Facebook Expected To Go Public Next Week

First time accepted submitter foozie writes "Many credible sources, including Forbes and CBS, say that Facebook will finally IPO next week, raising about $10 billion and valuating at $75 billion, almost three times the valuation of Google at the point of their IPO in 2004. This shift raises questions about how the new ownership will affect the company's ability to innovate and remain on the forefront of social media."

Comments

Innovate?

[tidepool]

Innovate? I think we're already past that with Facebook, no?

If you're looking for innovation, personally, I'd look elsewhere -- Way past the social-network situation that we see graying at a rapid rate.

Re:Innovate?

[Fri13]

We should have.... but Facebook did something what WWW couldn't and that is that every person has a own "website" where they have their contact information, photos, journals and so on.

The 90's boom for WWW was that everyone would have a own website.
It did not succeed as now WWW is primarily only used by corporations and teams (projects etc) but the normal people are far away from WWW idea to have homepages.

Facebook is the "homepage 2.0".

Is it innovative? No.... but is it something? Yes.

To get innovation back to people, from corporations for sake of security. We should have easy way to get normal people to make own pages, for their chosen server provider with small fee (like 1-2 euros a month for 1GB storage).

It should be easy as just drop a package to directory and then open site with editor and drag'n'drop images, resize tables and banners, place input boxes and link to existing data just by drag'n'drop way and automatic galleries with directory hierarchy.

But even today, almost after decade of CMS's and others... It is still too difficult to make a own website. So people love facebook or Google+.

Re:Innovate?

[Pharmboy]

I believe live journal, MySpace, geocities, tripod, etc all beat Facebook to your so called innovating by providing people with their own "web page".

Yes, a webpage that 5 people saw. Blogs made it possible for ordinary persons to have 12 to 20 people see their webpage. Facebook users typically have 50 to 500 "friends" who are forced to see updates about their cats, or the latest shared "image that is really only text" bit of wisdom. More importantly, it created networks with all their personal information available to the platform, and most importantly, Facebook figured out how to get people to give them this information for free. Some even pay for it, by purchasing game credits.

Facebook is different, and is the "necessary evil" of the month if you want to catch up with old friends from high school, etc. Other than conversation and "free" games that are designed from the ground up to be addictive, it offers very little to the user, but it offers tremendous value to the advertiser. Five years from now, Facebook will still be here. Likely worth a tiny fraction of the 75B that is laughably being touted, but it will be here.

Google brought advertisers millions of people. Facebook tells the advertisers where they live, what they like, and who their friends are. The problem of course is that everyone goes to Google when they are looking to buy something, not Facebook.

Really?

[TheRaven64]

This shift raises questions about how the new ownership will affect the company's ability to innovate and remain on the forefront of social media

Yes, that's exactly what I thought. Well, actually what I thought was 'I wonder how much money the investors in the Goldman Sachs Facebook fund will make out of this bubble,' but your version sounds better.

Re:Really?

[marcosdumay]

My thoughts were more aking to: "They didn't sell the company yet? What are they thinking? That they have a sustainable business?"

"company's ability to innovate"?

[wisnoskij]

Since when has Facebook innovated since its creation?
shifting around the GUI elements every few months is NOT innovation.

Re:"company's ability to innovate"?

[TheRaven64]

Facebook does quite a lot of research in data mining. You probably don't see it because you're their product, not their customer.

RTFA

[Anonymous Coward]

It won't IPO next week. It might *file* for it. Sigh.

Timothy You Dolt

[Anonymous Coward]

This headline and summary are totally incorrect. The story is that Facebook is going to FILE for an IPO, which is a big difference from actually going public. It will be months before that actually happens. For any gullible readers, you won't be able to buy or sell FB shares next week.

Once again, come to slashdot to see news stories mangled up beyond recognition by incompetent editors.

yeah other than food, energy, transportation,

[decora]

and everything that the lives of ordinary people depend on, there has been no inflation.

oh wait, maybe the modern 'science' of economics is a gigantic pile of horse shit? maybe 'inflation' is a political number manipulated by assholes at the Fed in order to support various fucked up ideologies, policies that benefit the already rich, and whichever corrupt bribery machine happens to be in power at the moment?

