Going Public Made Facebook a Much Better Company

It's easy to forget how sky-high expectations were for the Facebook IPO. The day before the company went public, some investors reasonably assumed that by the close of the market, Facebook would be worth $140 billion since the average first-day pop for tech companies was 32%.

Forbes also urged investors to "Buy Early And Buy As Much As You Can." A poll of 800 people determined that Facebook would close at $55 on its first day as a public company, putting it in that ethereal $140 billion range.

A year later, we all know how things actually turned out. Facebook's stock price jumped a mere $0.23 on that first day. Over the next few months, the stock bottomed out at $17.55 — less than half its opening price. The backlash was so fierce that there was even a movement to dump CEO Mark Zuckerberg in favor of a more seasoned chief executive. Viewed in cold economic terms, the Facebook IPO was a bust.

Sometimes a kick in the teeth can be therapeutic. Sometimes it can even be a lifesaver. Consider, for instance, why investors were so down on the stock: Facebook was caught flat-footed by the mobile revolution. Indeed, in early 2012, the company appeared to have no mobile strategy at all. Though its users were rapidly abandoning desktop for phones and tablets, Facebook wasn't making a nickel from either. Bearing in mind that even though mobile advertising typically sells for a fraction of the rates of ads on desktop, there were lots of reasons to believe Facebook's future looked bleak. No wonder Wall Street was bailing.

We'll never know what would have happened if Facebook hadn't gone public when it did. Perhaps the company would have realized that its was about to get hit by a Mack truck. Perhaps not, though. Either way, Wall Street analysts performed a valuable function by downgrading the stock and putting so much emphasis on mobile.

A quick study, Zuckerberg was soon predicting that Facebook would make more money from mobile than desktop. In July 2012, Facebook announced it was earning about $500,000 a day (roughly $45 million a quarter) from mobile ads. By the first quarter of 2013, 30% of Facebook's ad revenues (about $375 million) came from mobile.

Looking back, Facebook's mobile monetization strategy looks inevitable, but that's not necessarily the case. By December 2011, Facebook already had 425 million monthly active users who used the company's mobile products. Yet throughout 2011, there was little activity on the mobile front. The company went about a year — from November 2010 to October 2011 — without a major mobile release. The company's lead iPad app developer, Jeff Verkoeyen, left to join Google after he became frustrated with Facebook's slow progress on its iPad app.

Facebook had some reasons for its ambivalence about mobile. On iOS, since Apple controlled the ecosystem, Facebook couldn't make any money from apps. The only other choice was Android, which was controlled by another archrival, Google. While Facebook debated its mobile strategy, it appears that little thought was given to advertising on a platform that, as Zuckerberg later noted, would one day become the default.

The IPO seems to have provided the nudge that Facebook needed. Faced with failure for the first time in its gloriously short life, Facebook was publicly shamed into focusing its energies on mobile.

Though Facebook has yet to match its $38 opening price, it appears to be a much healthier company than a year ago. The ass-kicking, courtesy of Wall Street, was just what the upstart social network needed.

It may not be so lucky next time.

Image via iStockphoto, EdStock, Mashable composite