With a little over two weeks left until Facebook launches one of the most anticipated IPOs in history, this chart helps you put some of the crazy numbers into perspective.
As you can see, some of the other social media and online companies are dwarfed by what Facebook is about to achieve, Google is the only company to have a look in. What a lot of people forget, however, is the huge pot of money that Facebook will have at their disposal to grow the company, push it into new markets, acquire other companies and expand their marketing efforts.
The flip side of the upcoming IPO is that Facebook will be held accountable by the markets and their spectacular growth in both users and revenues will have to continue if Facebook want to justify its lofty price tag.
As the scheduled date to its IPO looms ever closer, Facebook is hoping that the company’s growth prospects will persuade investors to pay 99 times earnings for its initial public offering. If this happens, it would make it a higher multiple than 99 per cent of companies in the Standard & Poor’s 500 (S&P 500) index. This would make Facebook more expensive than every member of the S&P 500 relative to earnings except for Amazon.com, Leucadia National Corp and Equity Residential.
According to Bloomberg, the social media site will seek a market value of as much as $96 billion, offering shares at $28 to $35 each, according to a regulatory filing showed yesterday. If the company sell the 337.4 million shares it plans to make available, the IPO would raise $11.8 billion, making it the largest initial share sale on record for an internet company.
Facebook produced a slick 31 minute IPO roadshow video to show potential investors why they should invest in the site. Featuring Facebook’s founder Mark Zuckerberg, its vice president of product, Chris Cox and the chief financial officer, David Ebers, the video shows how Facebook chronicles people’s lives, referring to Timeline as its way of capturing people’s lives in a way that hasn’t been explored yet.
Facebook’s chief financial officer David Eversman sums up the message of the video: Facebook wants investors who believe in its mission and are excited about the site’s long-term potential. He says that the company won’t hesitate to make changes to drive user growth, even if monetisation of the site moves slowly. He uses mobile as an example of Facebook investing heavily to make the user experience engaging, even if it takes longer than expected to generate revenue.
The company will begin meeting investors next week and is currently scheduled to price the offering on May 17th, although rumours are circulating that this will be delayed to June or even later.
Professional social media site LinkedIn has announced its financial results for the first quarter of 2012, revealing that its revenue had increased by 101 per cent compared to the same period in 2011. This makes it the seventh straight quarter where the company has experienced an increase greater than 100 per cent year-over-year growth.
Announcing the earnings live from LinkedIn headquarters, revenue for the social media site was $188.5 million with net income reaching $5 million for the first quarter of 2012. Revenue had increased by 101 per cent from $93.9 million during the first quarter of 2011, while net income increased by $2.9 million during the same period.
These increases were generated by LinkedIn’s three main products: Hiring solutions which generated $102.6 million in revenue, marketing solutions which made up $48 million of revenue, and premium subscriptions which earned the company $37.9 million. Each sector experienced a significant increase in revenue compared to the same period in 2011. Hiring solutions experienced an increase of 121 per cent in revenue earned, while marketing solutions and premium subscriptions had a 73 per cent and 91 per cent increase respectively.
User engagement
The site has seen a steady increase in both the number of members on the site and its traffic. LinkedIn currently has over 161 million members signed up, and according to comScore, the site had 103 million unique visitors and 9.4 billion page views during the first quarter of 2012.
The majority of its revenue still comes from the U.S. with the country generating 64 per cent of LinkedIn’s total revenue. The region that comes closest to matching the company is the EMEA (Europe, the Middle East and Africa) which makes up 23 per cent of total revenue. The company has been expanding its services to Asia in recent times and will need to do so as not only is Asia a growing market, but the company is mostly dependent on the U.S. for generating revenue. A drop in engaged users would mean a drop in revenue, which could be damaging to the site if it continues its dependence on the U.S.
However, LinkedIn also revealed that it had acquired presentation service SlideShare in a $118.8 million deal. According to the Wall Street Journal, the acquisition is comprised of about 45 per cent cash and 55 per cent stock, and is LinkedIn’s way of adding new features to its site to keep its current users engaged. By incorporating SlideShare into its site, it will allow users to create more dynamic content, LinkedIn had added more traditional social media features like status updates to give its users further reason to return to the site when they’re not job hunting or looking to hire.
It also helps that SlideShare share a similar philosophy to LinkedIn as both sites focus on creating a experience suited for professionals. If the deal passes through, the acquisition is expected to be completed during the second quarter of 2012.
In preparation for its forthcoming IPO, Facebook will be listing its shares on the Nasdaq Stock Market, the waiting period for entry into one of the best known stock indexes factored in as a negotiating point when Facebook was considering its options, Bloomberg reports.