Re:Facebook Innovation?

[betterunixthanunix]

That is a pretty poor measure of innovation, since it basically defines innovation by popularity. Maybe Facebook was marketed better than its competitors; would consider that to be "innovative?"

Re:Facebook Innovation?

[Charliemopps]

Sure it is, just ask Apple.

Re:Facebook Innovation?

[poetmatt]

wha? open source isn't even a question, nor is it related to the situation.

The answer is: facebook didn't innovate at all, they simply had the most popular site by method of exclusivity before they went public. That's it.

that's not "wow! amazing!", it's more a stroke of luck. Their dealings with zynga and microsoft (who surely is positioned to profit from the IPO) highlight that facebook otherwise has no idea what they're doing aside from trying to sell every user's information in every way possible.

Re:Where's the numbers?

[TheRaven64]

Who bought those Goldman Sachs shares?

This is private information, so won't be disclosed. The public filing will just say that GS owns 10% (or whatever) of the company. The people who own the shares in the fund do not have to be disclosed.

Who at the SEC decided that these 'non-shares' that Goldman's wanted to sell were garbage enough not to be sold in the USA, but somehow could be sold outside the USA?

My understanding is that nobody did. Someone at GS decided that not selling them in the USA let them avoid the need to bother with SEC approval.

So will this shadowy group of Goldman's customers now manipulate the IPO?

Possibly, although I suspect that the IPO means that GS has decided that the bubble is now over. They hyped the shares, sold them to their preferred customers (at a big profit) hyped them some more, got their customers to sell them to other people, and now they have no further interest in Facebook. It can go public, people can review its books, and it could file for chapter 11 next week for all GS cares. They've moved onto the next bubble.

Re:Facebook Innovation?

[yog]

You pretty much summed it up. I fear that Facebook is a one-trick pony. "And now, for our next act... uh... hm... where's that card..." What more can they realistically do, other than poach internet services from competitors like Google?

Facebook messaging is encroaching on email turf, but I doubt it will ever replace an independent email service; no one trusts them, and it's unrealistic to force all your email recipients to join Facebook; this was AOL's downfall as well.

The comparisons with AOL are accurate and portend future trouble for Facebook. The broader, out-of-control Internet has a way of bypassing closed systems with ever more flexible and innovative alternatives.

Sooner or later, someone will think of something even easier and more convenient to use than FB, and FB will begin to lose its relevance. I have no idea what; it could be some sort of mobile-to-mobile chat and messaging paradigm that bypasses the website-based interfaces like FB's, or maybe a return to basics because of social network fatigue.

Personally, I've grown tired of FB after using it somewhat extensively for a year or two. It's been a great way to get back in touch with old classmates and the like, but the novelty's worn off and I now find it tiresome to sit down at a computer, bring up facebook.com, and read some oh-so-clever status messages from people who should be working or reading or (God forbid) exercising :)

IPO of Net ventures

[Taco Cowboy]

It's a sucker game, actually

Back in the 1980's when Al Gore proclaimed the "Information Super Highway" there had been more hype than everything else combined

There were so many example of Net venture wasted all the money being pumped into them, and yet, the financial world never learn

Take search engines for example

The was Altavista, and people was like goo-goo and gaa-gaa all over it

Then Yahoo came along, and the goo-goo gaa-gaa people flocked to it

When Google arrived, Yahoo withered

Take "community", for example

There was "The-Well", AOL, tripod, whathaveyous

How many of them are still left, today?

How many BILLIONS have they wasted?

I do not have a crystal ball, but I can tell you that FB will be just like any of the above-mentioned, and the billions pumped into it would be wasted

I can't remember how much $$$

Re:IPO of Net ventures

[Anthony Mouse]

There were so many example of Net venture wasted all the money being pumped into them, and yet, the financial world never learn

In this case it's even worse. Think about it: What's the point of an IPO? It's so that a company can raise money, to fund expansion or revitalize the company.

So, does Facebook need money to expand? No, they're undoubtedly sitting on a mountain of cash already. They're not a little company that needs capital to expand, and they're not a big company with aging plant and equipment that needs a capital infusion to get with the times.

The reason for the IPO is obviously so that the existing owners can cash out.

