Facebook IPO doubts of IT pros and investors

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Are you a Facebook IPO prospective investor or active user?

A lot of buzz, big headlines and billions of dreams brought tremendous excitement to fans, owners and prospective investors recently with the announcement of the long-awaited Facebook IPO. Now, skeptics and rumer spreaders feast on speculations, doubts and countless questions.

Those hundreds millions of people on Facebook? Some may not actually visit even once a month, while others have multiple networking accounts, because they are part of the big social media game.

On the first page of the now officially released Facebook IPO prospectus, it shocks the number of the platform’s “monthly active users” at a whopping 845 million people. The social networking giant arrives at an even more astounding number when it comes to “daily active users”: 483 million people.

The numbers stated at the Facebook IPO prospectus are some seriously huge and somewhat doubtful. It is hard to believe that so many people are clicking on the social network platform every day. Facebook is not Google, where people will search for an answer every time they don’t know what to do. So, are the daily users  mentioned in the Facebook IPO papers for real and how many of them see the addvertisements on the left, because most of the IT professionals are banner blinded due to the nature of their jobs?

On page 44 of the Facebook IPO prospectus, the company provides an inventive definition of an “active user”. Precisely, it counts as “active” users who go to its website or its mobile site. Along with those, it also counts an entire other category of people who don’t click on facebook.com as “active users” at all. According to the papers, a user is considered active if he or she “took an action to share content or activity with his or her network  friends or connections via a third-party platform that is integrated with Facebook.”

What does this mean?

Every time you click the “Like” button on DubaiChronicle.com, for example, you are an “active user” of Facebook. Perhaps you share a Twitter message on your Facebook account? That would make you an active  user, too. So, everyone is a big “active user”, even though they have never actually spent any time on  the social network’s website.

Not only IT and social media professionals can imagine what this means in terms of monetizing ‘daily users’.  If you barely click a ‘Like’ button, but do not open Facebook, you actually do not see any advertising and you do not buy any goods or services that is on offer. All what we do is barely advertise Facebook and ourselves for being hype and switched on by showing our friends (who may or may not see it) what we found online.

In the prospectus for the Facebook IPO, the company appears to be using the term “active” as a equivalent to “engaged”, rather than how many users are actually going to its site every month.

This raises obvious questions: How many users are really active? Furthermore, what results Facebook advertisement delivers and how much it is worth?

Different online tracking providers deliver different results. Four different operators produce four different traffic statistics for DubaiChronicle.com, for example. The difference in figures varies from 10% to 20%. Fot the over 800,000 million users of Facebook this coud translate to a difference from 80,000 to 160,000 millions.

Facebook acknowledges such differences, but  still says fictitious usage accounts for less than 5 percent of its totals.

This is not the first time that a dot-com company’s metrics have come under scrutiny. Groupon created last year a ridiculously misleading accounting metric known as Adjusted Consolidated Segment Operating Income that included all sorts of income, but excluded marketing costs. Google was recently criticized for disclosing only the number of registered users on its Google Plus service, not how many people actually use the service regularly. Twitter has similarly been criticized.

At this stage, it is for sure that all of those “Likes” help Facebook create a treasure trove of data that should make its ability to target online advertising to its users in the future.

Another big doubt among Facebook IPO investors is the real engagement of the platform users. A Pew Study recently rebutted any concerns about “Facebook Fatigue”: “We found no evidence among our sample that length of time using Facebook is associated with a decline in Facebook activity. On the contrary, the more time that has passed since a user started using Facebook, the more frequently he/she makes status updates, uses the ‘like’ button, comments on friends’ content and tags friends in photos.”

The big question is how Facebook can put all of its “active,” or engaged users in front of online advertising?

At the moment, the social network mobile users do not see any advertisements. That will eventually change, but the margins on mobile advertising, are still much lower than on a computer screen which translates into not so much lucrative revenues.

In the meantime, while the social platform has clearly become an important online hangout with hundreds of millions of users across the Internet, it could attract serious investors to  the Facebook IPO by being more transparent  and disclosing the distinction between the number of people engaged broadly and those who go directly to its web site.

Until then many prospective Facebook IPO investors will remain in doubt.

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