According to a person with direct knowledge on the matter said that Facebook had decided to list on the second-biggest U.S. stock exchange back in April 5th. Eight days later, Nasdaq shortened the time a company must be listed on a ‘recognised market’ before becoming eligible for the Nasdaq-100.
Before the rule change, it used to be at least two years before a company could be made eligible, or one if a stock would be among the top 25 shares in the index by market value. Now this ’seasoning period’ has been reduced from at least one year to three months. Facebook had confirmed this week that it would be listing on Nasdaq instead of the New York Stock Exchange, the same time the rule change was implemented. The change also applied to the Nasdaq Financial-100 Index and Nasdaq Biotechnology Index.
Facebook’s IPO is expected to happen in May, but Venturebeat is saying that, after analysing the major stocks over the past month, there’s a very real possibility that this will be delayed. It cites that the majority of tech stocks have experienced a 15-30 per cent drop over the last month, coinciding with the major markets experiencing a drop in stock prices too. The consensus is that unless there’s recently IPO’d stocks in the tech sector rise drastically very soon, the chances of seeing a Facebook IPO in May is very slim.
To be honest, although having the IPO happening sooner would mean more revenue coming in for the rest of the year – a drop in profits for Q1 2012 could suggest that it might lean towards this approach – it could potentially do more harm than good if it launches during what’s a turbulent period. The massive hype that has surrounded Facebook’s IPO since was first announced could give them an immediate boost in revenue, but that may be short lived if the markets continue to decline.
With the future of commerce and transactions heading towards mobile, Ebay has been aggressive in its expansion in recent times with their vision of mcommerce and the release of their card reader “PayPal Here“, which was remarkably similar to a similar product to rival company Square (pictured above). Yet despite this and the $7 million of mobile payment PayPal is expected to do this year, Square is still going strong and steady after it announced an increase in payment volume in the past month.
Bloomberg is reporting that Square, who specialise in credit-card readers for smartphones and tablets, has increased its payment volume by 25 per cent since March, the same time Paypal revealed its own credit-card reader. The company is processing transactions at an annualised rate of $5 billion, up from $4 billion a month ago with more consumers embracing mobile payments. Exactly how much Square is making from this and whether it’s earning enough to grow is unclear as the company doesn’t release its financial results or reveals whether it’s profitable or not, but the signs for them are positive.
The company also announced that it will guarantee that any payments processed by 5pm will get deposited into a merchant’s bank account by the morning of the next business day. Originally, fast deposits was one of Square’s main selling points but PayPal Here is now promoting the fact that businesses will get access to their funds on the same day, provided said funds are deposited into a PayPal account and then withdrawn using a PayPal debit card. Usually, similar transactions would take anything between two to five days to process
According to the company, more than one million businesses are using Square to accept credit cards. This is in comparison to the 200,000 merchants who have signed up for PayPal Here who are enticing merchants with a 2.7 per cent transaction charge, less than Square’s 2.75 per cent. Square is also reportedly trying to raise $250 million at a valuation of $4 billion.
After recently purchasing a number of patents from IBM, Facebook has further strengthened its stance after striking a deal with Microsoft to purchase a portion of the patent portfolio it acquired from AOL recently for $550 million.
Microsoft only recently purchased 925 patents and patent applications from AOL as well as a license to AOL’s remaining patent portfolio, which contains around 300 additional patents that were not for sale. The agreement today means that Facebook will obtain ownership of approximately 650 AOL patents and patent applications, as well as a license to the patents and applications that Microsoft will purchase and own.
Microsoft will still own roughly 275 AOL patents and applications, a license to the 650 AOL patents and applications that Facebook now owns and a license to approximately 300 patents that AOL did not sell in its patents auction originally.
In a announcement made on the Facebook site, the executive vice president and general counsel of Microsoft Brad Smith said that the deal “enables us to recoup half of our costs while achieving our goals from the AOL auction.”
The spending spree from Facebook comes after Yahoo! sued Facebook for 10 patent infringement back in March. The move is a case of Facebook wanting to cement their position and ensure that a similar scenario won’t occur in the future. Their upcoming IPO, which could see the company valued up to $100 billion, is also a reason for the purchases; the additional patents may make investors feel reassured if they want to buy shares from the company.
With the buildup towards Facebook’s looming IPO launch, many have been trying to figure out when exactly it will take place. May being the month referenced time and time again, since it’s the earliest time Facebook can potentially launch it.
Well, Techcrunch is reporting that the social media site is looking at a May 17th launch, depending on whether the State Examination Commission (SEC) agrees that all of Facebook’s papers – including the company’s recent acquisition of Instagram – are in order.
