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Facebook Privacy The Almighty Buck

Facebook Adds 96 Million Shares, Will Privacy Get Worse After IPO? 191

AlistairCharlton writes "Facebook has made yet another amendment to its S-1 filing, adding a further 96 million shares, pushing its initial public offering up to a potential maximum of $18.4bn (£11.5bn). In what is the eighth amendment to its S-1 filing with the Securities and Exchange Commission, Facebook has also increased the number of shares allowed for over allotment, up from 50.6 million to 63.2 million." Facebook will have a lot of pressure to increase revenue after it goes public. jfruh writes in with a story about how that will impact their privacy policies. "There's been a steady drumbeat of panics over the past few years involving how Facebook uses the personal information you give it; nevertheless, someday you'll look back at 2012 as the golden age of Facebook privacy. That's because, once Facebook has its IPO, it'll come under huge pressure from the markets to extract more revenue from its business. And with display advertising not generating game-changing amounts of money, Facebook has only one valuable resource: your data, which is going to be monetized as hard as possible."
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Facebook Adds 96 Million Shares, Will Privacy Get Worse After IPO?

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  • by WillAffleckUW ( 858324 ) on Wednesday May 16, 2012 @03:03PM (#40020969) Homepage Journal

    Will it make privacy worse?

    Yes.

    And here's why:

    Read the fine print of the IPO - it says FB "will do evil whenever it can".

    Now if that is not a slap in the face of Google, I don't know what is.

    • by jaymz666 ( 34050 ) on Wednesday May 16, 2012 @03:05PM (#40020987)

      They have a fiduciary responsibility to their shareholders to maximise profits, so of course they will do that by reducing privacy

      • by WillAffleckUW ( 858324 ) on Wednesday May 16, 2012 @03:13PM (#40021093) Homepage Journal

        They have a fiduciary responsibility to their shareholders to maximise profits, so of course they will do that by reducing privacy

        Which will, of course, result in successful lawsuits and fines in Canada and the EU.

        • by Sir_Sri ( 199544 ) on Wednesday May 16, 2012 @03:26PM (#40021243)

          And might be why they won't do it.

          Facebook has managed to behave the way it does for the same way Wiretapping laws didn't apply to Skype for a long time, as long as you're a bit player in the business no one gives a shit what you do. As Facebook has gotten big governments have started to take notice. The bigger they are, and the more public they are the more likely governments are to take notice, and if rules don't exist they'll write new ones.

          Governments are slow to react to change, that's the nature of the beast, and they have a lot of things on legislative plates that always seem far more pressing than whatever problem I think they should be addressing today. But that's beside the point, piss enough enough important representatives with TSA groping, Privacy Violations (wait until some important senators kid gets stalked via facebook and see how quickly the rules change), or whatever else and see just how quickly government can write new laws. And being publicly traded valued at 100 billion dollars means you don't have a lot of excuses about 'we can't afford to run our business like that' and if you don't comply your shareholders and the government will not be pleased.

        • by s.petry ( 762400 )

          Oh yeah? We'll see your privacy lawsuit and raise you a CISPA!

      • by TubeSteak ( 669689 ) on Wednesday May 16, 2012 @03:14PM (#40021101) Journal

        They have a fiduciary responsibility to their shareholders to maximise profits, so of course they will do that by reducing privacy

        Do you know that Facebook will have 1 shareholder with 55.8% of the voting shares?
        That shareholder is CEO Mark Zuckerberg.

        Zuckerberg e could do whatever he wants with Facebook after the IPO and never have to work another day in his life.
        The only shareholder that matters doesn't need maximized profits.
        How do facts jive with your "reduce privacy to maximise profits" ideology?

        • by jaymz666 ( 34050 ) on Wednesday May 16, 2012 @03:16PM (#40021133)

          considering THEY ALREADY DO IT and HAVE DONE IT, it jives pretty well.

        • The only shareholder that matters doesn't need maximized profits.

          Since when in the history of the world has anyone turned down increased wealth because they didn't need it?

