Tag Archives: Facebook IPO

Facebook’s Growth Since IPO In 12 Big Numbers

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Facebook Growth

$FB is still stuck at $26.25, way down from its $38 IPO price, but it’s made important progress since going public a year ago. Daily users up 26%, mobile monthly users up 56%, and revenue up 38% are some highlights. It’s running out of people to sign up in the developed world, but with this growth and no serious competitor in sight, it’s survived its hardest year yet.

  • Likes – 4.5 Billion – Up 67% – Average number of likes generated as of May 2013, up from 2.7 billion likes generated daily in August 2012
  • Content Items Shared – 4.75 Billion – Up 94% – Average number of content items shared daily as of May 2013, up from 2.45 content items shared daily in August 2012

[Stats and images provided by Facebook]

Likes and sharing are growing faster than Facebook’s user count, indicating strong engagement. This contradicts rumors that people are tuning out of Facebook. Zuckerberg’s Law, the CEO’s Moore’s Law-style theory, states that people will share twice as much every year. Facebook almost made good on Mark’s claim. It’s important that Facebook keeps that number growing as it’s shared content that keeps people visiting Facebook and seeing its ads.

To do that, Facebook is working on the more immersive mobile experience Home which has increased time spent on Facebook by 25% for its small number of active users. More time spent could lead to more sharing. This year it doubled the speed of its massively popular iOS and Android by switching them from HTML5 to native architecture, which lead to longer session times. It added content-specific news feed to boost browsing, and launched Graph Search to pull additional value out its data and get people to contribute more.

It’s also been beefing up its mobile SDKs for iOS and Android to make it easier for apps to share content to Facebook. That’s a big reason Facebook cares about helping its developers grow — they’re scratching each other’s backs.

  • Monthly Active Users – 1.11 Billion – up 23% – As of March 2013, up from 901 million MAUs in March 2012
  • Daily Active Users – 665 Million – up 26% – On average as of March 2013, up from 526 million DAUs on average in March 2012
  • Mobile Monthly Active Users – 751 Million – up 54% – As of March 2013, up from 488 million mobile MAUs in March 2012
  • Instagram – 100 Million Monthly Active Users – As of February 2013

Facebook is still signing up people pretty quickly, but all users are not created equal. While it earned $3.50 per user in the U.S. and Canada in Q1 2013, it only made $0.50 per user in much of the developing world including India and Brazil. Those emerging markets are where Facebook is getting most of its growth, meaning each subsequent 100 million users added is worth less than the last.

Growth in mobile has a similar issue. Facebook can show as many as seven ads per page on desktop whereas it has to be more careful not to overwhelm the small screen on mobile. So as Facebook’s users shift their access medium to mobile, it may earn less on each of them. Facebook is hoping that getting developers to pay for mobile news feed ads to get their apps discovered could counteract this, and that market is poised to grow as more businesses launch apps and the developing world switches to smartphones.

Overall, though, Facebook is still growing strong nine years after launch. The network effect of its ubiquity should not be underestimated. Dislodging Facebook as the premier general purpose social network will require something that’s not just better, but much, much better. Competitors might pick away at certain use cases, but are unlikely to replace it as the core identity provider for the web. Considering Facebook’s willingness to buy out threats like Instagram (which is still growing quickly in the first world), could stave off disruption and let it reign for years to come.

  • Local Businesses – 16 Million – up 100% – Number of local business pages as of May 2013, up from 8 million in June 2012
  • Promoted Posts – 7.5 Million – Number of promoted posts made from June 2012 to May 2013
  • Revenue – $1.46 Billion – up 38% – In the first quarter of 2013, up from $1.06 billion in the first quarter of 2012
  • Ad Revenue – $1.25 Billion – up 43% – In the first quarter of 2013, up from $872 million in the first quarter of 2012
  • Employees – 4,900 – up 38% – As of March 2013, up from 3,539 in March 2012
  • Game Payers – 24% more – Increase from March 2012 to March 2013

There’s no doubt about it. Going public made Facebook focus more on making money. It went from nearly zero revenue on mobile to $375 million a quarter, or about 30% of its total ad revenue. That in large part came thanks to the mobile app install ads it launched late last year. These let developers promote their apps in the Facebook news feed with ads that link straight to download pages in the Apple App Store and Google Play. These stores are getting more and more clogged with apps, inspiring developers to pay Facebook to get found.

Facebook also made big headway with Facebook Exchange, its retargeted ads that use people’s browser histories to show them highly relevant ads. FBX is absorbing advertiser budgets set aside for retargeting. Less successful has been Facebook Gifts, its entrance into direct e-commerce. Gifts has failed to produce meaningful revenue and may need to be overhauled to get more users purchasing real-life presents for their friends. Growth in payments revenue has been relatively slow too, as more game developers move from Facebook’s web canvas where it earns 30% to mobile, where Apple and Google get that cut.

One opportunity that should excite investors is that Facebook started showing ads in Graph Search. While they use the standard Facebook targeting now, they’re expected to incorporate keyword targeting, which could make them a more direct competitor to Google’s wildly lucrative AdWords business. The increasing technological savvy of local businesses could be a boon to Facebook in the future. Right now few of them actively buy social ads, but expect revenue to shift towards Facebook and away from less targeted print and telephone book ads in the future.

