Facebook IPO may be social networking bellwether

A successful financial coming-out for Facebook could be significant for Internet players like Twitter

Facebook today is expected to file plans for its initial public offering, and IT and financial analysts say it could be one of the biggest IPOs in U.S. history.

In fact, Facebook's IPO could be a bellwether for the entire social networking world; it could help generate interest and money for other big Internet players, like Twitter.

"What's not to 'like' about the Facebook IPO?" asked Kathleen Smith, principal of IPO investment adviser Renaissance Capital. "The social networking king is an advertiser's dream, accessing the intimate social interactions of one in every 10 people in the world.... We are expecting 2012 to be a year of recovery for the IPO market led by the Facebook IPO."

While many in the tech and financial industries have been sitting on the edges of their seats in anticipation of Facebook's filing with the Securities and Exchange Commission, the Wall Street Journal's All Things D reported that Facebook may wait to file until after the stock markets close today. That is, if it ends up filing today at all.

The largest social network in the world with an estimated 800 million members, Facebook is widely expected to file papers with the SEC today, or at least some time this week, and then launch its IPO in four to five months.

Many are waiting expectantly to see the outcome of Facebook's IPO, since it's being seen as a defining moment for the financial viability of the social networking sector.

With an estimated valuation of $100 billion, Facebook is expected to initially seek $5 billion to $10 billion through its IPO.

However, Facebook is no average Internet company. The social network grew quickly, changing the way people around the world communicate, get their news and share information ranging from party photos and health news to favorite videos.

However, the network also has gotten more serious. Instead of being a place where people post status updates about their favorite sandwiches and how long they worked out at the gym, Facebook also has become a place for politicians to reach out to potential voters and volunteers. It's also a place where people go to share their feelings about major events, like the death of Apple founder Steve Jobs and the killing of al-Qaeda leader Osama Bin Laden.

Facebook also amassed enough clout to take on Google in a high-powered duel for advertising dollars.

While Google has been the dominant player in the Internet world, Facebook has mounted an impressive challenge. Most companies aren't in a position to battle Google head to head.

"What is exciting about this is that this is going to be one of the largest IPOs in history," said Mark Siegel, a managing director at Menlo Ventures. "In terms of how we feel about social networks, it's incredible news. This is great news for Twitter and Tumbler."

Siegel added that the excitement over Facebook's IPO is an indication that social networks are changing entertainment and advertising.

"They're also changing us culturally in terms of how we interact with other people and how we feel about privacy," he said. "It's sort of this bellwether for social media. It will tell us a lot about what the demand is for social networks.... [Twitter CEO] Dick Costolo is paying close attention to Facebook's IPO."

Rob Enderle, an analyst at Enderle Group, noted that a successful Facebook IPO could immediately start driving more money toward social media. While he doesn't anticipate another dot-com bubble arising, Facebook's decision to go public could lead to an influx of cash to a lot of companies.

"It certainly could either drive more money into the segment if it is successful or pull money out if it isn't," Enderle said. "It will showcase just how rabid investors still are for this property. If Facebook goes big, its example should push funding into the segment. If it doesn't, it will simply tell us that investors have moved on."

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. You can follow Sharon on Twitter at @sgaudin or on Google+, or subscribe to Sharon's RSS feed . Her email address is sgaudin@computerworld.com.

Copyright © 2012 IDG Communications, Inc.

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