          Did I cross over into the mirror universe this morning?

          • Warren Buffett comes to mind, but he's one of a few. Mainly philanthropists. Bill Gates, too.
        • by betterunixthanunix ( 980855 ) on Wednesday May 16, 2012 @03:45PM (#40021507)

          Do you know that Facebook will have 1 shareholder with 55.8% of the voting shares?

          I am pretty sure that Facebook is required to maximize the profit of all its investors, despite the fact that one investor holds a majority stake. As CEO, Zuckerberg does have a duty to all of Facebook's investors, not just his own vision...

          The only shareholder that matters doesn't need maximized profits.
          How do facts jive with your "reduce privacy to maximise profits" ideology?

          ...except that Zuckerberg has already attacked privacy rights, both in statements and through Facebook's policies and design. So there is really no reason to think that he would not continue to do so.

          • by swillden ( 191260 ) <shawn-ds@willden.org> on Wednesday May 16, 2012 @04:18PM (#40021855) Journal

            Do you know that Facebook will have 1 shareholder with 55.8% of the voting shares?

            I am pretty sure that Facebook is required to maximize the profit of all its investors, despite the fact that one investor holds a majority stake. As CEO, Zuckerberg does have a duty to all of Facebook's investors, not just his own vision...

            I think, more accurately, that Zuckerberg has a duty to do what was promised in the IPO filings with the SEC. I haven't read them, so I don't know what's in there, but they could say he's planning to drive Facebook's share value to $0, and he'd have a legal obligation to try to do just that, and could be sued for trying to increase shareholder value.

            Now, that would obviously be silly, but the serious point is that if the plans laid out for potential shareholders to read include a focus on maintaining user privacy, or even just a focus on long-term value over short term value, then Zuckerberg would not be obligated to monetize as hard as he can. Rather he'd be obligated to balance the competing goals in accordance with shareholder expectations (which are defined by the filings). Even if they don't contain anything like that, it's still no slam dunk that he has to do whatever he can to maximize short-term profits. Abusing users' privacy too badly will erode the user base, which will damage the company long term.

            With all that said, the pattern that has been established is that Facebook takes two steps forward into user privacy abuse, then takes a half step back. Lather, rinse repeat. What I expect is for FB to continue pretty much exactly like it has, with the net effect being a gradual erosion.

        • Zuckerberg e could do whatever he wants with Facebook after the IPO and never have to work another day in his life. ...How do facts jive with your "reduce privacy to maximise profits" ideology?

          Okay, as you asked, here's a fact: The IPO will not make Mark Zuckerberg immediately fabulously wealthy. More accurately, on paper, yes. But he can't immediately convert that book value to real world cash. There are rules that state he must hold on to those shares for a certain period of time before he can trade them; these rules are put in place expressly to prevent such shenanigans. Zuckerberg sits back and lets Facebook go all burnt toast, and by the time he can sell his shares they're pretty well worthl

      • And if they drive users away in the process, how will that be fulfilling their fiduciary responsibility?

        • by betterunixthanunix ( 980855 ) on Wednesday May 16, 2012 @03:52PM (#40021577)
          People will only be driven away if they see their privacy being violated -- information exposed to friends, etc. Now, suppose that Facebook just conveniently sells more detailed information to advertisers at higher prices, without telling the users -- nobody will leave the site, and even if they are told what is happening they will just say, "Well so what, I am not that interesting so why should I care?"
      • I love it when people use the hackneyed logic. Yes it is true – but it does not mean that a company hast to rape, pillage or commit short term fixes to make next quarter’s earnings. As long as the C.E.O. can stand up and say – with a straight face – that their actions is part of a plan for the long term good of the company their safe.

        What this phrase means is that Zuckerberg can’t screw the minority shareholders because it’s inconvenient. If company X offered to buy out

        • by rtb61 ( 674572 )

          Facebook are already coming under income pressure http://www.theregister.co.uk/2012/05/16/gm_drops_facebook_ads/ [theregister.co.uk]. GM dropped Facebook adds because of poor response (that'll spread like a wild fire).

