Is Facebook taking over the world? You would think so with all the hoopla over its upcoming IPO, its estimated market value of US$100 billion - a record high for any company going public - its 850 million users, its meteoric success in less than a decade. But does Facebook offer a sustainable business based on true technological innovation, or will it turn out to be a flash in the pan like the many dotcom companies that flamed out soon after their IPOs?
As sceptics have pointed out, the company does not make anything - no widgets, gadgets or phones. Nor does it generate content like Yahoo! or Google. What Facebook has done phenomenally well is to exploit the networking capability of the internet, and the colossal amounts of data it can collect from its networking platform, to create a new business model.
The data, of course, comes from users like you and me. Facebook's inventory consists of our personal information, which we like to share with others. The value of Facebook to a user increases exponentially with the number of users that it has, while its value as a business also increases exponentially as it mines more data from more users. This positive feedback has powered Facebook to the forefront of the internet in record time.
Your Facebook account is contributing to its 'social graph' - the sum of the many connections between the site's users and their friends; between people and events (from the Arab Spring to protests against Hong Kong legislators' pay); between events and photos; between photos and people; and between a huge number of discrete objects such as users' demographics and their buying habits, all linked in a huge database.
In addition to this 'graph', Facebook also has 'nodes': users or events serve as nerve centres disseminating information to other nodes in the network.
Information volunteered by its users (age, education, profession, location, hobbies) is defined as a node in Facebook's social graph and stored in its technical infrastructure to be exploited by advertisers keen to target consumers. These advertisers provide over 85 per cent of Facebook's revenue.