Facebook has announced its intentions to go public through an IPO (Initial Public Offering). There is talk that the company will be valued at up to $100bn.
Here are some company numbers:
- Revenue for 2011 is reputed to be $3.7bn
- Net income of just over $700m
- Employs 3000 people.
Whichever measure you take, this valuation is clearly over inflated and absurd. So how do they make up such a staggering figure?
Facebook has only one thing useful, its 700-800m users. It is funnelling its users’ likes or dislikes as targeted data to its clients. It really is no more than an advertising agency. While most organisations have real assets to sell, Facebook is selling its users as though they are its own asset. Facebook is playing on its users’ obsession with popularity and the vacuous ‘celebrity culture’. Facebook, together with other social media sites have managed to cajole people into giving away information about themselves, thereby eroding personal privacy. Sometimes, sordid information or even pure lies are published on these sites leading quite often to disastrous consequences. There is now a growing consensus that social media sites do more harm than good.
As for the $100bn IPO, let us ponder on this for a while:
- Facebook is just a social media site. A passing fad that can easily change and that exaggerated valuation may turn out to be worthless.
- $100bn is equivalent to the GDP of many fairly large countries (such as Morocco, population 35 million).
- Just think of how much $100bn can improve public services (how many more schools, hospitals, roads, etc it can provide for) or what it can do for the millions of poor people around the world.
- The new Facebook will be capitalised almost the same as the UK’s GlaxoSmithKline, a company with large portfolio of products for fighting diseases and a work force of 95000, a company with real jobs and real products (and yes huge profits).
What benefit would this massive Facebook IPO bring to our lives? I bet, absolutely nothing. It is just another product in the line of ‘Get Rich Quick’ culture. It will add nothing of value to the real economy. It is one more exercise so that investment banks, lawyers, and of course Mark Zuckerberg and other owners of Facebook make huge sums of money. So when the floatation comes, just give it a miss.
More reading:
http://www.guardian.co.uk/technology/blog/2012/feb/01/facebook-ipo-announcement-live