Facebook IPO Presents New Challenges For The Social Media GiantBy: Zach Walton - May 18, 2012
Do you love Facebook or do you loathe the very existence of the platform? Your love or hatred can depend on a number of things, but I bet one of the main reasons is privacy. Facebook, as a social media platform, deals in information – your information. Is the IPO going to change how they use your information?
It’s pretty obvious that Facebook uses your information for targeted advertising. Why wouldn’t they? They have all this information on you so why not use it to deliver ads and products that matter most to you. It’s a genius marketing scheme and has led to Facebook making bank on advertising revenue.
All of this was before Facebook became a publicly traded company though. They will have to rely on more than just advertising now, but the ads will still contribute a lot to their bottom line. The concern is that Facebook may use your information in new and possibly privacy infringing ways to make more money. It’s a valid concern and one that could prove fatal to the company.
D.E. Wittkower at the Wall Street Journal likens Facebook to a monopoly. While there are other social networking sites out there, they all go back to Facebook. Pinterest, Twitter, Tumblr and others all go back to Facebook in some way or another. That’s the whole point of the Open Graph, it’s Facebook’s way to connect the entire Web into one service. It’s a weird monopoly, but I can kind of see what Wittkower is getting at. Facebook as the king of social media doesn’t have to worry as much about your privacy since they’re on top.
The problem according to him is when people tire of Facebook or feel threatened by it. A recent poll found that over half of all Facebook users think that Facebook is a fad while a little less than half of the general population feels the same way. This was taken pre-IPO so it will be interesting to see what people think after Facebook has been public for a few months.
This all leads to the idea that Facebook might not be the impregnable fortress of social networking that people make it out to be. One misstep can send the whole operation spiraling downward. As Wittkower points out, Facebook is dependent upon its users. It can’t operate without them. The user is all it has and the user have proven themselves to not be the most faithful lot.
That’s not to say that Facebook is doomed, far from it. If you look back on all the unpopular changes made to the platform, so many people complained and threatened to leave Facebook. In the end, they didn’t and just got to used to it. What happens if Facebook starts to violate your privacy by selling more of your information? Are you going to leave Facebook or are you going to just grin and bear it?
That’s the catch-22 with social networking platforms. They feed upon our inherent desire to be social. Humanity is willing to put up with a lot of crap just to remain socially linked to friends and acquaintances. Facebook provides that outlet to share our lives with others. There are others, but like I said, they all feed back into Facebook creating a giant social media kingdom with Facebook as king.
So more than anything, Facebook needs to keep its users engaged. These users are what drives the Facebook kingdom. It must keep us happy so that we’ll keep on using it. If we’re not happy, then we leave. Without us, Facebook would have nobody to sell ads or Facebook Credits to. The IPO is just going to increase the scrutiny that users apply to the company which will in turn give the users more power than any other group within the Facebook ecosystem.
Imagine if a rival service pops up that competes with Facebook on the same level, but offers more features and better privacy. That rival service is going to attract users and they might even leave Facebook. Their accounts might stick around, but Facebook doesn’t have anybody to sell ads to. At this point, Facebook would have to beg users to come back. If not, Facebook would have to answer to shareholders who put their faith in the company’s ability to retain users.
Like I said, it all comes down to the user. They have the ultimate power in this post-IPO world that Facebook has entered today. Facebook may think they answer to the shareholders and those investing into the platform, but they ultimately answer to the users. The users are going to decide where Facebook goes from here. The social media giant would be wise to listen to its users. If not, they will have to start answering to the shareholders and trust me, shareholders are way scarier than a couple of disgruntled users.