Even in a region famous for cranking out business marvels, Facebook is something to behold.
Almost eight years to the day after it was created in a Harvard dorm room, the Menlo Park social-networking giant on Wednesday took the wraps off a financial rocket that reached all but the loftiest of expectations surrounding the company.
In its eagerly awaited initial public offering filing, Facebook said its annual revenue last year totaled $3.7 billion as profits hit $1 billion. About 845 million people around the world check into the site at least monthly – and nearly 500 million do so daily – giving Facebook the kind of global reach usually associated with a century-old brand like Coca-Cola.
“This is a unique and extraordinary company,” said mark Siegel, managing director at venture capital firm Menlo Ventures, which doesn’t have a stake in the company. “I don’t know that you can draw a whole lot of parallels.”
All of which is why the $5 billion offering, which several reports say could rise to $10 billion, is the most highly anticipated tech IPO since Google in 2004. It could mint hundreds of millionaires, make boatloads of rich venture capitalists a whole lot richer and reignite market fascination with dot-com offerings in wake of some high-profile duds.
Behind the numbers
But as Champagne goes on ice across Silicon Valley and workers tally up their options, it’s worth taking a moment to think hard about what’s at work behind these numbers.
For all the concern surrounding Google’s behavior today, it’s hard to dispute that the founders started with fairly exalted goals – organizing the world’s information – and then wrapped a breathtakingly successful business model around them.
With Facebook, it almost feels like the other way around. After Facebook’s early success at Harvard, its founders spotted a great business opportunity and showered us with platitudes about “openness” and “connection.”
Its young engineers focus their considerable talents on collecting and analyzing reams of personal information to improve the odds you’ll click on ads. And it doesn’t stop when you leave the site, thanks to “like” and “share” buttons that follow you around the Web.
“Facebook continues to expand its platform and its offerings and, as a result, develops enormous, enormous warehouses of data around their customers and users that are invaluable to advertisers,” said Rebecca Lieb, an Altimeter Group analyst focused on digital advertising.
The precise ad targeting enabled by that information is why Facebook now claims nearly 30 percent of online display advertising, having long since blasted past the runner-up in the category, Yahoo, according to ComScore.
To be sure, social networking is entertaining and fun. It can help us stay connected to loved ones thousands of miles away. And examples like the Arab Spring underscore the tool’s potential as a force for good.
Data mining
But when you get down to it, as a colleague of mine said, “It’s a thin coat of paint over a massive data-mining operation.”
Probably even an unprecedented one. never before have we collectively turned over so much for so little.
At least with television, we submit to advertising in exchange for professionally produced content. At least with Google, the trade-off is the best information retrieval tool going.
Facebook just invites us into a big open room that we have to fill up with interesting things. And in exchange for free rent on that unfurnished virtual space, we hand over the intimate details of our lives: our relationships, weddings, illnesses and tragedies.
All of which would be less unsettling if Facebook had proven a trustworthy steward of that personal information. But it hasn’t.
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