Reaction to the official announcement yesterday about Facebook filing with the Securities and Exchange Commission for its initial public offering was fast and furious.
The media coverage doubtlessly inspired Chief Executive Officer to upload to his profile the picture shown here. Following are some highlights of the reactions we’ve noted online.
Facebook had 845 million monthly active users at the end of 2011, it said today when it filed to go public. That’s an increase of 39 percent from 608 million active users at the end of the previous year. With $3.71 billion in revenue spread across 2011’s users, that gives a rough total of $4.39 in revenue per user, per year.
But how exactly does Facebook’s ad business work? We still don’t know a lot about that part. The S-1 mentions “advertising” 123 times, and “advertisers” another 117 times.
But when it comes to describing how the company actually sells advertising, it is vague. We know that some of Facebook’s ads are sold via an automated self-serve system, and some are sold via sales teams working in 30 offices around the world. And we know that Facebook uses an auction system to price some of its inventory, and that it lets advertisers target users to some degree, based on their demographics and interests.
But Facebook doesn’t break any of that out in its filing. It simply has one big bucket labeled “advertising.” There’s no discussion of click-through rates, or the size of the average ad buy, or what percentage of ad buys come from repeat customers, or how “lumpy” its sales are.
Over the past year, Facebook’s revenue growth has slowed sharply, from 100 percent-plus to 55 percent in the fourth quarter. Revenue growth of 55 percent is impressive, but it’s not nearly as impressive as, say, Google’s growth was at this stage of its development.
And it’s not even as impressive as Apple’s growth is right now (an astonishing 73 percent in the last quarter, off of a vastly larger base).
What’s more, Facebook’s revenue is decelerating fast. Unless something has changed in the business since Q4, revenue growth in Q1 could be sharply slower than in Q4. And that would really begin to hammer the company’s valuation.
If you want to argue that Facebook is worth $100+ billion, meanwhile, you have to believe that Facebook will eventually launch a huge, fast-growing business that it hasn’t yet launched, or radically accelerate one of the two businesses it’s in today (payments and ads). Either of those things is possible, of course.
With Facebook’s astounding user-metrics, it has one hell of a platform to build on. But possible is not the same as probable. And paying a $100+ billion price for Facebook’s stock based on the possibility that it might someday invent an amazing new business would be fairly described as speculative. Or nuts.
Facebook has approved the use of a private plane for Chief Executive Officer Mark Zuckerberg and Chief Operating Officer Sheryl Sandberg. Zuckerberg can also use the private plane for personal purposes as part of the company’s security plan for him. In those cases, they’ll count it as part of his compensation. Last year, the company spent $692,679 this way.
Buried in Facebook’s filing for its much-ballyhooed initial public offering is the sort of contradiction that might sink a lesser company: The more that people use Facebook’s mobile offerings, the worse the company’s bottom line becomes.
That’s because Facebook’s mobile offerings don’t feature display ads. Or, as Texas Gov. Rick Perry was wont to say on another occasion, oops. It’s a pretty big oops.
Facebook has tremendous potential to become a cash-generating machine, but can it capitalize on its opportunities? That’s the question a lot on Wall Street are asking themselves one day after Facebook filed its S-1 IPO prospectus with the Securities and Exchange Commission. The social network boasts an impressively large — and engaged — user base. Yet the company hasn’t fully figured out how to make money off of them.
There’s no doubt that mobile is Facebook’s future. In December, Facebook said that more than 425 million monthly active users accessed Facebook on a mobile device.
This is roughly one-half of all of Facebook’s monthly active users. And the company expects this figure to grow, eventually eclipsing the number of users who access the company’s site solely via a computer. But Facebook is worried that this trend could harm its business, unless it can figure out how to monetize this growing user base.
Facebook just filed to go public after a long, tense wait, and so it seems like a good time to remind everyone who’s not in tech and finance to just forget it’s even happening. Facebook’s IPO will make some bankers, some venture capitalists, some privileged early investors, and some early employees rich. Everyone else should steer clear.
Mark Zuckerberg can now officially change his surname to Zuckerbucks. With his 28.2 percent ownership in Facebook, the paper wealth of Facebook Co-Founder Zuckerberg now serves as an eternal rejoinder to the legion of armchair critics — and where are they now? — who thought that the then-22-year-old was bull-goose loony for rejecting Yahoo’s $1 billion buyout offer in 2006.
