Has Facebook Become a Social Utility?

Facebook's astonishing growth and power has made it the General Electric of the social Web, a network that can force rules and associations upon its users

By Mathew Ingram

There has been a lot of sound and fury lately about Facebook’s initial public offering, with the Wall Street Journal saying the social network is expected to launch its IPO as soon as next spring. The issue could give Facebook a market value of $100 billion. Not only would this be the largest technology IPO in U.S. history, but if the Journal‘s numbers are correct, it would give the company a market value comparable to that of General Electric. That would reinforce something that has already started to become clear: Facebook—for better or worse—has become a social utility, the social Web’s equivalent of a power company.

A Facebook IPO isn’t a done deal yet. As reports make clear, the current state of the stock market and the pummeling some other technology issues such as Groupon have received (the e-mail-marketing service is currently down 42 percent from its issue price) could cause the social network to postpone its offering. Although the company must soon begin filing its financial results with securities regulators because it has crossed the magic 500-shareholder mark, that doesn’t necessarily mean it will go public. Some have argued that Facebook may never do an IPO because it seems to have no problem raising billions in the private markets.

Whether or not Facebook goes public is beside the point. Whatever the company’s market value—from $60 billion to $100 billion—it has become a central part of people’s lives in a way that would have seemed almost unimaginable a few years ago, when Facebook was still seen as a plaything for university students, or a place to put photos.

That was before Zynga showed that Facebook could be a massive cash generator for social games. (Zynga is also heading toward a public offering soon.) It was before websites of all kinds saw how much traffic and engagement they could generate by implementing the network’s “Facebook Connect” and open-graph plug-ins to add “like” buttons and other features. More than 7 million apps and websites use those plug-ins now.

Annual Ad Revenue Nearing $4 Billion

The numbers behind Facebook are still mind-boggling when you step back to look: If it keeps up its current rate of growth (there’s no obvious reason why it shouldn’t), the social network could have a billion active users within months. According to some estimates, it will soon have more than 16 percent of the display advertising market—a number that’s also growing rapidly—and will likely generate ad revenue close to $4 billion this year alone. That’s just one of the reasons why Google is so determined to develop its Google+ network as a competitor.

Although the growth of Zynga and social games is interesting, that’s really just the precursor to a much bigger story: the integration between Facebook and a host of other services that potentially carry much broader implications. Already there are some apps—such as the music-sharing app Spotify—that will not work without a Facebook account. If you are determined not to belong to the social network, you can’t use these services at all. This may not be a big deal yet, but imagine when other, more important services are also tightly integrated with a Facebook account

Media companies such as the Washington Post and the Guardian, among others, have also integrated themselves into the social network in a fairly aggressive way: Instead of just using Facebook’s open-graph plug-ins to show users’ social relationships when they are at the newspapers’ websites, they have created “frictionless sharing” apps that allow Facebook users to read and share their articles without ever leaving the network. That has benefits for the Post and Guardian in terms of engagement, but it also cements Facebook’s status as the default social destination and default social platform.