When Facebook Goes Public

Fast forward to the future to a time when Facebook has just gone public. The demand to own its shares is overwhelming, its options trade at premiums as the stock price gyrates, and Facebook gets billions of dollars in cash from the IPO proceeds.(Recent reports value Facebook at $75 billion).

This cash will undoubtedly be used to increase employee headcount by the thousands and push into numerous new markets. Other online companies should be concerned.

Facebook threatens not only its direct rivals like Bebo and MySpace. Those companies are now regularly categorized as ‘has-beens.’ In this winner take all market, Facebook has been declared the victor. “The framework for the social layer is now built, it's called Facebook,” said Seth Priebatsch of SCVNGR.

With five hundred million users, few would argue that point. Having been crowned king in its own space, Facebook now poses a threat that should send shivers down the spines of companies that are not its obvious competitors.

Consider the threat to Google. When you log onto Google and enter a search term, what does Google really know about you? The answer is not much. Unless you sign up to its other services, Google is limited in its ability to deliver finely targeted, relevant ads to you. While Google does a marvelous job with the information it has, Facebook simply has more information.

From an advertiser’s perspective, would it rather advertise with a company that knows just a little about who is viewing the ad or a company that provides laser-like targeted ads based on gender, age profile, interest type, group membership, and other information?

Facebook has all that information about its users already. It knows demographics and psychographics far better than Google does; advertisers are quickly realizing that they can create far more targeted and relevant ads on Facebook than on Google. It will come as no surprise to see Facebook increasingly encroach on Google’s territory in online advertising.

Facebook also poses a threat to companies that, at first glance, are in a totally different business vertical. Netflix is one such example if Facebook decides to stream video (it’s already contemplating doing so).

And take Groupon, one of the fastest growing businesses in the world. There is nothing that Groupon does so far that is inherently difficult from a technology standpoint; it simply has a large army of offline employees that pound the pavement for business partners.

When Facebook goes public, it could certainly employ the new capital from its IPO proceeds to hire thousands of offline employees and leverage its five hundred million strong database of users to directly compete with Groupon.

While Groupon is currently dominating worldwide markets by crushing smaller competition with its ad spend, Facebook – which already has a much greater reach – could beat it.

Groupon, Netflix, and Google operate in totally different spaces and yet all should be wary of the threat of a publicly-traded Facebook. A glimpse of what will emerge from it is already been revealed by employee recruitment videos made by current Facebook staff.

These insiders confirm that Facebook has big plans; dominating the online social fabric is just the beginning. What ominous thoughts for competitors of a company that has not raised even a small fraction of the capital it can potentially access.

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