          When people use Facebook they are very focused on their social relationships, the get in read what they have to, respond as they need to, maybe play a game and get out. They are never actually looking for anything, so adds are at complete divergence to their activity and ignorable background.

          When people are

      • No, they have a fiduciary responsibility to act in the shareholders' best interests which is not necessarily maximizing profits. It's what they sell to shareholders in their prospectus that matters. Go read Google's prospectus to see what makes them different from most other companies, particularly the sections about "privacy", "evil", "long term" and "brand".

        I don't work for Google or own any part of them.

      • by oxdas ( 2447598 )

        This begs the question; when should they maximize profits, short-term or long-term? Long term shareholders don't care about the next quarter. They want to see money reinvested, talent retained, and the user base satisfied. Short-term shareholders want to see money paid out, staff fired, and the user base squeezed for the maximum amount today. These two interests are directly at odds in all companies. Therefore, "profit maximization" is really not possible for all shareholders.

        As for the law, they have

    • by tlhIngan ( 30335 )

      As a future shareholder of facebook, I wil lbe encouraging it - I want access to all that sweet sweet data since I effectively own a part of it!

      On a more serious note, there is no privacy on Facebook to begin with. The only reason for "privacy controls" is purely one of marketing - it's used to encourage people to spew their guts onto the site, under the guise of "privacy". Otherwise no site will be able to get much in the way of user data - unless you pretend there's some "privacy", people will be cautious

  • by cpu6502 ( 1960974 ) on Wednesday May 16, 2012 @03:08PM (#40021029)

    I fill my profile with lots of fake data (such as the wrong city and birthday). Or just leave it blank (don't list my workplace or career).

    • by sideslash ( 1865434 ) on Wednesday May 16, 2012 @03:17PM (#40021145)
      I can picture your ads now: "Do you have compulsive lying disorder? Get relief now, ask your doctor about VeriPilium."
      • by vlm ( 69642 )

        tinfoil ads. I look at it as I'm going to be spammed anyway, about a hundred spam per day in my gmail spam folder.

        You know what I'd pay for? Real ads. Stuff I actually wanna buy.

        GOOG please spam the heck out of me with cheap 3-d extruder printer/replicator thingies, new Spartan series FPGA boards, sales on 3/8 inch aluminum cutting endmills, books about scala and ruby, raspberry pi sellers who actually have the device and stock and aren't therefore gouging on price, everything Charlie Stross and Oreilly

    • Hell, I'd bet a significant number of the profiles on there haven't even been accessed in months. As for false information, almost everyone I know has false information in their profile somewhere.

      That's one reason why I think this whole IPO is going to crash and burn. Once shareholders start demanding the wringing of every piece of revenue out of the data they can, they're going to realize that a lot of the data is trash, which is going to affect the value of it, obviously. Then you're going to end up wi

    • Almost all of my profile data is fake, much of it obviously ludicrous (my college is right, my degree in "Bible Sexuality" not so much, my occupation in the "Salt Mines" is factually incorrect but metaphorically true...). The only profile picture I've ever had that was actually a photograph of me was when I was 6 years old (40-odd years ago). There are no photos tagged of me.

      I don't really understand how they will plan to make money off this.

    • by bsane ( 148894 )

      Works great until people wish you happy birthday...

  • by Rob Kaper ( 5960 ) on Wednesday May 16, 2012 @03:24PM (#40021217) Homepage

    Facebook is not just a social network, it's consumer groupware. Compare it to television or telephone, not to Myspace and other previous offerings focusing solely on the social factor.

    I expect the following:

    - provides ticketing for events.
    - a store for media content and app content.
    - even a premium subscription model to remove ads (hi Slashdot!).

  • by cheesecake23 ( 1110663 ) on Wednesday May 16, 2012 @03:26PM (#40021247)

    Facebook Adds 96 Million Shares, Will Privacy Get Worse After IPO?

