Germany) at www.dpa.de/English.82.0.html Distributed by MCT Information Services |