Analysis: Could Facebook IPO help it dominate Google?

With the Facebook initial public offering (IPO) now official, industry and financial analysts say that a huge influx of cash could enable the social networking company to topple Google from its dominant position in the online world.

Facebook had been expected to file its IPO papers with the US Securities and Exchange Commission this week, and it did just that. Analysts and potential investors were eagerly awaiting what is one of the largest IPOs in recent years.

With an expected valuation of $US100 billion, financial analysts say the IPO is worth about $US5 billion. That's a big potential war chest for a company that has been fighting for social networking users and advertising dollars with the largest Internet company on Earth - Google.

Given the popularity of its search engine, along with services and products like Google Maps, Android and Chrome, Google obviously is no slouch: It has 32,000 employees around the world and $US37.86 billion in annual revenue. That's $US1.166 million per employee in revenue.

But Facebook, with just 3000 employees, pulls in $US3.8 billion in revenue; that's $US1.8 million in revenue per employee.

"Facebook has 800 million users," noted Dan Olds, an analyst with The Gabriel Consulting Group. "How many companies have 800 million anything? The thing that's interesting is that Facebook is profitable and solidly profitable. And an IPO is a huge step for any company, but it's the validation for Facebook, their business and their social networking model."

Facebook and Google are increasingly in each other's wheel house.

Just this past year, Google launched Google+, its own social network and a new direct competitor to Facebook. (Just last week it made Google+ more available to teens, another move to broaden its appeal.) And Google CEO Larry Page has said he plans to integrate Google+ social features into the company's wide range of services and products.

With a lot of new cash, Facebook could make a lot of moves. Olds wonders whether Facebook would try to buy Yahoo, which has been struggling, or even Twitter.

And both Olds and Scott Sweet, a senior managing partner with IPO Boutique, said Facebook could use the money to hire more employees and acquire other Internet companies. They also pointed out that Facebook could use the cash to find partners and set up operations in China, which could dramatically increase an already immense user base.

It would take some time -- and Facebook would have to successfully pull off some big moves -- but it could one day dominate Google, according to Sweet. "I do believe that anything is possible with Facebook," he added.

Unseating Google would be no easy feat, though.

First off, according to Olds, the companies are not substitutes for each other. Google is the basis for most searches. Facebook is the basis for most social connections.

And while a profitable IPO would make Facebook stronger, Google is still substantially larger.

"It gives Facebook a ... war chest," said Olds. "Google, though, has $US45 billion in cash and short-term investments. That's a really big war chest. Even with this influx of cash, Facebook still can't play in Google's league in terms of cash."

Mark Siegel, a managing director with Menlo Ventures LLC, said Google came along to surpass Microsoft as the biggest tech company. And now Facebook is poised to take the lead from Google.

"Facebook is potentially the platform company for the next 10 years," said Siegel. "I absolutely think this is a scary event for Google. Will it make [Facebook] dominant over Google? Well, Facebook already does dominate Google in terms of social networking. This will enable Facebook to compete with Google in a lot of areas."

Could Facebook push past Google?

"Well, this certainly enables Facebook to move in that direction," said Siegel.

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