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The Good Times Are Over For Facebook

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This article is more than 10 years old.

As Facebook rumbles towards its much-anticipated IPO, it faces a new, harsh reality: the publicly-traded landscape can be a demanding and nasty place, which could be a rude awakening for a company that has pretty much had its way and played by its own rules.

Once Facebook is a public entity, it will need to disclose all of its financial results and growth metrics. Every line item will be carefully scrutinized by an army of analysts and investors. And every comment by CEO Mark Zuckerberg will be broken down and dissected. At the same time, there will be expectations about how Facebook should perform.

As we're discovering from the company's pre-IPO filings, Facebook is a machine but it is far from being a highly-efficient growth engine, which was a surprise to many people who equate user growth with financial performance.

Facebook's first-quarter revenue growth, for example, was slower than the fourth-quarter, while expenses were higher, mainly due to marketing costs as Facebook spent more to attract users and advertisers.

And while Facebook now has 901 million registered users, there are questions about how many more users can be attracted. While Facebook will easily surpass one billion users this year, there could be a limit on future growth - let's say 1.5 billion for argument's sake.

The thing about Facebook is while 901 million people may be users, not everyone is a fan. There are many people who regard Facebook as an evil necessity - something they need to be on because their friends and family use it, or because they're a brand that has to be on a place populated by existing and potential consumers.

It means that Facebook, the publicly-traded company, could be seen in a much different light than Facebook the social media behemoth. My sense is the expectations and demands for analysts and investors will be sky-high, and that Facebook will be punished for any slips along the way.

In some respects, Facebook has had an easy ride for the past five years; now the tough times begin.