Re:IPO of Net ventures

[Sir_Sri]

You're missing an important one, and the one that eventually caught up to microsoft. If you're using stock options as a form of compensation you eventually have to go public, because the company cannot have more than some number of shareholders and be considered private.

Facebook may need to expand, a lot. Who knows what their plan is? They may need a massive infrastructure investment to support higher bandwidth in system applications (videos, 3d games, who knows), and they may need a massive investment to hire a large number of staff to start running revenue generating activities, along with a building full of lawyers to go with it all (advertising sales teams mostly). If they're serious about making facebook into a platform rather than just a webpage there's a lot of time and money that could be thrown into basically writing a giant web OS.

But Facebook faces a lot of fundamental problems. First off, if they have a billion users a 75 billion dollar IP values each user at 75 dollars. That's... absurd (admittedly, not 75/year, but even at 7.5/year you're pushing your luck, that requires a lot of suckers giving you 75/year for each user who contributes nothing). Right now they sell facebook points, which is all well and good, but 3rd parties take I think 70% of that. So again, you need to be moving a LOT of money per user.

So how else do you get money? Well advertising. And again, what is a user worth on facebook to an advertiser? My Facebook experience is going to be different than in the US, because they feed different ads to canada, but right now the ads they feed me are for very sketchy (not necessarily illegal, just not really serious big businesses). Valuing a facebook user might be like trying to value television viewers, but 10x harder.

Or you can sell your data to companies. Which is where this whole thing starts to fall apart fast. Facebook is now big enough that they're going to get buried in Laws from every country in the world (see the Twitter story that just got to the front page for another example). Some of those rules are going to be 'no selling data, anonymized or not, without explicit consent' and suddenly your whole revenue stream is first a legal quagmire, and second very very limited. And laws may be written about targeted ads (see previous paragraph), ads to under 13's and compliance...

So yes, the existing owners want to cash out, and I'm sure a lot of them are looking to jump ship ASAP. But google started as just a search engine, and now they have more products than I can keep track of and billions in revenue (and profits), so you never know. I would not be surprised if Facebook has a lot of thought going into what their future will look like and the manpower and infrastructure to support that gets expensive fast (when you're funded by private capital anyway).

Re:IPO of Net ventures

[TheRaven64]

I don't see why you think Facebook has no revenue. Google makes crazy amounts of money selling advertising based on the information that they've harvested. Facebook harvests even more information (their tracking cookies are personally identifiable and, for a couple of hundred million people, linked to real names, addresses, dates of birth, and so on, and they have a lot more personal communication to mine than Google), and sells not just advertising but also the information itself. Until people realise that Facebook is selling them a service worth a couple of dollars a year in exchange for personal information worth tens or hundreds of dollars, they'll keep making money...

Re:IPO of Net ventures

[TheRaven64]

But Facebook faces a lot of fundamental problems. First off, if they have a billion users a 75 billion dollar IP values each user at 75 dollars. That's... absurd

Actually, that seems pretty low to me. If Facebook can't harvest information worth $7.50 to advertisers, political parties, and so on from each user then I'd be very surprised.

In the last US Presidential election, Obama spent $7.39 per vote, McCain spent $5.78 per vote (as with every other recent US election, the candidate who spent the most won). In most elections, around 80% of the voting population has already decided to vote for either the red team or the blue team and will always vote for their favourite colour. In winner-takes-all states, the effect of getting a few tens of thousand of undecideds to vote for your team means that you win the election. Facebook has enough information to make a mostly accurate list of who these undecided people are and where they live. How much do you think that information is worth? I bet either party would pay $10/name for it, maybe more if you promised not to sell it to the other party.

Now, of course, not every person in Facebook will be on that list - probably only a few million - but that's just one example. How about the list of people who own cars and are bad at arithmetic? That would be very valuable to a lot of insurance companies...

Re:IPO of Net ventures

[flyingsquid]

The Internet Bubble was launched by the IPO of Netscape. People bought the stock because they looked at what Netscape did- they made a "browser" program that allowed you to access these things called "web pages" via this whole "internet" thing, and it was pretty clear that this was the Next Big Thing. It was going to change society, business, *everything*. And it did... so what went wrong?

