Kitcatt Nohr Digitas

IMAGE: fake-facebook-stocks.jpg

The facebook IPO launched today at $38 per share, making it the biggest Tech IPO ever. Indeed Twitter crowdsourcing bets that it will have reached $54 by the end of the first day. There's little doubt that all this IPO funding will be supporting a big push into Google territory - search and particularly mobile - but the interesting question is how the requirement to make money for its shareholders impacts Facebook.

At the moment facebook makes a great return from advertising - and any company that takes 10% of global ad revenue in return for 25% of global page views must have growth potential. But there are limits to facebook’s advertising model, as GMs recent rebuffal has highlighted. The more cynical of facebook’s critics are even going so far as to liken the network to a Ponzi-scheme. In one particularly vitriolic article, US tech blogger Joseph Perla labels their ad platform as completely useless and unsustainable, citing it as inevitable that businesses will eventually realise that the investment in facebook ads is pointless.

Paul Kitcatt has then rightly stated that therefore the real commodities being sold here, whether they know it or not, are the Facebook members. You now have to deliver shareholder value from them without them noticing, or getting hyper-pissed off. Herein lays a catch-22: Future growth potential relates to the incredibly valuable data facebook owns, but the effect of monetising it is likely to disaffect users. And now there is the added pressure that there will always be another social media network waiting to step into the wings; it has become too easy to copy or improve, especially if you used to work for Facebook and are now a millionaire. We're not betting on that though - if the user benefits are clear then most people will eventually get into line and not worry about privacy concerns. Remember all the concerns about cookies...