By: NuNet, Feb 2, 2012
It's finally happened. Easily & without doubt, the world's largest Social Networking Site & perhaps one of the world's largest Online companies, Facebook, has gone ahead & filed the required documents (all 198 pages of it) stating its intent of going Public.
Though this Website has nothing to do with the happenings of the 'Real World', we do occasionally have to take note of events in Cyberspace which could directly impact life in the 1st world, hence this write-up....
Before I get into detailing what the Real & Online World's initial reactions are to the IPO, here are some facts:
≡ By end 2011, Facebook had 845 million monthly active users
≡The vast majority of Facebook’s revenue comes from advertising: 85% of it last year
≡ More than 425 million people had accessed Facebook via mobile till December 2011
≡ Facebook commands a 28% chunk of the U.S. online-display ad impression market
≡ Details like number of shares to be offered, how much the shares will be sold for & when, will not be known till the time when the Facebook IPO is actually offered to members of the public to buy
≡ Facebook has stated in its S-1 document that it expects to bring in US $5 billion through the IPO
≡ This figure can be adjusted, as it was stated mostly to estimate the fees the underwriters -- led by Morgan Stanley
≡ Facebook made US $1 billion in profits on US $3.7 billion in revenue in 2011
≡ 2011 Revenue was US $3.711 billion vs. US $1.974 billion in 2010
≡ 2011 net income (taxed): US $1 billion vs US $606 million in 2010
≡ Annual revenue grew 154% from 2009 to 2010, & 88% from 2010 to 2011
≡ Cash on hand: $3.9 billion
≡ Facebook CEO & co-founder, Mark Zuckerberg still owns 28.4% of the Social Network. That amounts to 534 million shares
≡ Ticker symbol its shares will trade under is FB
≡ Choice of share market (whether NYSE or Nasdaq not yet known)
There's more but I shall stop the factoid here.
The next big question - How is the financial world, analysts, experts, Wall Street even, the Tech World & of course other Social Networking Sites, not to mention arch rival, Google Plus reacting to the proposed IPO?
Wall Street seems ecstatic, espcially after its had its best January in 15 years. February, too, seems to have started on the right note with the expectant Facebook IPO.
Now that the analysts & market experts have laid their hands on Facebook's financials, all kinds of expressions & views are being bandied about. Sifting through these initial reactions, the uppermost concern of everyone is - since Facebook has already grown into such a large giant (it rules in 126 of the 137 nations globally with approx 850 million users monthly), will it be able to grow so phenomenally? If not, what happens next?
The other area of concern is Facebook's attempted foray (or lack of it) in the Smartphone's arena. Immediately after that is its revenues, obviously largely from advertising.
Interestingly, all the 3 points of concern are tied into each other.
Facebook, started from a Harvard University dorm some 8 years ago, was clearly developed for the Web. Even Mark may have not envisaged then that an instrument called the Smartphone would come along to challenge the humble PC. But is has & FB needs to do something about it. That it has delayed this is a cause of concern.
FB users are increasingly going to their favorite Social Site from their mobile devices. In December 2011 itself, over half of FB users did that, i.e. over 425 million users. But by Facebook's own admission, it currently doesn’t generate any meaningful revenue from its mobile products...so its already on a weak wicket. Facebook needs to monetize its mobile biz, that too, quickly, to keep its financials glowing. What may come in the way, says experts, is the fact that many mobile platforms are owned by Facebook’s competitors, like Google (Android) & Apple (iOS). Ouch! Little wonder, of late, news coming out of FB HQ revolves around FB developing its own mobile phone.
Here's FB in its own words, saying focusing on the mobile phone business will be one of its five key, high-level strategies:
“We are devoting substantial resources to developing engaging mobile products and experiences for a wide range of platforms, including smartphones and feature phones. In addition, we are working across the mobile industry with operators, hardware manufacturers, operating system providers, and developers to improve the Facebook experience on mobile devices and make Facebook available to more people around the world. We believe that mobile usage is critical to maintaining user growth and engagement over the long term.”
Clearly, shorn of all the financial mumbo jumbo, the path ahead is clear. If FB needs to move ahead & make a success of its business, the world of smartphones should be a key area of its development. If not, the chances are high that revenues will be hit, which in turn will affect the price of its shares, once listed.
Finally, I leave you with links to what the world is saying about the IPO. Real World, Web World, experts, go ahead & have your fill.
http://www.washingtonpost.com/business/rubenstein-on-facebook-ipo-private-equity/2012/02/01/gIQAjQrZiQ_video.html (Washington Post)
http://www.cbsnews.com/8301-505123_162-57369940/why-facebooks-ipo-shouldnt-excite-you/ (CBS)
Internet News Facebook IPO 02-2-2012