Well, one problem was that Netscape didn't actually have a history of making money. The other problem is that they didn't even have a clear idea of how they were going to make money. There wasn't a clear business model. It was basically "hey, this is the Next Big Thing! Get in on the ground floor, and we'll figure out that whole profitability thing later. But hey, this is after all the Next Big Thing, how can you lose?"

Now, that's not how IPOs are supposed to work. You're supposed to go public *after* you have a proven track record- consistent profitability, a history of growth. But Jim Clark really wanted to cash in, so he decided he'd just skip those steps. And that basically set the model for the Internet Bubble. Profitability was meaningless, sound business models were meaningless, the only thing that mattered was getting lots of people to use your software/web site/service. The profitability thing, well, they'd just figure that out later. Except, of course, most of them didn't. Inevitably people realized that most of these companies weren't the Next Big Thing, and the market tanked. The only stocks that ended up being worth anything were the old-fashioned ones. You know, the ones with business models. The ones that made a profit.

So how does FaceBook stack up? Well, according to Reuters, Facebook raked in $1.2 billion in revenue the first 9 months of 2010, and earned $355 million on that, a profit of 30%. That's a lot of money, and that's a really good profit margin. And they're growing. According to a Reuters article, Facebook earned $500 million in just the first six months of 2011. FaceBook is not another Internet Bubble company. They actually know how to make money, and a lot of it. Whether the stock is a good investment will depend entirely on how much you pay for it. Right now, a typical company trades at around 20 times earnings- that is, for $20 for every dollar of profit. This is the P/E (price/earnings) ratio, which is the single most important number to know in looking at stocks. Anyway, If you're paying several times that- 50, 60, or 80 P/E- FaceBook will have to increase its earnings massively in the future to justify that price.

So it's all about how cheaply you can get it. A terrible company can be a great investment if you can get it really cheap. A great company can be a terrible investment if you pay too much. The Wall Street Journal and other publications are going to be chattering a lot about how much the company is really worth. The reality is that the average Slashdot reader probably has just as much clue as they do about Facebooks long-term viability.

So I'm curious. What do people here think- is FaceBook here to stay? Or is this just another social media fad that will go the way of Friendster and Myspace, as soon as something better goes along? Do people still use FaceBook, or have people sort of reached a saturation point with it?

Re:Facebook Innovation?

[jhoegl]

The only reason Facebook was better was because MySpace was its only competition. I mean, a virus laden social media platform that you could customize with terrible backgrounds, fonts, oh.. and music embeds vs friendly banter messages and drunken photos.
The world has spoken, and the world said "noobs shouldnt mess with html!"

Re:Given Goldman Sachs' non-public/non-US offering

[oldlurker]

...I'd like to know how much ad revenue have they generated in the past year, which would be a small fraction of it's valuation....

To extend on those remarks, two years ago the entire online advertising market was about $25B annually, with about half that going to GOOG for search placement. Old timers like myself will be surprised that only about a third of the online ad market is banner ads. I suppose adblocker-type technology will eventually completely kill off that market segment, or at least I hope it does. Anyway, FB can only be a small fraction of $10B ad revenue.

In normal market conditions companies used to sell for P.E. ratios in the single digit-ish range, but for a couple decades ultra high PE ratios have taken over. Once the baby boomers cash in their 401Ks that'll drop back to normal. Anyway it would not be all that out of line for a couple billion in revenue to account for a couple dozen billion in valuation.

Also the data they have is useful for spam services that are not online. Expect it to be mandatory to link your postal spam mail address and your social security number to your FB account, supposedly to cut down on griefers and spammers, but more likely to make the data they have on you more valuable.

Facebook has become a giant in web advertising. Their revenue was estimated at $3.8 billion in 2011 (slightly lower than their own prediction of $4b), and to reach $7b next year (2013). Similar numbers have been reported many places, but one source: http://www.emarketer.com/Article.aspx?R=1008598

Total online ad market is at $31b, so Facebook has 12% market share of the global online ad market. source: http://www.iab.net/insights_research/industry_data_and_landscape/1675/1816825 . Their market share of users and time is even higher than that - 16% -- source: http://www.zdnet.com/blog/facebook/facebook-is-destroying-google-in-time-spent-online-chart/4183