What's Next for Facebook?

Having already attracted Hollywood’s attention with the 2010 movie “Social Network”, loosely based on the Facebook story, the saga continues developing with the company’s upcoming IPO. What does the future hold for Facebook as it makes the significant transition from private to publicly held company?

Facebook’s meteoric rise from its birth in a Harvard dorm in 2004 has already affected its 845 million customers, and with its IPO, the company’s performance will begin to affect a whole community of investors. According to its S1 IPO filing with the SEC, the company made a profit of $1 billion last year and will probably earn more after its IPO.

Significant Changes for Facebook After the IPO

Some analysts foresee Facebook being less innovative as the company opens itself up to the scrutiny of its new shareholders. Also, due to the expected exodus of its brightest talent as employees and managers cash out and leave the firm, the company will be challenged to remain ahead of its competitors in retaining its talent.

Furthermore, Facebook employees — many of which came from other large firms such as Google — who cash out and leave the firm, may move on and use their newly acquired wealth to start up their own companies, creating additional competition for Facebook.
Once Facebook goes public, the company will be pressured to show increasing revenue. Presently, Facebook’s revenue comes primarily from advertising, with $3.8 billion made in 2011, and apps selling products on the Facebook platform for which the company takes a 30 percent cut.

Facebook’s network is a marketer’s dream come true, which will most likely have the company create new types of advertising vehicles and targeting applications for advertisers to take advantage of on their platform. With Facebook’s enormous client base, getting the word out for a product will be that much easier for advertisers.

Possible Takeovers of Other Companies

With the expected windfall of cash from the IPO, in addition to liquidity in its newly issued stock, Facebook will be in a prime position to take over other companies in related businesses, as well as its competitors.