Is Facebook the IPO of a Generation?

Investing Advice, Trends

Is Facebook the IPO of a generation? The much-anticipated initial public offering of the world’s most popular social networking site, Facebook, took place this morning on the NASDAQ. With it, the dreams and technologies of the millenial generation have taken root as a core part not only of American society – but of its formal economy.

Already, Facebook bears the distinction of having the largest market valuation of any US company at IPO at $104.1 Bn. That’s no small feat for a company that didn’t even exist eight years ago. The offering, which was originally priced at $38 per share, has “popped” to over $42/share as of the time of writing, creating over $16 Bn in value for the company. That could grow to $18.4 Bn, making it also the largest initial share offering in US history.

But all these big numbers aside, the Facebook IPO is also the hallmark of the new economy. Facebook doesn’t make anything, and its users aren’t even buying any products or servics (with the exception of some gaming functions), but most people still believe it has great value. The power of connectedness – and the technologies that enable us to share and display information across our network – has now taken root.

That, some analysts say, explains in part the $1 Bn Facebook paid for photo-sharing startup, Instagram last month: Sure, Facebook could’ve created a competitor, but Instagram was already growing to be hugely popular – and it’s a bit harder to convince an existing social network to migrate. It also helps explain the company’s big gains in advertising revenue (and its price to earnings value). It’s the network itself, that has value. Advertisers can use it to pinpoint people based on preferences in a more targeted fashion. It’s also a place where people are more tuned in; people care more about their friends’ lives than tv, and the power of social networking holds values for individuals and companies, alike. Ever heard of the term “going viral”?

In the end, we’re all part of social networks, whether we use applications like Facebook, or not. But it took a Harvard student in his dorm room to harness that power for the market.

What’s your take? Is Facebook the IPO of a generation? Will you “like” the social network by investing in its stock?


Leave a Reply