    Another question I've been mulling over lately is: will Kim Kardashian become less private now that she's dating Kanye West?

  • by escay ( 923320 ) on Wednesday May 16, 2012 @03:38PM (#40021393) Journal

    The interwebs is filled with stories, articles and opinions about why getting in on the Facebook IPO is such a bad idea. I can't find a single piece that argues for buying FB shares now (if you do, can you please share?). So I'm wondering, if there is such an overwhelming negativity against the shares, what's driving this demand up and making fb add more shares?! brokerage firms are offering pre-orders for pre-screened buyers with a minimum number of orders and still are not guaranteeing issuance of shares. If so many people are saying don't do it, who are all the people who are doing it, and why? I find it hard to believe that so many people are actually ignoring the news and willing to put money down - surely there's something we're missing?

    what's the pro argument for fb shares?

    • http://www.ft.com/cms/s/0/1f8d58f0-9ed8-11e1-a767-00144feabdc0.html [ft.com]

      Here is one view to think about:

      âoeWe want to dump a lot of money into Facebook,â one says, citing peersâ(TM) activity on the site as evidence of its longevity. âoeYouâ(TM)re on Facebook half your day, if not more. Itâ(TM)s a necessity. Itâ(TM)s water, itâ(TM)s death and now itâ(TM)s Facebook.â

      People have high hopes for Facebook.

    • Sadly it seems to me that it's the same people that thought pets.com or whatever.com were were good bets, but only now they're slightly more informed. Back in the 90's it was "They're on the INTERNET! That's the FUTURE! CAN'T LOSE!!"

      Now it's "Wow they've got the web 2.0, app store, iWhatever and wear hoodies. The kids love them and there's billions of users ... CAN'T LOSE!!"

      Nevermind that the beauty of the web is a lack of lock-in ... especially for these free services. A new one will inevitably c
    • by vlm ( 69642 )

      what's the pro argument for fb shares?

      Note I'm not buying and not seriously advocating, but paraphrasing a lot of sites I've seen:

      1) If the stock price reflects a price per user around $120 each, which seems to be the consensus view, and the earnings per user is known to be about $1.40 per user per year, that's a 1% rate of return. I wish I had a bank account with that high of return. Of course when investing you need to worry about return OF capital before you worry about return ON capital, if you know what I mean...

      2) Gaming on FB can prob

      • I think you are mashing two different ideas in your first point.

        The standard way to value a stock is the P/E ratio. If FB makes $.59 per share next year and the stock is priced at $37.50 that would give us a P/E ratio of 63. If you take the inverse of the P/E ratio you get a simple rate of return of 1.6%. This is a better way to calculated then your method.

        Which moves us to $120 price per head. This is a hoary method of valuating stock, normally used when the growth of a company is unpredictable. This was

    • by rev0lt ( 1950662 )

      The interwebs is filled with stories, articles and opinions about why getting in on the Facebook IPO is such a bad idea.

      Because you are probably looking only to the interwebs appealing to a typical slashdot user. The kind of user that understands the consequences of misuse of personal data, and already knows several examples of big internet-related companies that went under. Also, it is easy to understand how facebook value is largely overrated - the _real_ payday is probably now, but only for (not so few) investors. Those are the same investors financing the stories about the opportunity that investing in Facebook is, and h

  • by JazzHarper ( 745403 ) on Wednesday May 16, 2012 @03:55PM (#40021597) Journal

    By increasing the size of the IPO, they are offering closer to 15% of the shares, rather than 10%.

    At a price of $34/share, the market cap will be north of $120 billion, and the price on Day 1 could spike much higher than that, when all the rubes jump into the secondary market.

    Facebook may never again have a market capitalization greater than it will on its first day of trading.

