In a few months, Facebook will finally launch as a publicly traded company and the giant of social media will receive a veritable pot of gold to fund its future operations. The much talked about IPO is set to raise anything between $5-10billion; an enormous cash injection that will have a greater impact on the company than any single event since its launch and a significant influence over future development of the internet.

However, you would not necessarily know this from reading the Facebook S1 filing to the SEC where plans have been considerably downplayed. The company states: ‘We intend to use the net proceeds to us from our initial public offering for working capital and other general corporate purposes; however we do not have any specific uses of the net proceeds planned’.

That’s a decidedly coy statement for a company that is looking at a cash injection of $10 billion. In a similar vein, Mark Zuckerburg’s open letter published as part of the S1 explains how Facebook is driven by social mission rather than profits.

No specific uses? No plans on how to spend the money? Not driven by profit? What a peculiar way to launch yourself on the stock market!

It is important not to be lulled by the cuddly, gentle message Facebook is projecting. Make no mistake about it, you simply do not arrive at the dominating position Facebook finds itself in without being ruthlessly driven. Far from having no plans, Facebook will be looking very carefully at how it can maximise the benefit of the IPO cash. According to some observers, Facebook plan to create nothing less than a  web within the web; a place which is so all-encompassing that there will rarely be need for users to pop out of from under Facebook’s hegemony to visit parts of the web.

So that said, let’s have a look at where Facebook might spend its pot of gold to make that kind of internet dominance a reality.

Expand the User Base

The expansion of the user base is crucial; it is the rock on which Facebook’s power and value is based. Already the network has gathered 12% of the world’s population under its wing with 845million active users (Facebook’s stats) which it will look to expand further.

However in the English speaking world, Facebook has pretty much reached saturation point so it will be aggressively targeting new markets. In the S1, Facebook lists Brazil, Germany, India, Japan, Russia, and South Korea as its next hunting grounds. We can expect a major push worldwide to persuade internet users to make Facebook the world’s online home.

All Things to All Users

However, pure numbers are less than half the battle. Once people have bought into Facebook’s social vision, it is absolutely paramount that they are persuaded to stay and contribute actively to the community. In the past, Facebook has been very successful at creating features that people enjoy using even if, paradoxically, it has often been in the face of opposition from its users who routinely bemoan every major update. 

We can expect the cash injection from the IPO will drive harder and faster more groundbreaking innovation from Facebook and improvements to core features. Improved search will reduce the need for its users to pop into Google, video service to challenge You Tube, enhanced news delivery, a better music service – it will all arrive to give the Facebook users a completely integrated web service without the need to ever leave Facebook’s cosy world.

It's More Than a Game

In 2011, the company derived 12% of its total revenue of $3.71billion from its relationship with online game developer Zynga.  It is likely that Facebook will want to diversify its revenue stream away from over reliance on advertising and clearly gaming offers one route in which this can be accomplished. It is highly likely that gaming directly through the Facebook network will increase, both in the number and complexity of the games on offer.

Zynga and Facebook signed a five year deal in 2010, but Zynga appear to want to develop its own platform outside the Facebook world which could lead to Facebook to consider spending some of its new gold on buying a specialist game developer or even the creation of an in-house games division.

Moving into Mobile

In December, more than 425 million people accessed Facebook through mobile devices. Currently however, Facebook mobile does not carry ads and as a result generates no income stream from this usage.

In addition, Facebook lists the company’s mobile dependence on third parties as one of its major risks. It could, say the company, ‘degrade our products’ functionality or give preferential treatment to competitive products (which) could adversely affect Facebook usage on mobile’.

Therefore expect Facebook to make a big move into mobile. 

It is a poorly kept secret that Facebook has advanced plans for the launch of a branded mobile phone in partnership with a third part manufacturer. HTC, LG and ZTE have all been touted as potential collaborators.

Having its own branded phone optimised for functionality with the Facebook network would not only help mitigate against that risk, but also open up another diversified revenue stream. It is not difficult to conceive how a cleverly branded, realistically priced smartphone could capture the imagination of teenagers; thereby not only tapping a lucrative market, but also drawing in a whole new generation of Facebook users.

Making Money – The Expansion of Facebook Credits

Facebook currently runs a system of credits which can be used in its online games and to purchase apps. However, if Facebook expanded the credit system across its entire network it would literally be producing its own money. This possibility is perhaps the greatest opportunity that the IPO cash could potentially unlock; the creation of a payment system that operates through the Facebook network.

However it was organised, whether on a cash or credit system, Facebook would be a total winner. The network is already and undisputedly the most popular social location for businesses on the web, so it would make sense to add a layer of functionality to allow companies to sell directly online from their Facebook pages. The companies acquire another sales outlet and Facebook users are offered an easy, reliable online shopping experience which can be shared with their friends and generate yet more sales. Everyone’s a winner!

Company Acquisitions

Some observers have commented on the possibility of acquiring Twitter, but even if Twitter were open to such an arrangement (which is highly unlikely) and if Facebook could outbid Google (equally unlikely), it is surely a waste of resources compared to the other opportunities on offer. 

Designing massively multiplayer online games, developing smartphones and establishing a large scale payment system are far more exciting objectives and if they were successful why would Facebook need Twitter?

However, all these areas are complex undertakings requiring a high level of diverse technological and management skills. If Facebook wants to maximise the opportunities the IPO money will unlock, it will either have to enter into partnerships with other companies or more likely, it will simply look to buy them.

Corporate acquisition is nothing new to Facebook. In 2011 it purchased half a dozen companies that had the experience and personnel it required, but it is nothing compared to the scale that we are likely see after the IPO money arrives.

Will Facebook Win?

I have over the course of this article been quite deliberately bullish about Facebook’s future in order to highlight firstly the absurdity of Facebook’s statement that it does not have a plan and secondly to demonstrate some of the areas into which the company is likely to expand.

There are even question marks over how successful the IPO will be. The cuddly words of Mark Zuckerburg, his total control over the company, the insistence that social mission will have primacy over profit and the declaration that dividend payments are off the agenda are hardly likely to appeal to hardnosed Wall Street investors.

Even if the IPO is a success, $10 billion has its limits and Facebook’s resources will still be dwarfed by those of Apple and Google. Google has already shown it will not be ceding its dominance over the web lightly and other social networks will rise up to challenge market share.

Whatever happens, it is going to be fun to watch!