Still, Facebook isn’t trying to make as much money as it could. Another year went by without TV commercial-style auto-play video ads (though they’re rumored to be getting closer to this), and it even paused its experiment with a mobile ad network. If Facebook built out these streams it might piss some people off or make them feel like they data is being exploited, but it could definitely produce a huge boost in revenue. Off-site and off-app ad networks could let Facebook leverage its enormous wealth of personal data to power ads elsewhere so it can earn money without showing more ads on its own properties. That potential more than any is an argument for why Facebook is undervalued.

Most importantly of all, Facebook’s efforts to earn more money have not significantly impeded its mission of connecting the world. There are definitely more ads on Facebook, especially on mobile, but the data shows that they’re not annoying users enough to reduce their engagement.

Facebook has grown up. It’s no longer the red-hot startup that could double its user count every year. And it’s not the mature corporation churning out amazing profits by squeezing every last dime out of its data and usage. But Facebook has weathered the storm of going public without letting it destroy its regard for the user experience. It’s now a fundamental utility for most of the world. If it can keep from getting too greedy and stay focused on the long-term health of its community, it will have plenty of time to figure out how to turn the world’s life story into serious business.

NASDAQ’s Glitch Cost Facebook Investors ~$500M. It Will Pay Out Just $62M. IPO Elsewhere.

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Burning_Money__by_RoxasRocks0813

When Twitter or Dropbox go public, they should remember May 18, 2012. The SEC has approved NASDAQ’s payout of $62 million to investors burned when the stock exchange’s trading systems broke down during Facebook’s IPO. Total losses for investors were pegged at $500 million by the Wall Street Journal, though. The debacle should push companies eying big IPOs to look at other exchanges.

The NASDAQ gambled with other people’s money and Facebook’s reputation when it claimed it was ready to handle one of the most anticipated initial public offerings in history. But the morning of May 18th, the bet went sour.

As I wrote back when the blow-up happened (based on Reuters’ play-by-play of the meltdown) there was “a trading delay of 30 minutes and investors were unsure how much of Facebook they’d bought. There were 12 million postponed share orders suddenly filled between 1:49 p.m. and 1:51 p.m. without being properly marked ‘late sale’, which exaggerated the impression that people were trying to dump Facebook shares.”

There seemed to be insufficient preparation, no back-up plan, and little communication from NASDAQ. This resulted in confused investors who pulled back from Facebook, thus contributing to its falling price. There were certainly other issues with the IPO, including that Facebook may not have properly announced mobile revenue uncertainty or last-minute revenue forecast cuts. But NASDAQ’s glitches certainly didn’t help, and Facebook is still trying to claw its way back to its $38 IPO price.

Now the SEC has given the go-ahead for the NASDAQ to pay out $62 million in cash. As the WSJ details, eligible investors include some whose orders weren’t carried out, or who weren’t correctly notified when buys or sells did go through. Many banks who lost big money due to the breakdown are understandably unsatisfied with the compensation plan that comes up hundreds of millions of dollars short.

Hopefully the whole situation will serve as a lesson to stock exchanges and the companies that IPO on them: Consumer tech is now part of the financial zeitgeist. People want to own a part of the services they use every day. Trading systems must be ready for the onslaught when these companies go on sale. And if something goes wrong, don’t try to play it cool. Have a contingency plan and be prepared to delay an IPO an hour or a day if necessary. It’s better than watching so many dollars disintegrate due to confusion.

[Image Credit: Roxasrocks / Deviant Art & The Dark Knight / Warner Bros.]

Who’s to Blame for the Facebook IPO Debacle? Federal Court May Decide

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Technical errors caused by the Nasdaq stock exchange helped push down Facebook shares in early trading, the social networking giant suggested in a legal filing late Friday, turning what should have been a triumphant moment for Silicon Valley and Wall Street into one of the worst-performing IPOs in U.S. history. Facebook’s claim about Nasdaq’s performance — [...]

Facebook IPO: After the Hype, Investors are Betting on Hope

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Eight years after launching Facebook in a Harvard dorm room, Mark Zuckerberg is about to pull off one of the most valuable stock offerings in U.S. history — and the largest ever in tech — making him one of the world’s richest men, worth nearly $20 billion. Thousands of employees and early investors will reap [...]

To Capitalize On Demand, Facebook May Sell 50 Million Extra Shares At Increased $34-$38 Price

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Facebook Greenshoe Done

Everyone wants a piece of Facebook, so the company will likely allow underwriters to sell a “greenshoe” of up to 50.6 million additional shares, and definitely will increase its IPO share price range from between $28 and $35 to $34 and $38, I’ve confirmed with sources very close to the IPO. This means Facebook could sell up to 388 million shares to raise between $13.1 billion and $14.7 billion at a CNBC-reported valuation between $92B and $103B.