Maybe they should ask the same question of Yahoo’s former CEO, Terry Semel, who reportedly refused to up the offer for the up-and-coming social network.
Facebook is all about infrastructure. The ad revenue and user experience it relies on to exist mean Facebook can’t afford to take it easy on IT, which means shareholders and users will both find plenty of reasons to get upset with the soon-to-be-hottest stock on Wall Street.
Beneath all the Zynga games, timelines, likes, and pokes, Facebook’s business relies on fast, reliable infrastructure. And infrastructure concerns figure heavily in the risks it faces as it goes public, according to Facebook’s newly released S-1 filing.
To put it plainly: Facebook’s ability to attract, retain, and serve users is dependent upon its infrastructure working as advertised.
In a very important way, Facebook still remains a private company. Why? Because it is controlled by Chief Executive Officer Mark Zuckerberg through a special class of stock that gives him supervoting rights, and he also controls the board. In other words, you may own stock in the company, but you have virtually no say in what happens to it.
Los Angeles Times
Moments after Facebook filed its long awaited S-1 Wednesday afternoon, the S-1 itself got its own Twitter feed. “Hey, I’m new here,” it began, simply enough. And shortly thereafter, it tweeted, “Hey! Anything interesting happen today? LOL!!!”
No clever names for this silly feed — just the straightforward @FacebooksS1. Its profile says it was born Feb. 1, 2012, and lists its location as Menlo Park, Calif.
Facebook’s $5 billion IPO is not the biggest of all time, but it’s up there, which means that it’s faced with the same gimlet eye as every other big Internet public offering. The word “bubble” has been floated. That’s unfortunate, since there is nothing bubble-like about Facebook.
New York Post
In an almost unheard-of twist, Zuckerberg on his deathbed can handpick his successor. “In the event that Mr. Zuckerberg controls our company at the time of his death, control may be transferred to a person or entity that he designates as his successor,” according to one disclosure.
It’s unusual for a CEO to have such power, said Sam Hamadeh, an analyst with PrivCo.com. “He controls succession rights. You can’t fire him, can’t replace him. He designates his successor,” Hamadeh said.
The New York Times
At the top end of the range, Facebook would be far bigger than many established American companies, including Amazon, Caterpillar, Kraft Foods, Goldman Sachs, and Ford Motor. Only 26 companies in the Standard & Poor’s index of 500 stocks have a market value north of $100 billion.
Facebook has made a $3.1 billion business from a social advertising sector that many, even it, concede is experimental and unproven. Now it must find that proof. But experimenting on Wall Street, as well as Madison Avenue, could prove challenging.
We learned a lot of things about Facebook from its IPO filing. But there is one detail that sticks out for its improbable exactness: The $1.000 billion in profits Facebook reported for 2011.
The number wasn’t $998 million. It wasn’t $1.003 billion. It was $1.000 billion right on the dot.
Is this just a happy coincidence, or did Zuckerberg “manage” earnings to make a statement? Companies have many different accounting levers they can pull to slightly adjust their reported earnings.
It appears that the excitement over the Facebook IPO has crashed the SEC’s website. The link to the Facebook SEC filing, previously available here, is no longer loading. Instead, we’re seeing a “this webpage is not available” message when attempting to load the site using Google’s Chrome Web browser, and similar errors in other browsers.
This has gone on for several minutes now, as everyone is clicking through to read the filing. That’s too bad for anyone coming late to the news — you’ll have to wait for those who already had it loaded up on their screens to tell you what it said.
There is certainly no guarantee that Facebook is going to become the next PayPal, but considering the amount of times the payments business was mentioned in the filing, as well as statement of the potential plans for expansion, it could be a significant business in Facebook’s future as a public company.
Here’s another way that Mark Zuckerberg is following his idol, Steve Jobs: He will have a $1 salary, starting in 2013. Of course, Zuckerberg’s real compensation is his 28 percent stake in the company.
You know what’s awesome about today? Facebook just revealed its financials in preparation for public offering. Bear with me: This means no more “leaks” of Facebook’s revenue numbers to spike its valuation in secondary markets. No more banal and vague conversations about how Facebook is “killing it” at San Francisco bars. It means that I’ll never have to write another one of these “Report: Blah Blah Blah” posts about Facebook revenue using this Zuckerberg dollar graphic I made for Mike.