High Expectations for Facebook’s IPO

The Wall Street Journal reported that Facebook plans to file IPO documents with security regulators from the SEC as early as Wednesday. Facebook is reported to be close to picking Morgan Stanley as the lead underwriter with Goldman Sachs also playing a role in the IPO, which is expected to occur in late May.

Founded in Mark Zuckerberg’s Harvard University dorm room in 2004, Facebook has  quickly emerged as a dominant force in social networking with 800 million active users as of September 2011. 

Valued in the range of  $75-100 billion, Facebook’s IPO is expected to raise $10 billion dollars, becoming the largest tech IPO in history, and perhaps even the 4th largest overall IPO in history. If Facebook obtains a valuation of  100 billion, its valuation would become larger than Amazon, McDonald’s, and HP.

Facebook’s 2011 revenues are reported to be around $ 4.2 billion. The company generates sales revenues from display advertising, estimated to reach 15 billion in the U.S in 2012 which is significantly smaller than Google’s advertising revenues. Advertisers are seeking ways to become more integrated on Facebook with rich and beautiful display ads, similar to the ads found on Yahoo and U-Tube. Facebook is expected to release mobile ads in March.

Another source of Facebook’s revenues are generated from monetary credits by game developers from gaming companies such as Zynga in addition to other revenues from social e-commerce. Facebook is expected to further develop F-commerce, a social e-commerce platform, which was described on Bloomberg West as a “Facebook meets Amazon” with an online checkout.  

Facebook is expected to generate more revenues from  F-commerce in 2012. According to one Forrester analyst cited on Bloomberg West, Facebook generated 1 billion in e-commerce U.S. sales in 2012 with revenues expected to grow to 14 billion in three years.

Although Facebook is hugely popular with internet users, there is growing competition in social networking.  Last year, Google launched a new social networking site which competes with Facebook called Google + which already has 90 million users and has the option to group your friends list by creating Google Circles and attend Google Hangout, which President Obama recently attended.

In September 2011 Mark Zuckerberg was the keynote at the f8 Conference in San Francisco. During the conference he introduced some of the future changes that will occur within Facebook. Some of the new changes includes the introduction of a timeline, scrapbook of your life, and Facebook  Gestures. You will also be able to watch T.V., movies, listen to music, and read news with your friends- all within Facebook.  Chris Taylor from Mashable describes the new upcoming Facebook changes here.

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