This is the social media generation. More and more, we measure our lives in likes, tweets, connections and followers. And as cyber-society expands, social media has come to encompass and infiltrate almost every imaginable aspect of the human experience. It played an integral role in organizing the Arab Spring, it redefined communication and networking and it showed us a little more of Anthony Weiner than was probably necessary. In fact, it is nearly impossible to escape the influence of a social media bubble that has grown exponentially over the past decade. And that bubble is only going to get bigger.
This week, Facebook is expected to file for an initial public offering (IPO), which would allow anyone to purchase stock in Mark Zuckerberg’s company. It’s an enormous step for the social media superpower, as this stock market launch may be one of the largest and most heavily anticipated in recent memory. Investors can barely contain their enthusiasm, and with good reason: Facebook is looking to raise anywhere between $5 and $10 billion through this IPO. To put that in perspective, Google currently holds the record for largest IPO by a tech company — $1.66 billion.
What do the numbers mean? Even investment firms are unsure of Facebook’s true value, but some have speculated that prices could soar over $100 per share on just the first day of trading. In any case, the hype behind this latest launch is not without precedent. Last spring, LinkedIn became one of the first social networking companies to sell public stock, rocketing from an opening price of $45 to a closing value of $94.25 per share on its first day. Its momentum quickly faded, however, and prices have fallen back to moderate levels. Last year’s similar IPOs from Groupon and Zynga produced even greater letdowns, as both companies are now trading just above their initial opening prices.
But if any form of social media has a serious chance to shake up the market, it’s Facebook. With more than 800 million active users, 80 percent of whom are outside the United States, Facebook’s global reach is both impressive and sustainable. With such a massive user base, it may seem that the top social media giants have already reached their peak potential. But as Internet access becomes more readily available, companies like Facebook will have plenty of opportunities to expand into developing countries.
With this IPO, Facebook also brings a vast array of secondary investment opportunities. Application developers, mobile operators and every website with a “Like” button all rely on Facebook’s immense user base for integration with the social networking community. More than 350 million users currently access the site through a mobile device, and that number is only bound to increase as smartphones and tablets become the norm. It’s an opening into the new “social economy,” as media theorist Douglas Rushkoff calls it — a world where “we will all make our living playing Farmville, or designing new versions of it, or investing in companies that do.” For a company already so interconnected with almost every facet of the technology world, it’s no surprise that investors would be so eager to jump on board.
The biggest question that will follow the Facebook IPO is whether Zuckerberg and Co. can buck the recent trend of social media startups. Will the enthusiasm fizzle as with LinkedIn and Groupon, or will Facebook’s entrance into the public economy mark a turning point in social media investment? Right now, it seems the bubble is destined to expand, with more companies diving in for a piece of the social economic pie. With its revenue expected to double in the next two years, Twitter has already generated expectations of an IPO in 2013. LinkedIn may not have had the momentum to remain financially attractive, but companies like Facebook and Twitter have staying power. For now, at least, the user base is only expected to grow, and the excitement of social media will not fade anytime soon.
The real danger is overvaluation. Is Facebook really worth $100 billion? What will happen when public enthusiasm finally plateaus? Will the bubble burst like the 1999 dot-com fiasco? Only time will tell, but the hype surrounding this latest string of public offerings is certainly reminiscent of bubbles past. Social media may be engrained in our society, but it’s only a matter of time before the novelty wears off, leaving overzealous investors holding the bag.