Mark Zuckerberg, founder, and CEO of Facebook Inc. has filed an Initial Public Offering (IPO) of $5 billion on Wednesday.
Facebook is the largest social networking site in the world which has more than 845 million members. It started as a small dream of Zuckerberg in his Harvard dorm room and within eight years?transformed into a multi-billion dollar company.
The estimated valuation of the company is around $100 billion, the same as Amazon and McDonalds.
Reports show the company has been growing rapidly during the past few years. In 2011, Facebook profits were up 65% compared to the previous year, to the tune of $1 billion. The social network’s growth has also resulted in the an extraordinary increase in expenses. The Research and Development cost has been $114 million compared to $9 million last year. There was also a substantial growth in employees – 3,200 in December 2011, compared to 2,172 in 2010.
Around 85% of Facebook’s profits come from online advertising. The users are not the customers but the product – Facebook – is attracting the attention and time of its users, in shape of likes, which enables businesses to precisely target an audience while advertising their products. Their advertisements are personalised to match the demographics of the users.
While filing the IPO, the Facebook founder also included a letter to his potential shareholders, stating that Facebook’s mission is to make the world more open and connected, calling it the ?social mission?. He said: ?We think it?s important that everyone who invests in Facebook understands what this mission means to us, how we make decisions and why we do the things we do.?
He has also promised to maintain the privacy of its users, insisting: ?Privacy and sharing settings is how the company creates value”. He also assured that Facebook will improve its service and the primary goal would be to get more people to use services of companies that are not focused on their profit margins.
Analysts believe Zuckerberg would be able to keep to his word as he will be holding 57% of the companies voting stock. However, the filing does not mention the number of stocks that will be up at the IPO.
Some of the biggest banks in the US will be in control of the stocks when it goes public later this year with Morgan Stanely at the front of the queue, followed by JPMorgan and Goldman Sachs. Supporting roles have also been secured by Bank of America, Merryl Lynch, Barclays Capital and Allen & Company.
Source: Wall Street Journal, BBC, Financial Times