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Facebook IPO: What it really means

Facebook's $5-billion initial public offering has sent shock waves rippling through the markets. But what does it really mean? Amid all the hype and conjecture, here's a quick rundown of the potential impact:

1 — Short-term, business as usual

To the average user, nothing changes for now. Going public doesn't change how a web-based service works and the typical user probably wouldn't know anything had changed behind the scenes. Google's going public, for example, didn't result in any overnight changes to the way its search engine worked. While it may have created a lot of employee-millionaires — and in Facebook's case, the number of instant-millionaires could top 1,000 — the service itself was little-changed initially.

2 — Longer-term, it's a slightly different story

An IPO gives a company access to resources — Facebook could reap $5 billion in cash — that could allow it to buy whatever it wants. For a company like Facebook, it means a gold rush for hiring engineers, developers and other critical staff. Or buying other companies that can further fuel its growth.

The benefits extend beyond the company itself. Governments everywhere — including those in high-tech Canadian hotspots like Waterloo region — compete with each other to attract satellite operations that, in turn, attract high-tech, high-value jobs. In the wake of Nortel's collapse and RIM's rocky road, extravaganzas like Facebook could give investment-seeking municipalities hope that they could potentially land an R&D or marketing operation

3 — The markets need this

The ongoing recession ground all major sector investment activity to a halt when it first blanketed the markets in 2008, and huge IPOs have been off the radar since since then. A few last year — LinkedIn and Pandora, for example — got the ball rolling again, but they've failed to take off since, with share prices falling below the initial offer level.

The Facebook IPO could either reignite a wave of investment in tech — which could send stronger signals to other sectors and pull investors spooked by the market chaos back into the fray — or it could be a case of too-high expectations ultimately flattened by the cold reality of European debt, Iranian sabre-rattling and fears of a stalled U.S. recovery. We won't know until the markets have had a chance to weigh in after go-live, but for the first time in years, there's at least a light at the end of the IPO tunnel.

Average users still probably don't care. But recession-scarred investors probably do, as it's a massively bright spot in the middle of a whole lot of uncertainty.

4 — It marks a fundamental shift

Why are the numbers so big and why is this causing such a fuss? Simple: Social media is becoming the new "in" place for people to spend their time online. Once upon a time, Google dominated our online activity because it helped us navigate a then-new landscape. But as we spend less time searching and more time poking, statusing and sharing photos, advertisers are shifting to where the action is.

This tectonic shift is the Internet equivalent of a gold rush, and largely explains why Google is scrambling so aggressively to catch up with its push to bake its Facebook-competitor Google+ into its entire range of services.

4 - Personal data is the currency of the future

Facebook has busted into an elite club of companies - including Google, Amazon and Apple - that collectively know everything we do online. They know who our friends are, what our interests are, our individual backgrounds, employment histories, tastes in entertainment, travel preferences, etc. That data allows advertisers to narrowly focus in on us in ways that are only now becoming understood.

The more things we do in online landscapes like Facebook, the more they learn about us. And the more they are worth to advertisers. For now, a $100 billion valuation divided by Facebook's 800 million users puts a $125 price on each of us. Going forward, those numbers will only grow.

6 - An IPO is only the beginning

Publicly traded companies are fuelled by growth. Facebook will have to figure out ways to continue to grow its user base at an historically rapid clip — which means major global expansion, as growth rates in North America and Europe are already starting to flatten because most folks who would use it are already signed up.

The company will also have to get the users that it has to spend more time in its universe. So those interface redesigns — Timeline, anyone? — that so annoy so many will become a more frequent thing. So will new apps, new partnerships, new developers and new capabilities. When you're public, standing still is equivalent to being dead in the water, so like it or not we can expect a post-IPO Facebook to become a master of rapid reinvention.

7 - Facebook will need to grow up

A publicly traded company is subject to much more rigid operational and reporting rules than a privately owned one. Facebook has long been known as something of a bad boy when it comes to corporate governance. Its approach to privacy, for example, has put it squarely in the sights of Canada's own privacy commissioner, Jennifer Stoddart.

After global investors take ownership of their respective chunks, Facebook will need to be less of a rogue player. This could lead to better leadership on the thorny issue of privacy/confidentiality, and give everyday users more protection from third party developers who play fast and loose with the rules.

8 - It signifies that social media is truly coming of age

Facebook started as a way to find the best-looking students on campus and evolved into an often-dismissed website where folks poked each other and posted what they'd just had for lunch. An IPO of this scale sends the message, loud and clear, that Facebook has evolved well beyond its simple, seemingly trivial roots. And as poster boy for a whole new generation of social media tools - hello Twitter - it confirms that social media is the Internet, and Facebook is just as serious a player as Google, Amazon and Apple.

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own. carmilevy@yahoo.ca

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