Mendoza School of Business

After IPO, Facebook will face new profit pressures

Published: February 3, 2012 / Author: Michael Writer



 For all the huge numbers in Facebook’s IPO papers, a surprisingly small figure stands out: $4.39, the amount the site generated per user last year.

It’s one of the company’s major challenges because the total is paltry compared with competing Internet companies. Google makes more than $30 a year from each registered user. Even struggling Yahoo and AOL make $7 and $10, respectively.

Once Facebook goes public, Wall Street will surely demand more. That means the social network will almost certainly have to attract a lot more users or be more aggressive with its advertising, perhaps by mining personal data even more than it does now.

But can Facebook do all that without spoiling the user experience?

The company may have a tough time increasing the number of ads on a site that has become primarily a home for online conversations.

“It’s a communications tool. Can you imagine what a turn-off it would be if we were talking on the phone and AT&T tried to play an ad in the middle of our conversation?” said University of Notre Dame finance professor Tim Loughran, who studies IPOs.

To read the entire article visit: After IPO, Facebook will face new profit pressures

The following article also appeared in over 149 other publications including The New York Times, US News & World Report, Washington Post, MSNBC.com, CBS.com and ABC.com.

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Topics: Mendoza