communications

Facebook's IPO motives: domination of the web

It isn't just trying to be a bigger company—it wants to become a cultural norm.

Zuckerberg wants Facebook to be about citizenship, not just consumption. (Paul Sakuma/Canadian Press)

One of the tech world’s most persistent rumours made solid, Facebook’s official filing of its forthcoming initial public offering generated the predictable torrent of scrutiny and discussion. But much of that discussion centred around the IPO’s oddness. Though going public is something of a rite of passage for a company of Facebook’s size, it isn’t easy to pin down why it’s choosing this moment to do so.c It’s true that, through its many private offerings, the company had acquired nearly enough investors to legally require it to make public much of the information in the IPO filing. But there are complications to being a public company; the trade-off is the ability to raise money. And Facebook doesn’t ostensibly need the capital. It has $3.5 billion on hand, has been cash flow positive for some time now, and hasn’t struggled to raise money privately. So why now?

The answers lie in Facebook’s long-term ambitions. But unlike many companies that might use new capital to nudge up market share, Zuckerberg & co. have grander goals. More than introducing new products or marketing strategies, Facebook wants to cement its position as the social backbone of the web—and entrench itself as more cultural phenomenon than corporation.

There’s an urgency, thanks to the pressure of Google’s newly social ambitions. Though it’s unclear whether the Google+ social network will catch on as a direct competitor to Facebook, a core goal for the search giant is clearly for a Google-owned social identity to follow users around from site to site. It’s that sort of “social passport”—full of the kind of detailed, personalized information that marketers dream of—that is the true battleground. Facebook needs to go public now because it has entered a race with Google to provide your default online identity.

There’s a long way to go, of course, and the IPO is only one step. As The Atlantic’s Alexis Madrigal and others have pointed out, a key figure in the filing was Facebook’s low revenue-per-user (currently $5.02). In order for its proposed $100-billion valuation to make sense, it needs to make far more on each user.

On one level, that simply means more—and, Facebook hopes, more-effective—advertising. What’s also likely is some form of integrated shopping that leverages the social graph (the map of online connections between us) to create another revenue stream. But those efforts dovetail with the company’s need to turn much of our day-to-day online activity—reading the news, shopping, sharing and communicating—into something one “naturally” does via Facebook.

It’s a goal they’ve been pursuing for years. From the integration of media services like Netflix or “reading apps” from the likes of The Guardian, to the Like button that aggregates all of a user’s online activity in one place, everything the social network has done over the past few years has suggested that it wants to be the go-to entry point of the Internet. If Amazon is the web’s version of a shopping mall, and Google the library, then Facebook’s aim is both simpler and more far-reaching: to become most Internet users’ online home.

But to become that culturally significant, you have to go beyond consumption—and Mark Zuckerberg knows it. In fact, in the letter that accompanied the filing, he wrote that he aims to “change how people relate to their governments and social institutions.” In addition to becoming the social backbone of the consumer web, Facebook is also hoping to become the place people go online to express political citizenship. It’s a bold vision. Whether or not it’s possible, of course, is a different question.

Social networks rise and fall with an almost alarming rapidity, and in a medium as new as the web, it’s hard to make long-term forecasts. Nonetheless, Facebook’s reach and omnipresence are, historically speaking, unparalleled. And if the goal is for Facebook to become not just a company but a cultural norm, then going public was just the sensible next step.

Navneet Alang is a Toronto-based blogger and technology critic.