This is in line with earlier reports from AllThingsD that the company was going to hit the NASDAQ stock market during the third week of May, and from CNBC which said that Facebook was eyeing either the 17th or the 24th to go public. The company is expected to be valued at around $100 billion, which reflects the current levels of trading in the secondary market, and the valuation desired would price the company at roughly $40 per share.
Techcrunch is also reporting that the IPO for another company, Millennial Media, was pushed up to early April because Morgan Stanley and Goldman Sachs, which were underwriting both offerings, wanted to make room for Facebook. Issues concerning mobile strategy and privacy are the biggest concerns for institutional investors, the former was somewhat eased by the purchase of Instagram.
This week, April 12th to be exact, the Internet Corporation for Assigned Names and Numbers (ICANN) will stop accepting applications for a new round of generic top-level domains (gTLDs), the part of a web address that appears to the right of the period. Currently gTLDs like ‘.com’, ‘.net’ & ‘.co.uk’ are some of the 22 current top-level domains available, but the new gTLDs will allow companies to register their own domain names. (For example, if Starbucks wanted to purchase one, they could end their web pages with ‘.starbucks’ instead of ‘.com’, we could be ‘.simplyzesty’ etc.).
With a price tag of $185,000, (a discounted price of $47,000 is available for those from developing countries who need financial assistance), it will only be bigger brands that will apply, although that doesn’t mean that brands are queuing up to get theirs. AdAge reports that of the major marketers that they contacted, only a few said that they are planning to apply for new gTLDs. Google is planning to apply for several, including their own trademarked TLDs as well as new ones, suggesting that the company will go for TLDs such as ‘.google’ and ‘.youtube’.
Other marketing companies contacted by AdAge either refused to comment or said that they weren’t planning on applying for new TLDs. Theoretically, while brands can apply for it, the chances are that most established brands will delay their application is high as people are so familiar with ‘.com’ and ‘.net’, that it’s a given that using them will find you the site in question.
The addresses in question won’t be appearing until 2013 at the earliest as the application process will last for months. Also the application is optional so brands will perhaps like to wait and see how the first batch do before they make any changes to their own as the change may confuse users who’s browsing habits aren’t going to change any time soon.
If hardware is the backbone to any good smartphone, then apps have become the lifeblood with many consumers judging a device on what they’re able to download for it. Microsoft know this and because it’s playing catchup with its competitors, iPhone and Android, it’s turned towards funding developers to ensure apps are created for them.
The New York Times reports that Microsoft is financing the development of well known apps, costing anything between $60,000 to $600,000 depending on the complexity of the app. Developers are reluctant to dedicate time and money into a platform that is both small and unproven so Microsoft is adapting different methods to incentivise developers. Alongside funding their app’s development, the company also provides developers with free phones and the promise of prime spots in its app stores and in Windows Phone advertising
One such example is the popular location sharing app Foursquare. When Microsoft offered to underwrite a Windows Phone version of the app, Foursquare gladly accepted. While Foursquare has in-house engineers working on iPhone, Android and Blackberry versions of its service, their head of business development, Holger Luedorf told the New York Times that if Microsoft didn’t offer to pay an outside company to do the work, they would “probably not” have developed an app for Windows Phone.
Microsoft only has an estimated 70,000 apps for its Windows Phone platform. Comparing that the iPhone has roughly more than 600,000 apps in its store and Android has almost 400,000 apps, the company is very much trying to bridge the gap between themselves and speed up the process. Their other initiative is teaming up with Nokia to open up an AppCampus in Finland, where over €18 million will be invested into the project over three years, but the company has a lot of work ahead of them if they seriously want to be in a position to challenge the big two.
It’s (reportedly) two months away, but Facebook is halting the trading of its shares on secondary markets by the beginning of April as it prepares for its initial public offering (IPO).
Bloomberg report that representatives of the company have instructed firms that help investors buy and sell stock in closely held companies to cease trading of its equity this week. Facebook, which filed to raise $5 billion in the largest-ever Internet public-market début back in February, is actively traded on secondary markets, including SharePost Inc. and SecondMarked Inc.
The halt would give the company time to account for its shareholding base and would end any price fluctuations as it determines its IPO valuation with bankers and investors.
SharesPost moved the date of its Facebook-share auction forward from April 2nd to March 30th. The company said in a note to clients that: “At Facebook’s request, SharesPost will cease facilitating transactions in Facebook’s stock as of Friday end of day to help ensure the company’s orderly transition into the public markets.”
Facebook’s implied value had dropped from $98 billion to about $93 billion in a late-February auction of a fund that holds shares of its stock. The sale set a price of $40 apiece for 125,000 units of the fund, according to SharesPost, which managed the auction. Facebook still intends to hold its IPO in early May.
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With a little over two weeks left until Facebook launches one of the most anticipated IPOs in history, this chart helps you put some of the crazy numbers into perspective.
