Zuckerberg and Facebook from a Social Media Point of View

By Erin McBride - May 21, 2012 | Tickers: FB, MSFT, ZNGA | 0 Comments

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Facebook (NASDAQ: FB) filed an amended S-1 to its initial public offering Tuesday, raising its share price up to $38 per share. Additionally, the company is offering another 50 million shares, for a total of 337 million shares. With these new changes it could bring the company's valuation closer to $106.4 billion, a jaw-dropping number for the value of a social network.

As the number rises, a few vocal complainers have had a problem with Mark Zuckerberg showing up to meetings on Wall Street in his token hoodie. There are somewhat legitimate concerns about Zuckerberg’s leadership, as he will have 67 percent of voting shares. Like his company, he does not comform to traditional corporate style. But those who are focused on what he wears, and not on what he says and does, are making a big mistake- and are showing just how out of touch they are with the social media era.

Here are a few reasons I like Mark Zuckerberg-

• He's a focused, single-minded kind of guy. He sets his mind to something and he makes it happen.

• While he appears to have some quirks, and may be a little self-centered (see: token hoodie, and everything portrayed in the Social Network), he hasn't turned into a rock star, demanding all of the attention and glory of his company for just him. He didn't get rich and start looking for ways to glorify himself, and forget to run a great company. How many twenty-something year olds do you know with that kind of money who choose to work harder, instead of party harder?

• He hasn't bowed to conventional thinking- not in his personal life, and not in his business. It may vex a few of the suits in corporate machines, but it doesn't appear to hurt the productivity and success of his own business, so who cares?

• He has been learning Chinese in order to give him an edge up as Facebook tries to break into China. Learning a language is more important than just being able to speak and understand. It also helps an individual understand and appreciate culture more, and that is the real advantage that Zuckerberg will gain. (Again, he isn't taking the rock star, spoiled CEO approach- he's working harder.)

Now, for a few reasons I'm not comfortable with Zuckerberg-

• I'm not comfortable with anyone person having so much control over one business and so much money. Especially a 28 year old.

• Supposedly, he bought Instagram without talking to his company first. (See: problem with one person having so much control.)

There are some out there who question whether or not Facebook will lose its edge after the IPO? Will it live up to the hype? As a student of the social media generation, I see two answers to this argument. First, it is inevitable, and already in progress, that other social networks will build up and rival Facebook. This is good, this is healthy, and this is to be expected. The thought that just one website or company can control all of the social interactions of mankind leads my imagination to the plots of too many sci-fi films and Wall-E, where humans mindlessly walk around like drones in a zombie-infested world, controlled by an unseen force and computer. A far-fetched scenario to say the least, but at the same time, as free-thinking humans we crave variety and competition. And therefore, Facebook rivals will bring welcome new flavors.

The birth of a publicly traded form of social interaction intrigues me. Can you really put a value on virtual social interaction? Is there truly a way to profit from it? At first the question seems deep and complicated, but in fact, it is not. And in fact, yes, we have put a dollar figure on social interaction for decades. It began with the telephone- and just the one telephone company. And look how far and wide the world has changed because of the telephone. But at the birth of the telephone, did anyone ever comprehend how many ways the phone would evolve and the different uses it would bring in a little over a century? Social network websites may turn out to be the next telephone. We have only begun to see the ways social networks will change themselves, and will change us.

Second, from a strictly social media analyst point of view, I do not believe Facebook will lose its edge for a very long time. Zuckerberg and his company have proven over and over again an ability to keep the site fresh, new, and integral to what users want (compared to other sites like MySpace in particular). When the original, younger users began to panic that their mothers (and grandmothers) were joining the site, they didn't flee the site. Instead, at about the same time, Facebook brought in new games and new activities for users. The Timeline has morphed several times throughout the site's history. Each time it does, users complain, but they never actually leave, and quietly, without the users even realizing it, the site becomes more integral to users' daily activities. The acquisition of Instagram is an excellent example of this. Facebook has long been a popular place to share photos. But now it will also become a place to edit photos and share them. Again, Facebook becomes more useful to its users.

Zuckerberg himself has said that he doesn't build new applications to make more money. He makes more money so he can build more applications. Some on Wall Street may be uncomfortable with this statement- they want a CEO who wants to make money and profits- but they are wrong to do so. If Facebook is going to make money for its shareholders, it has to stay relevant, useful, and important to its users, and there is only one way to do that – build more applications.

Going public will be good for Facebook. A company so large and with so much money, needs to be kept in check to some extent. Some may worry that corporate fingers will have too much reach, too much control, and the creativity and original thinking of the site will be choked or stifled. But again, I disagree. Creative personalities need the balance of bean-counters and outside voices to make sure the bills are paid and the lights stay on, so the creatives can make the magic happen.

Facebook already has competition, but not from strong social networks, but in the business unit where the money is made. The company earns its revenue from advertisements on the site, which accounted for 85% of the revenue. According to filings with the SEC in February, Facebook brought in $3.7 billion in revenue and $1 billion in profits. The company brought in $1.97 billion in revenue in 2010. Zynga (NASDAQ: ZNGA), the social games company which hosts dozens of games on Facebook, brought in 12% of Facebook's revenue.

Facebook is responsible for more than approximately a quarter of online ads in the United States. However, ad sales for the company decreased in the past year, as advertisers turn back to paid search providers, such as Google and Yahoo. Microsoft (NASDAQ: MSFT) (Microsoft holds a financial stake in Facebook) through its search engine site, Bing, also challenges Facebook in paid search ads, mobile applications, and users. They are two very different companies, with a not-too-different business model. The success, growth, and at times failures, of these companies must be monitored and watched as an indication of what to expect from Facebook's revenue opportunities.

The Facebook IPO will not just be a banner day on Wall Street. It has the potential to set new precedents in both investing, and social networking. Just how much of an influence the company will have will be determined not only by the company, but by the media, shareholders, potential shareholders, and users.

Read Also: Facebook's IPO will be a Game Changer

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