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Tuesday, May 15, 2012

KNOW HOW FACEBOOK'S IPO WILL AFFECT USERS!

WASHINGTON -- If you are one of the almost one billion people who use Facebook, you are unlikely to notice any major changes when you sign in this weekend.

Facebook's entry to the stock market -- expected Friday -- will be a timeline-shaking corporate event, but users may find nothing new to like or dislike.

Expect the same babbling wall posts, ill-advised photos and links to the weird and wonderful dark corners of the Internet.

But a few years from now, the ripple effects of Friday's events could make things look dramatically different.

From now on, the company will come under relentless pressure from profit-hungry investors to monetize you, the humble Facebook user.

"Going public could certainly change the user experience within Facebook," said James Lenz a professor of business at Rice University.

Lenz and other experts predict Facebook users will have a more business-focused and ad-soaked experience.

"Meeting quarterly (earnings) expectations will be the most difficult hurdle for Facebook," he said. "The stakes will continually become higher as stock price pressures mount."

Users who check their news feed on a mobile device will likely see the first changes.

"If you want one concrete change that is going to influence the user experience -- look at mobile," said Rebecca Lieb of the Altimeter Group, a new technologies consultancy. "You are going to start seeing ads."

Amazingly, on the eve of a $77-$96 billion IPO, Facebook still makes almost no money from its mobile products, which do not feature ads.

In its sales pitch to investors, Facebook said that was something it wanted to rectify quickly.

And like mobile users, website users should expect more a more business-friendly site, but not necessarily a stream of traditional company advertisements.

"Facebook needs to maintain the familiar look and feel of its pages while incorporating timeline, social app updates and sponsored ads," said N. Venkat Venkatraman of Boston University.

Instead Facebook will likely try to develop a new type of advertising: expect more product endorsements from friends, more scope to 'check in' to specific restaurants and businesses and more company-backed pages to "like."

"They are not necessarily going to be ads in the form of media buys," said Lieb. Facebook "is really blending paid, owned and earned media into new messaging channels."

Whether there are more dramatic reforms at hand -- perhaps even a pay-to-use 'Facebook plus' -- will equally depend on founder Mark Zuckerberg's willingness and ability to satisfy the relentless logic of quarterly earnings reports.

Indeed balancing income generating innovations without riling users will be the central challenge for the freshly listed company.

"If Facebook alienates its audience they won't have an audience, and they can't monetize that audience," said Lieb. "We've seen other Internet giants not follow the demands of their users and fail."

In the past Facebook has not always proved adept at threading the needle.

It has frequently run up against allegations of flouting privacy agreements and selling personal information to companies.

And recent history is replete with cautionary tales of the pitfalls of putting quarterly profits before consumers.

"Relationships take time to build, but can quickly be destroyed as we saw with MySpace," said Rice University's Lenz, pointing to the spectacular decline of the company after it became part of Rupert Murdoch's News Corp.

Similarly Netflix had long been the darling of the tech world, building a customer base by providing a cheap and easy way to watch movies.

"One bad move, in this case, splitting the streaming business from the mail subscription segment, alienated its users to the point that the stock quickly dropped," said Lenz.

But there are also examples of how things can go well.

Notwithstanding foul ups over its entrance into China, Google has won plaudits since its 2004 listing.

"Google's owners came out and said, 'Well, we understand that we need to look at quarterly earnings, we will consistently have our eye on the far horizon and investors in this company should be aware of that,'" said Lieb.

"I think it absolutely has worked."

So far Zuckerberg is talking the good fight: assuming the role of apostle for a social network that can improve people's lives and make bank at the same time.

That will either turn out to be incredibly naive, or the mark of a man who, in some significant way, transforms Wall Street, Madison Avenue, Silicon Valley and people's lives, in one fell swoop.

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