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Facebook's Googly IPO delivers on Sun man's vision

Selling data ain't like shiftin' boxes, boy

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What we have is a company that roughly doubled revenue and net income between 2010 and 2011 while net income has remained at about a third of revenue.

Growth is paramount, both in revenue and users. This is because the first is predicated in part on the other, thanks to the fact Facebook is a free service for end users but charges the advertisers who target them.

Advertising is “substantial” part of the Facebook business, the filing says, any loss of advertisers or a reduction in ad spend could “seriously harm our business”. With growth stalling in the US, Facebook is looking for new users abroad: Brazil, Russia, India, China and South Korea.

Growth in mobile is key, both in terms of reaching more users in different places and in serving ads to devices – something Facebook doesn’t currently do.

To achieve growth, Facebook must find new ways to exploit the data that it has on 845 million people, and do so while remaining legal.

Facebook is working to achieve that with the Like button and with Timeline, which respectively tease out more of our preferences while also making data that's already in Facebook easier to find. Ultimately both features will help with the targeting of ads by partners. Timeline and Like are easier to sell as features for the end user and they show that Facebook has come a long way from the days of Beacon, a feature for advertisers billed as being "for people", but which crudely sent data about sites you’d visited back to Facebook’s ads system for targeted ads.

Based on Facebook’s history and its future needs, it is likely Facebook will continue to be tripped up over what it does with the photos, status updates and messages of the 845 million people who use the social-networking site.

Beware privacy rules

As such, Facebook’s IPO points to the prospect of running up against regulators. “Our business is subject to complex and evolving US and foreign laws and regulations regarding privacy, data protection, and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could harm our business,” it says.

This is IPO boilerplate, but given Facebook's business is mining people's data and that clouds are already gathering, this chapter on regulatory change is painfully pertinent for Facebook.

The ascendancy of Google, Facebook and others has made it hard to hide from the hungry eye of advertisers, and while we might not have liked what McNealy said, Sun's former CEO was right in his observation – ahead of the game, even.

The problem part is "getting over it” – and it's a problem not least for today’s crop of Silicon Valley giants, who would rather we love them than explain exactly how they’ll make money from our data. ®

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