Updated: There has been a lot of sound and fury lately about a Facebook IPO, with the Wall Street Journal saying the social network is expected to launch its public stock offering as soon as next spring, and the issue could give Facebook a market value as high as $100 billion. Not only would it be the largest technology IPO in U.S. history, but if the WSJ’s numbers are correct, it would give the company a market value comparable to General Electric. That would reinforce something that has already started to become clear: Facebook — for better or worse — has become a social utility, like the social web’s equivalent of a power company.
A Facebook IPO isn’t a done deal yet, of course. As the WSJ story and others have made clear, the current state of the stock market and the pummeling some other technology issues such as Groupon have received (the email-marketing service is currently down 42 percent from its issue price) could cause the social network to postpone its offering. Although the company has to start filing its financial results with securities regulators soon, because it has crossed the magic 500-shareholder mark, that doesn’t necessarily mean it will go public. Some have argued Facebook may never do an IPO, since it seems to have no problem raising billions from the private markets.
But in many ways, whether Facebook goes public or not is really beside the point. Whether the company’s real market value is $100 billion or $60 billion or somewhere in between, it has become a central part of people’s lives in a way that would have seemed almost unimaginable just a few years ago.
No longer just a plaything: a social utility
It seems like just yesterday Facebook was still seen as a plaything for university students, or a place to put photos. That was before Zynga showed Facebook could be a massive cash generator for social games (coincidentally, Zynga is also heading toward a public offering soon), and before websites of all kinds saw how much traffic and engagement they could generate by implementing the network’s “Facebook Connect” and open-graph plugins to add “like” buttons and other features. More than 7 million apps and websites use those plugins now, according to Facebook’s official stats.
Many of us have grown used to them, but the numbers behind Facebook are still mind-boggling when you step back and take a look at them: If its current rate of growth continues (and there’s no obvious reason why it shouldn’t), the social network could have a billion active users within a matter of months. According to some estimates, it will soon have more than 16 percent of the display advertising market — a number that’s also growing rapidly — and will likely generate ad revenue of close to $4 billion this year alone (just one of the reasons why Google is so determined to develop its own Google+ network as a competitor).
Although the growth of Zynga and social games is interesting, it was really just the precursor to a much bigger story: the integration between Facebook and a host of other services that have potentially much broader implications. Already, there are some apps — such as the music-sharing app Spotify — that will not work without a Facebook account. If you are determined not to belong to the network, you can’t use these services at all. That may not be a big deal right now, but what about when other more important services are also tightly integrated with a Facebook account?
Media companies such as the Washington Post and The Guardian, among others, have also integrated themselves into the social network in a fairly aggressive way: Instead of just using Facebook’s open-graph plugins to show users social relationships when they are at the newspaper’s website, they have created “frictionless sharing” apps that allow Facebook users to read and share their articles without ever leaving the network. That has benefits for the Post and Guardian in terms of engagement, but it also cements Facebook’s status as the default social destination and default social platform.
We expect much more of a utility than a simple social service
So what happens when Facebook is a social utility: the General Electric of the social web? Governments start trying to regulate the network in the same way they would a telecom company or an electricity provider — as the European Union and other jurisdictions are, particularly when it comes to privacy rules. And the policies of that utility become a lot more important than they were when it was just a simple service used by a few million university students. (Update: Facebook just announced that it has settled a privacy case with the Federal Trade Commission over changes to its privacy settings and its “opt out” policy. Co-founder Mark Zuckerberg has a blog post about the settlement, and the FTC release is here).
That’s one reason why Facebook’s “real name” policy has caused so much controversy (which spilled over onto Google when it took the same approach with Google+). Requiring real names is fine when you are just one of many social services, and you want to cut down on trolling and other bad behavior. But what happens when your policy makes it impossible — or at the very least, dangerous — for dissidents in Egypt or China or other totalitarian states to use your platform for social good? The implications are profound, and it’s not clear Facebook has thought them through as much as it should.
Facebook COO Sheryl Sandberg wrote recently in The Economist that we are approaching a future where your online identity merges with what she calls your “authentic identity,” something Co-Founder and CEO Mark Zuckerberg has also argued is a natural evolution — and it’s pretty obvious Facebook sees this as a good thing. But is it? Those are the kinds of questions we will have to come up with answers for now that the company has become the General Electric of our social age. And the answers are far from obvious.