I joined Andy Dean on his radio show, "America Now with Andy Dean," once again for a spirited half hour of discussion and debate about the mighty Facebook IPO filing. We were able to hit the important highlights, and I was glad I could make one of my favorite points about Facebook. And that is: Facebook has built what may be a $100 billion valuation (although it might not go public at quite that high, high level) on what it is essentially the donated labor of 845 million active users.
What does that mean? Simple: You update your status, you post pictures and videos, you play Zynga games, your hit that Like button across the Web — and you do this repeatedly and often, enabling Facebook to capture this activity and sell it to advertisers. No wonder the company has been so reluctant to do an IPO — it's making billions off free content and doesn't need to actually pay the public anything! Unfortunately, the company now has so many private shareholders that the SEC is effectively forcing Facebook to go public (the SEC won't let you amass private shareholders forever).
This has driven my recommendation for how to play the Facebook IPO. Set up a ShareBuilder account. This will allow you to buy fractions of shares. Fund it with $100. If Facebook debuts at $50 per share and you can buy in at around that once the initial shares are sold by the insiders, you'll own about two shares. If — and it will be a decent-sized if — Facebook moves even higher in traded value, you won't be assuming much risk (IPO companies are very risky), but you will be getting paid for the status updates and for subjecting yourself to Facebook's tendency to violate your privacy.
For where I sit, it's about time.
And by the way, Andy went to Harvard (smart guy) and his time there overlapped with Facebook CEO Mark Zuckerberg. I kind of thought that might have been the case, but Mr. Dean brought it up himself so I didn't have to put him on the spot.