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Sat May 19, 2012
What To Expect In Facebook's Future
SCOTT SIMON, HOST:
This is WEEKEND EDITION from NPR News. I'm Scott Simon. Stock in Facebook went on sale for the first time yesterday, the largest initial public offering of stock for an Internet company, and the sale instantly created scores of millionaires in Silicon Valley, about half a dozen or so billionaires. NPR's technology correspondent Steven Henn joins us. He's followed it all from Silicon Valley. Steve, thanks for being with us.
STEVE HENN, BYLINE: Sure, my pleasure.
SIMON: After all the attention, all the clamor, all the expectation, what can be said about the first day of trading?
HENN: Well, after thousands of newspaper articles and blog posts blaring breaking news, Facebook shares yesterday closed just a few cents higher than their IPO asking price. Still, even though the stock didn't pop as they say, buying shares of Facebook is expensive. Last year the company had about a billion dollars in earnings, so its shares are close to a hundred times earnings. Most companies, even ones that are growing really fast like Apple and Google, have price earnings ratios in the teens.
SIMON: A lot of people were watching yesterday to see if Mark Zuckerberg kept the hoodie. He did, at least when ringing the bell to open the stock exchange. But there's a lot of interest in how Facebook might change now that it's gone public.
HENN: Facebook's going to be under a lot of pressure to increase the profit that it brings in, but I think that over the next few years, the executives at Facebook are going to do everything they can to try to prevent it from changing. They want their employees to stay focused on building great products and getting them out the door. I think Mark Zuckerberg is unlikely to spend much of his time courting Wall Street.
He owns the controlling stake in the company, so when push comes to shove, he really doesn't have to answer to the new investors. And I think that they would like the company to just stay focused on building products that, you know, hundreds of millions of people, possibly some day more than a billion people, find engaging.
SIMON: I also wonder what's the effect of having so many instant millionaires in the company? I mean, surely a good percentage of them might decide, you know, I've always wanted to explore the Amazon.
HENN: And they actually said, you know, a number of our employees after the IPO will have substantial personal wealth, and, quote "it may be difficult for us to continue to retain and motivate these employees, and this wealth could affect their decision on whether or not to continue to work for us." So I think the lure of the Amazon, or of going out and trying to start your own business, is going to be intense for many really talented people there.
SIMON: How might Facebook be different for the people who use it each and every day?
HENN: Well, I think the pressure to increase advertising is the thing users will probably notice the most and the soonest. Already in the months leading up to the IPO, there have been a number of small changes that have increased the numbers of ads users see and where they see them. Facebook actually provided the public with a little hint about how - where they might be going with this last week.
They tweet their privacy statement, and they asserted that they had the right to use information they collect about all of their users to begin to sell ads on other websites using their data to target those ads. So that might be one way Facebook tries to preserve the user experience while at the same time making more money.
SIMON: Steve Henn is NPR's technology correspondent. Thanks very much.
HENN: My pleasure. Transcript provided by NPR, Copyright National Public Radio.