The IPO of the Virtual Passport

By Peter Pham - May 21, 2012 | Tickers: FB | 0 Comments

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On the eve of the biggest IPO in history, that of social media giant Facebook (NASDAQ: FB), everyone is thinking about it in terms of the size.  Can Facebook justify the valuation that is being implied by the IPO?  In essence, that’s what all the verbiage boils down to.  And, as an investor, that is the ultimate question one has to answer before putting in your order to your broker. 

But, I’m not asking that question today.

I’m asking a completely different question.  Facebook, and social media in general, means different things to different people.  For most it is a way to create community without being constrained by geography, where you bring the world to you without, in some ways, having to actually go there in person.  For others it’s a way to promote their business, book, band or farm; interact with customers and build a relationship that goes beyond the next sale. 

So, what?  We know all that.  Yes, we do, and living in Vietnam having grown up in Canada, I see Facebook and other social media networks in a different way.

The International Passport

In more closed societies, like Vietnam, the cost for citizenship in a foreign country like the U.S. or Canada is around $250,000 in local government bonds and other associated costs.   The strong desire among some families here to have for their children to have what the West has (and in many ways is squandering) that a young U.S. male can make a lot of money marrying a young Vietnamese girl.  This ‘dowry’ is the price of instant citizenship in the husband’s home country and it’s substantially cheaper, shaving as much as 80% off the price. 

On the other hand some South Korean and Singaporean men will pay up to $10,000 for a young Vietnamese bride.  There the men who are looking for something they can’t get in their home countries due to lopsided birth ratios or socio-economic status.  This has become such an issue that all foreign men have to pass a psychological profile to get approval first.

The point is, though, that much like transnational physical infrastructure, i.e. pipelines and railways, is breaking down the barriers of arbitrary political borders, the internet is breaking down cultural and interpersonal barriers created by geography and for some countries, those very same political borders.  Facebook and other social media networks, like the erstwhile Yahoo 360^o was in Vietnam, are giving young people virtual passports that allow them access to the things that were unavailable to previous generations. 

For Facebook, the average user is worth $1.17.  But for some of those users the value of their account and their online identity can be worth up to $250,000, minus the cost of a mobile phone.

The Next Step Forward

For those that grew up without even the internet, your first e-mail address was a huge leap forward, things like USENET and message boards were the Facebook and Twitter for the generation that came before me.  There is something very powerful about having an account that unlocks so much of the world for you with a single identity. 

With Facebook or LinkedIn there is no hiding behind a handle or some crafted persona that one might create for a blog.  Your Twitter persona can be the best of both, creating a public persona or brand around your identity.  It’s globalization without all the nasty colonialism, cash-cropping and debt-slavery. 

So, on the eve of Facebook’s IPO when everyone else is wondering if they can justify the valuation and where they are going to find ways to monetize it all, I’m thinking about how much Facebook is grinding down the arbitrage between the perception of value for a person in a closed society living in a foreign land and the reality that they already have at their fingertips. 

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