  • Does anyone think Facebook's privacy will be improved by a massive infusion of investment?
  • Worldwide ad spending. The only thing they can sell right now is ... you. But the buyers are spending less than a trillion worldwide annually. That's the total market. Their annual revenue is already about 4B. Realistically, they should be able to grab no more than about double their attention share, and what is that, maybe 5% (generously). That puts about a 25x growth cap on facebook, and assumes that they successfully reach basically everyone who ever sees advertising.

    Personally I'll be shocked if they can grow revenue 10x.

    • by vlm ( 69642 )

      IF they never sell anything but advertising.

      But what if they start selling background check services to corporations? Or live monitoring of employees/customers/competitors/whatever?
      "Peeking" into teens life for parents (and teachers?) for a hefty fee. Fear sells!
      Market research is valuable (FB what car colors do people prefer? or whatever)
      Style. Like zynga's virtual stuff, maybe your fb profile can look like an old myspace page full of animations if you send FB $5 for each little animated taggy / yellow

      • > But what if they start selling background check services to corporations?
        > Or live monitoring of employees/customers/competitors/whatever?
        > "Peeking" into teens life for parents (and teachers?) for a hefty fee. Fear sells!

        Those sevices would become worthless in a few months, once it became widely known they do this. People will start getting more discreet, or dumping Facebook altogether. Remember the recent rash of stories about prospective employers wanting access to job applicants' Facebook acc

    • A whole lot of people seem to forget that there's a ton of cash floating around FB for the games. I recal reading they get like a 30% rip on every zynga transaction so it's probably the same for all others. Just zynga alone makes up like 15% of their revenue. I don't think they will grow all that much going forward personally but I wanted to point out that ad revenue is not their only source.
  • by spirit_fingers ( 777604 ) on Wednesday May 16, 2012 @04:14PM (#40021811)

    Facebook is caught between a rock and a hard place with regard to user privacy. They already take a lot of flack from users who don't like what they perceive as Facebook's lax privacy protection. Facebook can't simply dilute it further without risking a flood of protest from its users. It can't afford that. That's not to mention the various state and federal privacy regulations already in place that will also constrain them.

    Oh, and don't count out Google+ as competition just yet. Google isn't going to declare defeat in the social media space any time soon. They recently completely revamped the Google+ interface and have shown that they're in it for the long haul. They will be waiting for Zuckerberg & Co. to stumble and give users an excuse to jump ship. I suspect they won't have to wait long.

    Of course, the investors will be howling for Facebook to bring in the numbers, especially now that GM has announced yesterday that they are cancelling all of their advertising on FB due to its lack of effectiveness. You can bet that move has caught the attention of every other large advertiser. Facebook is in trouble. They have very little maneuverability to enhance their revenue stream and a lot of pressure to do so. Something's got to give and I predict it will not be pretty for either FB's bottom line or their stock price.

    • Facebook is caught between a rock and a hard place with regard to user privacy. They already take a lot of flack from users who don't like what they perceive as Facebook's lax privacy protection. Facebook can't simply dilute it further without risking a flood of protest from its users. It can't afford that. That's not to mention the various state and federal privacy regulations already in place that will also constrain them.

      No, they simply cannot dilute it further because it's as diluted as it could possib [msn.com]

    • Oh, and don't count out Google+ as competition just yet.

      I haven't counted them in as Facebook competition yet. G+ is more a competitor to Twitter than it is to Facebook, given it's near complete lack of any features beyond the ability to share posts.

      They recently completely revamped the Google+ interface and have shown that they're in it for the long haul. They will be waiting for Zuckerberg & Co. to stumble and give users an excuse to jump ship.

      The term you're looking for isn't "revamping the

  • OK, for a nice summary analysis of Fadbook, have a look here: http://www.zerohedge.com/contributed/worlds-first-phenomenally-forensic-facebook-analysis-what-you-need-you-invest-pt-1 [zerohedge.com]

    Now, for me its pretty simple:

    1. 1 billion users, valued at 100 USD per user is absurd. I don't see them being able to monetize traffic better than Google does, especially international. They are locked out of China too, so forget that market growth. FB is way too faddish. You will see major attrition over time without the

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