Facebook IPO Priced Amidst Mobile Uncertainty

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After years of speculation and three months after Facebook officially registered to go public, the social giant has set a pricing range on its highly anticipated IPO, set to take place on place on May 18th according to industry watchers.

Facebook shares will be priced at $28 to $35 when it goes public, according to documents filed with the SEC, resulting in a record-setting valuation of up to $96 billion. Facebook expects the IPO to pad its war chest by $5.6 billion, assuming a split-the-difference price of $31.50 per share.

Founder and CEO Mark Zuckerberg’s stake in the company may be worth as much as $18.7 billion when the stock begins trading, according to the Wall Street Journal. After the IPO, he will retain control over Facebook’s fate with roughly 57 percent of shareholder voting power.

Despite an public offering that stands to eclipse the Wall Street debut of any American company, including Google’s IPO in 2004, Facebook warns that a turbulent technology market — one that’s being roiled by a flood of mobile devices and services — could lead to a reversal of fortune.

Monetizing Mobility

In terms of reach and engagement, Facebook is the envy of the industry. The company reported to the SEC that as of March 2012, it had 526 million daily active users on average, a 41 percent increase over the 372 million daily active users it logged in March 2011.

Facebook had 901 million active users as of March 31, 2012 — 488 million of which used its mobile products to connect with the service. And the company expects its mobile user base to keep growing and present a challenge, that by its own admission, may prove tricky to navigate.

In its latest SEC filing, Facebook wrote, “Growth in use of Facebook through our mobile products, where our ability to monetize is unproven, as a substitute for use on personal computers may negatively affect our revenue and financial results.”

Advertising is Facebook’s primary moneymaker. In the quarter ending March 31, 2012, the company booked over $1 billion in revenues, compared to $731 during the same period a year ago. After tax net income was $205 million in the quarter ending March 31, 2012 versus $233 million last year, indicating that a less robust mobile advertising platform is starting to eat into its margins.

Compared to the desktop browser experience, Facebook currently employs a light touch when it comes to advertising to its mobile users. While it’s experimenting with ways to make its mobile products more advertiser friendly, there is no guarantee it will succeed.

Facebook writes, “we do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven. Accordingly, if users increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetization strategies for our mobile users, or if we incur excessive expenses in this effort, our financial performance and ability to grow revenue would be negatively affected.”

Even if Facebook succeeds in mobile advertising, factors beyond its control could negatively impact the company.

“We are dependent on the interoperability of Facebook with popular mobile operating systems that we do not control, such as Android and iOS, and any changes in such systems that degrade our products’ functionality or give preferential treatment to competitive products could adversely affect Facebook usage on mobile devices,” states Facebook.

Given how quickly mobile platforms are evolving — not to mention the whims of network carriers — it’s a valid concern.

Pedro Hernandez is a contributing editor at InternetNews.com, the news service of the IT Business Edge Network, the network for technology professionals. Follow him on Twitter @ecoINSITE.