Facebook IPO makes many millionaires



Today's initial public offering by Facebook is expected to be the biggest ever for a Silicon Valley company - but is also clouded by uncertainty.

The oversubscribed IPO could raise US$16 billion (Dh58.77bn), valuing the world's top social media site at up to $104bn, and creating scores of millionaires among its employees.

But it has also cast doubt over Facebook's business model, after one of its biggest advertisers this week pulled its spending on the site.

The car maker General Motors (GM) said it would withdraw its $10 million Facebook advertising budget - although it said it would continue to use the site's free functions.

This has cast doubt over Facebook's valuation and long-term prospects, after the site reported net income of $1bn last year.

"There's still a lot of uncertainty about how Facebook might continue to develop its advertising and other commercial streams, to really justify the very high valuation," said Matthew Reed, a senior analyst at Informa Telecoms & Media,based in Dubai.

"One of the problems that Facebook has is that because companies can use it so extensively for free, some are wondering whether they also need to spend on the advertising."

Some Middle Eastern advertisers yesterday affirmed their commitment to Facebook, with Emirates Airline saying it would not be following GM's move.

"We have no plans to discontinue advertising on Facebook," said a spokeswoman for Emirates.

Unilever- one of the world's biggest advertisers - said it was a "close partner" with Facebook globally.

"We will use it. We will use any digital channel that delivers our objectives cost-effectively," said David Porter, the media director for Unilever in the Middle East and several surrounding regions.

Facebook is by far the most popular social-networking site in the UAE, where 54 per cent of the population are active users of the site, according to the Arab Media Outlook and Arab Advisors Group.

Despite this, digital advertising revenue is relatively low in the Arab world, said Mr Reed.

"The use of social media has grown very strongly in the Middle East, including the use of Facebook," he said. "But the advertising spend per capita in the Middle East is still very low."

Facebook was founded eight years ago and has grown to a community of some 900 million users.

Its listing on the Nasdaq is expected to be worth several times that of Google's $2bn listing in 2004.

Petr Molik, the chief financial officer at Mena Corp in the UAE, said that assuming it goes ahead the flotation could boost global markets.

"The buzz was similar when Google decided to float," said Mr Molik.

"If the first couple of days of flotation succeed, it could - given the massive capitalisation of the company - lift the overall market," he added. "It will be seen as a time of confidence."

However, Mr Molik also cautioned that much of Facebook's appeal is still largely academic. "The revenues are not there yet," he said.

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