A greenshoe is an SEC-permitted over-allotment option that can stabilize a stock’s price by allowing underwriters to sell up to 15% more stock than the company originally planned to sell, but with the option to buy back the stock at the offering price if the actual price drops below this. The greenshoe would allow Facebook to raise up to an additional $1.72 billion to $1.92 billion by selling up to 50.6 million shares through Morgan Stanley, J.P Morgan, Goldman Sachs and other underwriters, which could prevent high demand and limited supply from causing the share price to skyrocket and making the stock seem volatile.

“Quite likable indeed, har har” laughs some monocle-wearing banker on Wall Street.”

The greenshoe is named after the first company, Green Shoe Manufacturing , to give underwriters the over-allotment option. Offering a greenshoe means Facebook could take advantage of stellar demand by selling more stock and raising more money. Alternatively, in the event that the share price falls below the offering price, Facebook’s underwriters could buy back all or some of that 15% at the offering price without losing money. In this way the greenshoe gives Facebook and its underwriters more control over the total pool of stock being traded and the price. One source confirmed the greenshoe and another said it was very likely to go through.

The fact that 526 million people use Facebook every day may have a lot to do with the strong demand for its stock. People around the world may be thinking to themselves “I can’t live without Facebook. It’s going to be around for a long time. I should invest.”

They may be right, at least about the first two parts. Facebook’s network effect is so strong that to be truly disrupted and fall from its place as the premier social network for everyone, another company would have to provide a something much, much better than Facebook. Not just cooler features or faster apps or ties to search and other services (*cough* Google+ *cough*). But truly, revolutionarily better, and with a brilliant distribution strategy.

Whether that longevity makes Facebook a wise investment will depend heavily on its ability to make money on its mobile site and apps where it doesn’t currently show as many ads as its web interface. Its Sponsored Story in-news feed ads are a good start, but it will either need to show a lot of them or come up with another ad format or revenue stream. I wouldn’t be surprised to see Facebook introduce full-screen, glossy, old magazine-style ads mixed in between organic news feed stories and more subtle Sponsored Stories.

Investors will need to make their plans quickly. Facebook will likely update its S-1 filing with the SEC over the next few days to make the $34 to $38 price range official, and possibly note the greenshoe. On Thursday it’s expected to set the actual IPO share price. And on Friday it all goes down with CEO Mark Zuckerberg opening trading of his company’s stock by ringing the NASDAQ bell from Facebook’s headquarters at 1 Hacker Way, Menlo Park, California.

[Image Credit: Green Shoe, Alamy]

Facebook Wants to Connect with You After All

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Facebook is connecting with Mom and Pop. The world’s most popular social media site has added an online trading firm to group of firms underwriting its IPO — and is serving up a video for potential investors that might well have made George Eastman cry. It’s the longest Kodak moment ev-uh. Individual investors and financial [...]

Facebook Ads Becoming (A Little) More Valuable; Mobile May Be Next

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facebook ad

In the S-1 filing for Facebook’s IPO, the company offers a little more insight into its advertising business, which it describes as “the substantial majority” of its revenue (and that’s an understatement).

In 2009, advertising accounted for 98 percent of Facebook’s revenue. The number declined to 95 percent in 2010 and 85 percent last year, thanks largely to the growth of revenue from payments. Advertising revenue is climbing, though that growth has slowed  — it grew 69 percent in 2011, to $3.2 billion, but it grew 145 percent in 2010. (As one point of comparison, our corporate masters at AOL reported $1.3 billion in ad revenue last year.)

What’s driving the growth? Facebook’s increasing traffic, which led to a 42 percent increase in ads served. Plus, the company says that the average price advertisers pay per ad increased by 18 percent, thanks to improved ad targeting capabilities and more prominent ad placements. Another factor: Facebook increased the minimum bid price for an ad,
“to reduce the frequency with which low quality ads are displayed to users.”  (Hat tip to Inside Facebook for catching that last bit.)

As evidence of the effectiveness of  its socially driven ad strategy, the filing points to a Nielsen study, which found that Facebook ads wrapped in social data (i.e., including “Friend X liked Brand Y” above an ad) did 50 percent better in ad recall than Facebook ads without that data.The filing also highlights some of Facebook’s advertising success stories, and it talks about the advertising ad spend from specific companies —  namely, the ones whose executives are also on Facebook’s board. The Washington Post company spent $4.2 million on Facebook ads in 2011. Netflix spent $3.8 million.

There is, however, one big gap in Facebook’s monetization strategy. Despite the fact that mobile makes up about half of Facebook’s traffic, the company doesn’t currently serve ads in its smartphone apps, something the filing brings up multiple times. However, Facebook says, “We believe that we may have potential future monetization opportunities such as the inclusion of sponsored stories in users’ mobile News Feeds.”

Facebook Set to File For $5 Billion IPO Wednesday: Report

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Social networking giant Facebook is expected to file documents for its long-awaited initial public offering on Wednesday morning, according to a new report by International Financing Review, a Thomson Reuters publication. IFR said the 7-year-old company will seek to raise $5 billion. IFR said Facebook has chosen Morgan Stanley as the lead bookrunner — occupying [...]