The end of Facebook’s private profile

Facebook, the social networking phenomenon that managed to change the word ‘friend’ from a noun to a verb, has long kept us guessing about its intentions regarding becoming a publically listed company.

Facebook, the social networking phenomenon that managed to change the word ‘friend’ from a noun to a verb, has long kept us guessing about its intentions regarding becoming a publically listed company.

Since its launch in 2004, Mark Zuckerberg’s Harvard creation has trounced the likes of MySpace and Bebo and placed itself firmly at the top of the pile as it approaches its billionth registered user.

However, in stark contrast to its social mantra of sharing, Facebook’s financial details have always been shrouded in secrecy. Those curious about how such a young, volatile company could be valued at the $100 billion figure that is often bandied about have been left no wiser as to its true worth.

Speculation about an IPO filing has intensified in recent days with the assembled press taking delight in breaking down how much each stakeholder in the California-based company is set to make. And it has now been announced that it will list under the ticker FB, with plans to raise an initial $5 billion.

There is no doubt that while the likes of Zuckerberg and ‘founding’ partners Dustin Moskovitz, Eduardo Saverin and first chairman Sean Parker will make a tidy fortune out of the listing, the long term returns for investors who are entering the equation at this stage are by no means guaranteed.

The dot.com bubble which imploded at the turn of the millennium saw many high flying internet-based businesses come crashing back down to earth, and with them the hopes and fortunes of many private investors.

The recent public offerings involving the likes of business network LinkedIn, voucher service Groupon and online gaming company Zynga have all had stock listing prices which have failed to track, bringing the question of their long term investability into question.

With the level of both UK and US tech start-ups at a healthier rate than it has ever been the question needs to be asked: Is the large amount of cash soon to be ploughed into Facebook better spent on earlier stage companies?

Rather than jumping on the Facebook cash cow, there is a good argument for suggesting that this level of money could be better used on investments in smaller, but more secure businesses. It is here that venture capitalists and angel investors alike can have a conscious say in how a business is being grown through direct involvement with management teams.

No one really knows how much revenue Facebook makes from its advertising, applications and virtual goods, but the opening up of its financials once it becomes a public entity will make for some interesting reading.