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'A fascinating time' for tech companies

Jason Cato
| Saturday, June 2, 2012, 6:28 p.m.

Innovations developed a century ago by Andrew Carnegie, George Westinghouse and other Pittsburgh giants of industry and commerce changed the world, spinning off companies and employing thousands.

Will Facebook's founder Mark Zuckerberg leave a similar legacy?

Though the world's most valuable company today, Apple Inc., still makes consumer products, Facebook and other technology companies have created economies that people might not notice, business experts say.

"A lot of people don't understand that," said Audrey Russo, CEO of Pittsburgh Technology Council. "You could make a genealogy chart for Westinghouse and see all the companies that it spawned. They would understand that in this region. But in today's world, much of it is intangible."

Facebook Inc. shares sharply declined following the company's initial public offering price of $38 per share. Its 22 percent slump shook investors and caused negative sentiment, Bloomberg reported. At least 13 companies withdrew or postponed IPOs globally since Facebook's stock began trading May 18.

"Scrutiny is so high that companies don't want to go public, and investors aren't prepared to look at them," said Jeffrey Sica of Sica Wealth Management LLC in Morristown, N.J. "You're talking about long-standing damage to the psyche of companies wanting to go public and investors."

Facebook's value stood at $63.3 billion on Friday, when shares closed at $27.72. The Palo Alto, Calif., company reported a $1 billion profit in 2011 -- money gained largely from advertising, which brought in $3.7 billion.

The company's real value, however, rests with the information it has amassed on Internet behavior from its 900 million users, Russo and others said, and the number of jobs it has helped to create beyond its payroll of 3,200 employees.

Some of those jobs exist in the Pittsburgh region -- but just how many jobs the "Facebook economy" has created and how valuable they are is a source of debate.

Spinning off jobs?

A University of Maryland study, conducted for Facebook last fall, showed the company creating at least 182,000 jobs and adding $12.2 billion to the economy.

Those jobs include 53,000 programmers and other employees of software companies designing Web- or smartphone-based software applications for Facebook and 129,000 positions the company fostered indirectly -- people working for suppliers or in positions created from the money spent by those working for app-design firms.

"The idea is that these people would not have jobs if the company didn't exist, and that isn't true," said Peter Cappelli, a professor of management at the University of Pennsylvania's Wharton School. "Companies try to do this to make themselves seem important to society and the economy."

Facebook did not respond to a Tribune-Review interview request.

TechNet, a high-tech industry lobbying group in Washington, in February released results of its survey that estimated the "app economy" created about 466,000 jobs in the United States through companies such as Facebook, Apple, Google, Microsoft, Research in Motion and others. None of those jobs existed before Apple introduced the iPhone in 2007, the group said.

"This highlights how a lot of companies in the tech sector do serve as a platform for creativity and innovation and can be job creators beyond the companies themselves," said John Horrigan, TechNet's vice president of policy research. "A lot of times, until you quantify something, it's hard for people to understand the breadth."

Jobs, money in 'apps'

Facebook exists as an application on people's computers or smartphones and as "an application for other applications people use to connect with each other," Horrigan said.

Facebook reported about 8,000 firms have created more than 25,000 apps for the company and that it paid $1.4 billion to outside developers in 2011.

Like the proliferation of Web-design firms in the1990s, opportunities exist to create firms that help companies develop smartphone apps, as well as other business plans that use information from social networks such as Facebook, LinkedIn and Twitter, said Jim Jen, director of AlphaLab, a South Side technology business accelerator.

"I think there are a lot of companies that are building social features into Web and mobile apps to leverage Facebook and Twitter," Jen said.

Notable among those is Zynga Inc., the San Francisco-based creator of "FarmVille," "Words with Friends" and other games for Facebook users.

"Zynga basically built its whole company on top of Facebook," he said.

Impact in Pittsburgh

Several Pittsburgh companies use websites in similar ways.

Uptown's Careerimp Inc. mines professional network LinkedIn for its jobs-seeking products Resunate and ApplyApp.ly. South Side social-game creator MogiMe distributes its products through Apple's AppStore, Google's Android marketplaces and others. LunaMetrics, another South Side company, helps companies optimize Google search results and connect with customers through online networks.

Engineers Shawn Wall and David Evans teamed last year to create TwoTap Labs, a mobile-app design firm in East Liberty.

Their client list includes The Andy Warhol Museum, Giant Eagle and a Washington County company that needed an app to help with heavy-equipment inspections. TwoTap built apps for Wexford-based legal software company Bellefield Systems and ShowClix, the Shadyside full-service ticketing company that competes with Ticketmaster through technology and creative marketing.

"We're the new way of looking at an interactive agency that didn't exist 10 years ago," said Wall, 33. "We focus on things that make people's lives easier every day."

' Never great' for workers

California-based software engineer Martin Ford doesn't pretend Internet-based companies such as Facebook don't create jobs.

Yet Ford, author of "The Lights in the Tunnel," believes most of these high-tech positions would be filled anyway and the innovations created will put others out of work.

"I think, going forward, more and more companies will look like Facebook, relying more on information technology, and the whole economy will become less labor-intensive," Ford said.

That's happened since primitive man invented the wheel, continuing through the Industrial Revolution to modern manufacturing, said the Tech Council's Russo.

"It's never been great for the average worker," Russo said, noting that innovations in steelmaking, textiles and automobile manufacturing replaced people with machines and technology.

"But that doesn't mean the creation of jobs and opportunity will not continue to proliferate. It's uncharted territory, and it makes for such a fascinating time."

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