This week Facebook went public with their IPO listing. The figures illustrated that no slowdown in profitability is forecast, going from a 2009 profit of $229m to a $1,000m in 2011. Mark Zuckerberg has of course emerged as the single largest shareholder, owning 28.4% of Facebook.
Commentators have noted that Facebook’s 85% reliance on advertising revenue is a model that has more in common with older media companies such as News International that foster a structure which allows the founders to retain the majority of the power.
One area where Facebook isn’t seeing great ad revenue is mobile. Some have suggested future monetisation strategies could appear in the form of sponsored new stories in the mobile news feed.
Propping up 12% of Facebook’s revenue in 2011 was the games company Zynga, maker of Farmville, Cityville and Mafia Wars. A figure which has caused some surprise, it explains why Facebook is so committed to media partnerships.
One of the most interesting parts of the IPO presentation was a mission statement from Facebook, billed as a ‘letter from Mark Zuckerberg’. The letter contained a feel-good message explaining Zuckerberg’s favourite philosophy ‘The Hacker Way’. The key points? Build in a bold way, learn quickly from early builds, and take risks.
Whilst the Facebook public float certainly has everyone’s interest, leading financial journalists are unsure about the likelihood of a headline-making social media valuation translating into similarly impressive profits. Some have even suggested that Facebook is underdeveloped from a business standpoint – for such a ubiquitous platform it is completely dwarfed by Google in terms of the revenue generated. Despite such a momentous and era-defining valuation, the next five years will be the time in which Facebook proves that it can actually deliver on its hype and make money for shareholders.