If you haven't heard, all signs are pointing to a Facebook IPO in 2012. And if you have heard, I bet you know exactly two things about that fact: 1. Mark Zuckerberg will become very, very rich. 2. Facebook is HUGE!
True enough. But let's look into the whole situation a little more deeply with an infographic created by AccountingDegreeOnline. The first bit isn't totally surprising—but when you see the numbers laid out, it's rather breathtaking. It's thought that Facebook's IPO will raise $10 billion and place Facebook's value at $100 billion. To put that in perspective, only companies such as Visa and GM have ever raised so much in an IPO. And the $100 billion valuation will make Facebook a more valuable company than McDonald's:
Now, you might chalk this up to untreated Internet madness, a la 1999. But the thing is, the Facebook IPO becomes more astonishing when you consider the merits of the business. This isn't like Pets.com. If anything, it's surprising that the company isn't thought to be worth more. Just consider: By the end of 2012, Facebook will have signed up more than 1/10th of the human population. The. Human. Population. I'm not sure that any business has ever had such a vast audience of users. Moreover, it will already control 28% of the ads seen online and 1/6th of display-ad revenue in the U.S.:
Take a step back and consider Facebook's growth prospects. When you use the service, it's actually surprising that the ads remain as unobtrusive—and as limited—as they are. It's not gummed up with blinking exhortations. And the ads they do have seem relatively well targeted. The point I'm trying to make is that Facebook hasn't even begun to test what it can really do with ads—and I have no doubt there are fleets of designers and programmers busily working all that out as I type. (Sure, it's 4 a.m. right now in Palo Alto, but you know what? No one ever made a billion dollars by being lazy.)
The business analysts who tout the IPO will all tell you that the biggest risk to Facebook's business model is continuing growth in their ad business. But that's not it at all: It's that they'll constantly need to fight against their own ad-free history, while trying to make more and more ad money. They have to balance giving us, the audience, a good enough service that we'll put up with more ads. But it's up to them to figure out how many ads—and what kind of ads—they want to risk.
Thus, companies such as Facebook and Google are in a position quite unlike any other business out there: In some sense, it's up to them to determine how big they want to get, and how much money is enough. What a hell of a fortunate position to be in.