Facebook's SEC S-1 filing last week has brought about a lot of speculation and questions -- questions whose answers could over time determine the company's fate.
Some of the questions were posed in the Sunday Review section of yesterday's The New York Times, which ran three opinion pieces: one about this new world of "seamless sharing" and the "death of the Cyberflâneur," one lamenting an era where people are being "used" for their data, and one questioning whether the United States needs harsher regulations on data collection.
Nick Bilton, too, had a blog up on The New York Times posing the question of whether Facebook's oversharing users are owed a cut of the riches.
Regardless of where you stand on the aforementioned questions, all of the above suggests this era of social sharing, and of profiting off of data, is still evolving, and none of the models that have given Facebook security thus far are sure things. Rather, every question that is emerging -- or at least growing louder -- in the wake of Facebook's IPO filing has the potential to knock the site off its perch as individuals wake up to what's been going on since people lost their senses and went so totally social.
So let's address a few problems, starting with a little something called revenue: Facebook last year made $3.2 billion in advertising. That number is 85 percent of its total revenue. While it may sound like a lot, one should consider that Google's ad revenue for 2011 was $36.5 billion.
Now, no one is expecting Facebook to earn nearly what Google does at this point, but one thing is clear: For a company that doesn't make anything except for a platform where the brainwashed herds share every detail of their lives, that ad revenue is going to be dependent on users' willingness and ability to keep doing that, and to do more of it.
Things may very well change, though. Why? I'm glad you've asked!
Demand for "mine." Now that we know how much money Facebook's making, one may wonder: If it's earning billions from my data, am I owed any of it?
We posed a similar question to Internet Evolution users back in the day (as they say). Responding to the question, "Is it right for free online services, like Facebook, to use and distribute your profile data at their will to sell advertisements?" 12 percent of over 220 respondents said, "Yes, but only if I get a cut of the revenue"; and nearly half of respondents said, "No, I think this is an abuse of my data."
That was back in 2009, before Facebook was close to going public, and before anyone would associate the site with $3.2 billion in advertising dollars based on their Likes. Now, with figures like that being thrown about publicly, some are questioning whether users are at least owed a slice of the pie. It's not just Times journalists either: After Facebook filed last week, one visiting Mark Zuckerberg's profile on the site would have seen more than a few users asking that very question.
Sharing fatigue. As one opinion piece in the Times this weekend -- written by Evgeny Morozov, author of The Net Delusion: The Dark Side of Internet Freedom -- highlights, the experience of essentially sharing every experience with everyone within the confines of one site is a dream conjured -- not by users, but by Zuckerberg and Friends. Whether users want this will become more obvious as we see how well they take to Facebook's manic social sharing apps, which will multiply in the coming weeks and months. The ability to convince users that this is what they want will be key to the site's ability to earn more revenue.
Government meddling. As we've discussed before, the federal government is growing increasingly interested in making it more difficult for Facebook and sites like it to profit off of user data without asking their permission every step of the way. The EU has set forth a proposal like this, and some -- like the aforementioned Times writers -- are pondering whether the United States needs something similar. A site like Facebook, reliant on data and ad revenue, could be destroyed by rules like this.
So rejoice all you want, celebrate the overnight millionaires and billionaires of Silicon Valley, including the graffiti artist who painted Facebook's walls for stock options many moons ago.
But once you're through wiping champagne bubbles out of your eyes, consider facing up to the reality that, all things considered, the future of Facebook is anything but secure.
— Nicole Ferraro , Editor in Chief, Internet Evolution