Facebook’s Challenges Will Linger Past Its IPO

As Facebook winds down an obligatory pre-IPO road show and prepares for its first day of public stock trading May 18 as "FB" on the NASDAQ exchange, investors and potential investors are thinking way beyond just how high the stock price will jump on the first day.

For starters:

  • Can Facebook prove its overall value and sustain profits for its backers over time?
  • Can its advertising model continue to evolve and find new ways to make income?
  • Can the company identify and penetrate new business markets?
  • Can the company figure out efficient ways to monetize itself in the mobile space?
  • How will the company continue to toe the line regarding the privacy of its users, because so much of that private information represents eventual profit for the company?

And those are only five of myriad questions. With regard to the IPO, time now becomes a major factor in how Facebook does its many jobs. With all that money in the bank comes more pressure to get products and services created and into production faster than Facebook might prefer.

So What’s Ahead?

What will Facebook do to make money besides selling those little right-hand column ads to numbers of businesses?

"Facebook, like the whole IT business, is just at the beginning of a lot of things," analyst Charlene Li, founder of the Altimeter Group, said May 13 on NBC Bay Area’s "Press:Here." "This is a company that’s only 8 years old, the advertising market in this space is maybe three or four years old.

"Just two years ago, the (online) advertising was minuscule compared to where they’re at today," Li said. "If they just continue on that trajectory, they will continue to meet those expectations. And what we’re seeing is that the advertisers also have a pent-up demand and appetite. Mobile has been around, but the mobile advertising market hasn’t."

One example is that Facebook recently signed a deal to help Apple sell more applications from its AppStore. Other partnerships are said to be in the hopper.

"The biggest issue isn’t so much the app experience and the user experience as it is that they’re shifting people away from a very lucrative space, the Web platform, into a mobile platform where they can’t advertise, which is the adjustment they highlighted in their S-1," Li said.

Facebook on May 9 filed the sixth amendment to its S-1 filing with the SEC for its IPO, acknowledging the new challenges of monetizing advertising on mobile devices, which have much less virtual real estate to sell than laptops, desktops or even tablets.

The company addressed the concerns that have been raised over the fact that more users are accessing Facebook via mobile devices, and that it is limited in the number of ads it can pass through to those users.

But Facebook will have to find other ways to utilize its power, Li said.

To read the original eWeek article, click here: Beyond the IPO: What Challenges Facebook Will Face