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Value of personal data? Facebook all set to find out

Facebook cashing in on the fuel that powers the engine of Internet commerce: personal data

Written by New York Times | New York | Published: February 2, 2012 1:31:41 am

SOMINI SENGUPTA & EVELYN M RUSLI

Facebook,the vast online social network,is poised to file for a public stock offering on Wednesday that will ultimately value the company at $75 billion to $100 billion,cashing in on the fuel that powers the engine of Internet commerce: personal data.

The company has been busily collecting that data for seven years,compiling the information that its more than 800 million users freely share about themselves and their desires. Facebook’s value will be determined by whether it can leverage this commodity to attract advertisers,and how deftly the company can handle privacy concerns raised by its users and government regulators worldwide.

As the biggest offering of a social networking company,the sale is the clearest evidence yet that investors believe there is a lot of money to be made from the social Web. Facebook’s dominance in this field has left Google,a Web king from an earlier era — less than a decade ago — racing to catch up. Facebook is considered so valuable because it is more than the sum of its users. More than the world’s largest social network,it is a fast-churning data machine that captures and processes every click and interaction on its platform.

Every time a person shares a link,listens to a song,clicks on one of Facebook’s ubiquitous “like” buttons,or changes a relationship status to “engaged,” a morsel of data is added to Facebook’s vast library. It is a siren to advertisers hoping to leverage that information to match their ads with the right audience.

Barring an unforeseen event,the Internet giant plans to list a preliminary fund-raising goal of $5 billion,according to people briefed on the matter,smaller than some previous estimates of the offering. But it is essentially a placeholder,a starting point used by companies to generate interest among potential investors. The eventual offering is expected to be the largest for an Internet company,bigger than Google’s in 2004 or Netscape’s nearly a decade before that. Trading of the stock is expected to begin by late May,the people briefed on the matter said.

In recent months,Wall Street’s banks have competed fiercely for a top assignment in Facebook’s offering,a coup that comes with millions in fees and valuable bragging rights. The company has hired Morgan Stanley to serve as its top underwriter,while JP Morgan and Goldman Sachs will also be co-leads on the deal,according to people with knowledge of the matter who did not want to be identified because the discussions were private.

The offering will compel Mark Zuckerberg,Facebook’s 27-year-old founder and chief executive,to do what he has until now preferred to avoid: share information about his company.

Facebook,created in 2004 in Zuckerberg’s dorm room at Harvard,grew from being a quirky site for college students into a remarkably popular platform that is used to sell cars and movies,win over voters in presidential elections and organise protest movements. It jumped from 50 million users in 2007 to 800 million in 2011,according to company figures. It offers advertisers a global platform,with three-fourths of its users outside the United States; the notable exception is China,where Facebook does not operate.

Facebook’s offering is “an American milestone,” said Lawrence H Summers,the former Treasury secretary,who has been a mentor to Sheryl Sandberg,Facebook’s COO.

Cashing in

* Facebook is poised to file for a public stock offering

* The offering is likely to value the company at $75 billion to $100 billion

* The social networking site currently has over 800 million users

* The offering is expected to be the largest for an Internet company,bigger than Google’s in 2004

* Trading of the stock is expected to begin by late May

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