Facebook fever: Facebook is about to raise $5 billion by selling its stock to the public. What makes all your 'likes' and 'updates' so valuable?

• Author: Bilton, Nick
• Position: Cover story

In 2005, a young graffiti artist named David Choe was hired by a new Internet start-up called Facebook to paint murals on the walls of its California offices. As payment, Facebook offered Choe either $60,000 in cash or company stock, then worth about the same amount. Choe chose the stock.

It was a smart decision. Choe's shares are expected to be worth about $200 million when Facebook stock begins trading publicly later this year.

The online social network, which currently has more than 845 million users worldwide, announced in February that it will go public this spring by offering $5 billion worth of stock for sale to the general public.

When a private business "goes public," it means that it's decided to raise money by selling a portion of the company to stockholders. It's called an "initial public offering," or I.P.O. Facebook's $5 billion I.P.O. will be the largest ever for an Internet company, and the seventh-largest for a U.S. company. Investors are expected to value Facebook at $75 billion to $100 billion (see "How I.P.O.s & the Stock Market Work," facing page).

Facebook is considered so valuable because it's more than just the world's largest online social network; it's a data machine that captures and processes every click and interaction of its users: Every time a person shares a link, listens to a song, "likes" something, or changes a relationship status, a piece of data is added to Facebook's vast library. That data collection is invaluable for advertisers who can use that information to match their ads with the best potential customers.

The question for Facebook is how to turn those assets--its users and the information it has about them--into a steady stream of profit. Facebook doesn't charge membership fees, and so far, it has limited the number and type of ads it allows to avoid alienating its users.

27-Year-Old Billionaire

Mark Zuckerberg, Facebook's 27-year-old founder and CEO, is expected to enter the ranks of the world's richest people when Facebook goes public: His shares could be worth more than $28 billion.

Facebook's I.P.O. is "an American milestone," says Lawrence Summers, the former Treasury secretary, who likens the social network's influence to that of companies like Ford and I.B.M. in their heydays, when they changed the way people lived and worked.

Facebook, created in 2004 in Zuckerberg's dorm room at Harvard, grew from being a quirky site for college students into a global platform that's used to sell cars...