A Canadian Artist's Take On The Facebook IPO

How High Will Zuckerberg's Star Rise?

I have a history of predicting cultural and technological trends correctly. So after being bombarded with the culture of Facebook for years, I'd like to offer some thoughts on their initial public offering. I know little about investing, so please think of this article as more of a blind rant than an investment recommendation.

Zuckerberg built an amazing tool, and he turned that tool into a huge company. They did 3.7 billion dollars in revenue last year, not too shabby. As they go public, the fairy tale version of their story would go something like: public money allows facebook to unleash a plethora of amazing new technology offerings, stock prices rise steeply for years. A story something like Google's, who came out of the recession smelling like roses, and have seen their stock rise from an $87 IPO in 2004 to a current price of $600 per share.

But Google grew out of a time when it was easier to remain a global tech powerhouse. They snatched up all the right young talent, and expanded their offerings in all directions simultaneously to become an integral presence in all digital spaces. My phone's OS is Google, I use Gmail, I search the web with Google, this blog is powered by Google, my web browser is Google Chrome, etc... Recently, they even made the smart calculated move of buying tech giant Motorolla to help usher them into the hardware space by allowing them to create their own superior devices. They are a giant because they've earned it. 

Remember Myspace? Many suspected they would become THE social media giant. Then Facebook came in and did social networking better. I've heard it through the grapevine that Myspace still exists, but that they've been reduced to a staff of three working out of the backroom of an East Oakland Chinese restaurant. Who can say that Facebook isn't just another Myspace with larger bells and bigger whistles? I can't.

ONE HUNDRED BILLION DOLLARS is what people keep saying Facebook is worth. I don't know how that's possible when everyone and their dog is a computer programmer these days, and only a small fraction of developers work seriously on Facebook products. Truly, I see the digital space fragmenting more and more as we move forward, and I see a lot of room for new smaller companies to do all sorts of innovative things without even thinking much about Facebook.

Facebook is highly addictive to users and has many strong supporters. But in the end, I still see it as a hollow play on the reality that most people approach the net in a very simplistic way. The majority of internet users worldwide are still computer or internet "beginners". As huge populations learn how to expand the horizons of their media experience, they will simultaneously encounter myriad new technologies that challenge Facebook's dominance.

Their new marketing idea promoted posts is an attempt to cash in on a service many are likely to feel they should be getting for free. For example, I administrate a Wordpress site that allows me to select which posts I want to be promoted for better visibility in Google search. I don't pay to use that plugin, these tools are all free or very cheap. As far as page admins like myself are concerned, posting updates to your Facebook fan page is "simply supposed to work well". If it doesn't work as well as it should, or if the service may begin being manipulated for profit, then the power user base will feel like they are being nickle and dimed. They will readily seek out new media technology offerings at every turn. The net effect of this exchange will be a sewering of the price point for this sort of marketing before the market has even fully materialized! Another thing I don't like about this idea is the fact that it allows fan pages that are better capitalized to BUY consumer loyalty. The internet (and Facebook, as stated in their mission statement) is supposed to be about making the world more open and connected. When a tech giant's mission diverges from the will of the internet (and from their own mission statement :P), bad things happen. Google isn't perfect, but one thing they've never had to do is limit such core services in this way. The idea screams weakness.

The world uses the net more and more each day. In an environment like that, any company can grow (maybe even Myspace!). Facebook will have to reconcile the fact that much of their valuation and reputation is based on hype. In the long run they may truly be an unstoppable juggernaut. But over the course of the next two years, I wouldn't get my hopes up about their stock doing what Google's did from 2004 to 2006. I'm willing to bet that their stock will tank for awhile, hit bottom, stabilize, and then begin outperforming the market for many years to come. But I'm far from being a Facebook detractor, so my prediction may be a bit hopeful. It was recently suggested on Forbes that Facebook (and Google) may not even exist in 5 years!