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Updated Saturday, February 4, 2012 0:43 am TWN, The China Post news staff

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Wise words lend credibility to groundbreaking social network

When a Fortune 500 CEO said something along the lines of “we don't build services to make money; we make money to build better services” or “we expect governments will become more responsive to issues and concerns raised directly by all their people rather than through intermediaries controlled by a select few,” one can almost always sign that off as PR talk and astroturfing. But the statements by Mark Zuckerberg, founder and CEO of Facebook, in a public letter issued yesterday — as the social website filed paperwork for a US$5 billion initial public offering — might have more substance to them.

First of all, Zuckerberg has shown his preference of keeping his version of quality for Facebook over quick profit. Facebook had refused advances for acquisitions before its financial future was secured, including one in 2006 for US$750 million (bid later increased to US$2 billion), in order to keep its independence. Zuckerberg had also famously decided to delay the IPO until he was legally required to launch as Facebook private shareholder numbers reached 500 in late 2011. He wanted his employees to focus on the service instead of Facebook share price. Also, Zuckerberg had signed “the pledge” to give away the majority of his fortune at some point. There are reasons too because making money might indeed not be the foremost concern, at least for now.

Secondly, Facebook is unlike most Fortune 500 companies. With its estimated valuation of between US$75 billion to US$100 billion, the IPO would place Facebook alongside American icons such as McDonald's, Citigroup, and Kraft Foods in terms of market capitalization, as Time magazine has pointed out. Food giants like McDonald's and banks like Citigroup, or for that matter, automakers like General Motors, provide important but replaceable services/products. One always has to eat, needs lifelong banking service and often drives but one can easy switch to another company's product. A sedan from another manufacturer or account for another bank, after all, is basically the same in function. That's why most brands are eager to beef up consumer loyalty and brand recognition. Facebook, on the other hand, provides unique merchandise — connection and private information.

Their users become more intertwined with the website every time they add photos, click the “Like” button, share their views, and add new friends. It is possible to switch other social networking sites (or quit social network altogether), but it's considerably troublesome to migrate all photos and data to the other site and ever harder to rebuild the whole social circle there. Newcomers, on the other hand, naturally tend to go to services with more friends.

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