Will Facebook IPO Be Long-Term Bust or Boom?
Friday, February 3rd, 2012Facebook finally filed for its initial public offering. Now the social-media giant can look ahead to a potentially new source of revenue from “social advertising.” Or it could come out with plump prices, only to deflate after a few quarters.
Many industry watchers expect Facebook’s valuation to range between $75 billion and $100 billion. Facebook wants to raise up to $10 billion, according to The Wall Street Journal. Facebook posted a $1 billion profit in 2011 on $3.71 billion in revenues.
“The social network IPOs have been trending down. What is interesting is there appears to be no connection to financial viability,” said Rob Enderle, principal analyst at Enderle Group. “The weakest company was Groupon, which started the strongest. The strongest company was Zynga and it was also the most tightly connected to Facebook and it barely made it out of the gate.”
Dampened Success?
As Enderle sees it, Facebook is massively popular but there is also a sense that people are tiring of social networks. And that, for all the hoopla over the long-anticipated Facebook IPO, could significantly dampen their initial success.
“Odds were this would go big initially and then collapse down to a more reasonable price. Facebook is limiting supply to drive initial price into the stratosphere,” Enderle said.
“If investors see the subsequent fall like they apparently did with Zynga, Facebook’s initial high could be a fraction of numbers we’ve been discussing so far. And their prospectus does point to a strategy that likely will have them operating in the red, with more investment expenses than revenue for some time after the offering.
“While I still think it will initially come out strong — it is Facebook, after all — the risk it won’t is increasing, and suggests caution,” he said.
Power of Social Advertising
But new research by Catherine Tucker, associate…
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