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Facebook grows, yet some fans say "No"

(CNTV)

11:18, May 18, 2012

Demand for Facebook is high. Because of this, initial investors and insiders have increased the amount of shares they will sell as part of the offering, by almost 25 percent. This comes after the company raised its share price range for its initial public offering to between 34 and 38 dollars a share. The additional shares and boosted share price will make Facebook the third largest IPO in US history, after Visa and General Motors. But not everyone is a Facebook fan and there are growing questions about Facebook’s business model and privacy.

Just days before trading starts on the NASDAQ, Facebook has lost one fan - General Motors. The car giant had been advertising on the social networking site but just announced it will cease to as of this summer because it reportedly doesn’t find the ads effective.

At the same time, a new poll by the Associated Press and CNBC finds 57 percent of Facebook users never click on display ads.

This has raised questions about Facebook’s main revenue source - ad sales.

But experts say there is still value in advertising on the world’s largest social networking site.

Eric Greenleaf, Professor of Marketing, NYU, said, "People spend a lot of time on social networking sites but I think you have to give them a reason to want to look at your ads. For example, I heard that Ford is very happy with the response of their Facebook advertising."

Tom Forte, Internet Analyst of Telsey Group, said, "They can give advertisers a lot of relevant information, the gender of the person, what they like, generally speaking where they live and they have the ability to put within a social context a lot of advertising for brands."

But the personal user data Facebook has accumulated and is passing on to advertisers is potentially a problem for the company. The recent poll says 59 percent of Americans distrust Facebook when it comes to data.

Greenleaf believes concerns about privacy could cause Facebook to lose some of its 901 million active users.

Eric Greenleaf said, "I think they will leave and that’ll be fine with Facebook because if they make no money off you, they may be happy to see you leave."

"Facebook’s ad revenue fell in the first quarter of this year compared to the last three months of 2011. If Facebook user numbers fall, will more advertisers bail That’s a growing question. For now though investors seem to have faith in the company that goes public on Friday. Karina Huber, CCTV, New York."

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