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vangogh
02-01-2012, 11:40 PM
Time to get your checkbooks out to buy in on the next big public offering. At least that's what Facebook is hoping. They filed prospectus today for an initial public offering and are looking to raise $5 billion. I'm pretty sure they'll get it. People have been waiting for this for a couple of years now.


According to the company’s IPO filing, in 2011, it recorded revenue of $3.7 billion, operating income of $1.75 billion, and net income of $1 billion

The above is from a Wired article Facebook’s $5 Billion IPO: The Next Google? Or The Next Groupon? (http://www.wired.com/epicenter/2012/02/facebook-ipo-2/all/1) I found that looks at today's filing and also some of the potential dangers the company faces in the future. It's also more revenue and profit Google had the year before it's IPO.

If you're thinking of jumping in and buying up stock it may not be as good a deal as you think right away. Not because Facebook is a bad buy, but rather there have already been lots of shares sold through early financing and it's expected the price may drop on opening day, something that happened to both Groupon and Zynga.

Speaking of Zynga, they account for 12% of Facebook's revenue, which is a lot for a 3rd party. 85% of their revenue comes through advertising as you'd expect.

One thing Facebook has going for it is they're on a mission, a social mission. In a letter to potential investors (http://www.wired.com/epicenter/2012/02/zuck-letter/) Mark Zuckerberg shared that mission


We hope to strengthen how people relate to each other.
We hope to improve how people connect to businesses and the economy.
We hope to change how people relate to their governments and social institutions.



Other companies that set out to do something more than simply make a profit and we on a mission include Apple and Google so Facebook is in good company here. Mark Zuckerbeg also looked to Steve Jobs as an mentor and that's not a bad person to learn from.

It'll be interesting to see what happens once Facebook goes public. It tends to change companies and put more focus on the bottom line to please shareholders. For Facebook that probably means doing more with the data they collected, which could push more privacy buttons. Odds are Facebook is going to do pretty well over the next decade.

What do you think? Facebook has certainly done a lot right the last 8 years. You don't get to 800,000 users without doing some good things. At the same time they face some challenges ahead in order to increase revenue and hold on to the revenue they have.

technowonder
02-02-2012, 10:11 AM
$5 billion is a staggering amount! I'm sure that in 3 years time it will be one of those things people look back on as being over valued at launch when it comes down to bottom line profits and revenue growth. Of course, only time will tell and hindesight is a wonderful thing.

As soon as facebook becomes less and less of a happy social network community for people to hang out with their friends and more and more about making a profit from those users and their data, the more those users will feel harrassed and move somewhere else. Having shareholders will mean more emphasis will be on short term profits so it must mean strategies will be more short term and aggressive in their goals and meeting revenue targets.

vangogh
02-02-2012, 10:59 AM
It'll be interesting. I have no doubt they'll raise the $5 billion. I'd also expect they will continue to grow. The growth in new members probably slows down since it seems like everyone on the planet already has an account, but I would think revenue will continue to grow. I don't expect Facebook to go away anytime soon.

At the same time not everyone is in love with Facebook. They often push the envelope a little far to test the waters. Having shareholders is only going to increase the pressure on them to do things their community may not like. While I think Facebook will continue to grow and do well, I also expect the anti-Facebook sentiment to grow. It's typically what happens. Look at any big company and you'll find people who love the company and hate it. I agree with you that there will be more emphasis on profits which will anger more users.

When you look at the short history of the internet, first it was AOL who was the first stop for people getting online. Yahoo and other portals joined them. Next came Google as people started with a web search. Now it's Facebook that's the initial destination of many. That first stop changes relatively fast in business years. It's not much of a stretch to think in a few years another site will come along to take over the first stop spot.

It will be interesting.

technowonder
02-02-2012, 11:17 AM
I watched a TV programme on facebook several weeks ago. The thing which stuck with me was that they said that everyone is putting price tags on them up with companies like Google, Microsoft (ok, not quite as big but in the billions none the less) but he said in comparison, their company only had about 600 developers or so compared to the likes of Google and Microsoft who had thousands of in-house developers.

When they put it like that, that's pretty darn impressive.

lucas.bowser
02-02-2012, 04:39 PM
They may have only 600 developers, but they really only have one product. It's also a little deceptive. Facebook is really more of a Social Network Framework. They really have millions of developers working in partnership with Facebook to extend the platform with Facebook Apps.

vangogh
02-02-2012, 05:20 PM
I think you also have to consider that Google and Microsoft have been hiring people for more years. I won't be surprised if Facebook starts to catch up, especially now that they've gone public. They're greatest asset to investors is all the data they've collected about us. Right now they use it to serve some lightly personal ads, but I think they'll be stepping that up as well as looking to do other things with the data that probably involve more developers.

Good point Lucas. Plenty of 3rd parties are developing for Facebook. In fact letting those developers in was one of the things that pushed Facebook past MySpace years ago.