Facebook IPO: How could privacy concerns affect revenue?

Now that Facebook has set its share prices, valuing the company between $77 billion and $96 billion, the question is whether it will be able to convince investors that it’s got a sustainable business model, can keep growing and find new ways to generate revenue. And because advertising revenue is such a big part of Facebook’s business model, user privacy will have to be a major consideration for potential investors.

“If you use Facebook, you’re the product, not the customer,” said Bill Kerrigan, chief executive of the privacy company Abine. “The company’s financial success requires it to collect more personal information and make available to advertisers.” Facebook itself is clearly aware of how important it is to keep up a good reputation on privacy, especially after settling with the Federal Trade Commission over complaints that it was making data public without user permission. In the list of risk factors that the company has put in its S-1 filing, the company has listed that “changes in user sentiment” about the network’s “privacy and sharing, safety security or other factors” could have a bad effect on the company and its revenue.