I'm not saying that Facebook is dying or that it's gonna die anytime soon, but I am not able to foresee any significant growth.
The article compared, with sort of negative terms, Facebook's IPO to Google's, saying that google didn't even impress that much when it went public.
But we all know here, that Wall Street made a mistake with Google, since now their shares now are worth 5 times as much as they were at the opening.
So, my question is, how can Facebook ever be worth half a trillion dollars? What should the company do to get evaluated 5 times as much as it is now?
At least with the number of users, it seems to me that they can't be too far from their natural limits.
Facebook is a company certainly with great minds and ideas, but after all it's a website, and I'm not sure people will want to stick around for so much longer on just a website. It seems unfeasible to me that people will stop using the rest of internet, just doing everything on Facebook.
Sure, they can improve a million things (like a real search in Facebook posts, or ways of sharing more complicated things, or better off site integration (which is already pretty good though), but at the same time they can't just open too much, or people will just start migrating. Yet, if they stay too close, people will get bored and start migrating anyways.
Sure, they can start having actual physical products and increase their presence on different markets, but there are lots of tradeoffs for that too. People won't eventually be happy to have a anything-Facebook.
So, maybe I'm wrong, but I tend to believe that this might be one of the highest points that Facebook can reach. I'm sure it can still grow, but I can't expect a growth of orders of magnitudes, it just seems unreasonable.
Maybe it's just that I got bored of Facebook's social life a long time ago and ended up spending very little time on it, almost using it as an email server for certain friends. But I certainly don't think that things like timeline can do this huge difference. To me, timeline is just another improvement (maybe) to avoid people to get bored after a while. One of the constant and frequent improvements and changes that every feature/product has to do to feel alive, but can anyone see any change that could make this company much bigger than what it already is?
If I were Zuckerberg I would probably sell a bunch of my shares and buy a bunch of companies, without necessarily integrating them into Facebook, you never know...
Since Google went public, investors have learned a lot more about how these business models work, and how quickly they can build durable competitive advantages.
If "Can it go up 5X" were the threshold for going public, investors would price this in, so the actual threshold would drop.
The bull case for Facebook is basically that it's by far the cheapest platform for spreading memes--whether those memes are shared infographics, political slogans, or, say, the existence of Gap's latest sale. Plus, FB owns identity in a way few other sites can match--even Google only owns identity around the ages (they know what you want but don't yet have; Facebook knows more about who you are). Through credits, FB essentially owns a piece of any successful business built on its platform; if it were a country, $100bn would not be an excessive valuation to put on the net present value of its future taxes collected, less collection costs.
I agree with this. All I'm saying is that most companies can in general grow, and so it depends on you whether or not you want to buy stocks.
In Google case, they underestimated it. And who bought might be doing quite well right now.
In Facebook case, in my opinion they aren't underestimating it, and I just think it's hard to grow much more than they are already.
First, they have already 1 billion users (order of magnitude). There is no way they can go to 10 billions, just because they don't exist.
Second, I believe that the external pressure from other companies will somehow kick in, not allowing one only company to rule the world. Maybe some anti monopoly laws, some other platform, a yahoo -> google effect, I don't know.
It just seems unlikely to me that Facebook will be doing much much better. I may be wrong, but in the long run I'd still buy GOOG or AAPL towards whatever Facebook code will be.
What the stock will do in the short run is a different thing, maybe boosted by the media, who knows...
Smart VCs!
Anyway, that said, I'm a bull on Facebook. It's incredibly hard to stop using. And they're (purportedly) profitable, and growing, and have barely started monetizing their user base.
As for what need Facebook meets... it's communication (and communing): people connecting with people. This is the basis of many technological innovations (telegraph, phone, internet; some would include trains, planes and automobiles as "communication" technologies). There is plenty of need left unsatisfied. The question is, has Facebook perfected what can be gotten out of the internet yet? If not, that means they have room to grow. (one day they'll be blindsided by a new technology that better satisfies that need; but that's a different issue). And, if there is room to grow, are they going to retain leadership? e.g., will Google overtake them? (google serves a different need of customers, so I think google will win there, yet not beat facebook at the need it serves).
Big issue: some people thought myspace would be long-lasting, yet facebook toppled it. Facebook is very aware of this fact. They have some idea about what would make them vulnerable, and, like Microsoft being very aware that they won out over IBM, they won't be complacent.
That said, IPOing before google+ hits its stride is good timing...
That statement is backwards. Facebook sort of knows what I kinda like, but Google knows exactly what I want, right now. If I type "Escort midtown manhattan" and click the Google ad, Google will make about $4, which is more than Facebook will make during an entire year by guessing what I want.
Search ads are 1-2 orders of magnitude more valuable than perfectly targeted display ads.
* The escort example was to only prove the point that wants are where the money in advertising is, not people or interactions.
Actually, the money comes from advertisers.
Eyeball-hours are a fixed-sum game at any point in time (the sum grows over time). Eyeball-hours spent on Facebook are eyeball-hours not spent elsewhere looking at Google searches, Google products or Google-mediated advertising.
* The Facebook Phone
* The Facebook Netbook
* Major user datamining product sales to global governments
* Acquiring binge (gaming, education (I think they will go for Khan Academy)
* video hosting
* Their own voip platform
Facebook still has a lot of room to innovate, not that they would necessarily be successful in each iteration. But I would say that the number one thing FB could do right now to have a major impact is to create an education platform.
If their nearly billion users can all take education throgh the platform that would be very game changing. Allow users to sign up for classes, watch them, participate on them and collaborate with other students directly through facebook - plus have their progress and status tracked and gamefied then we could see real growth.
As facebook could start absorbing every person on the planet that is newly born.
Seriously, if facebook didnt buy KhanAcademy and integrate it for this reason, then I would say they lack vision and are simply the worlds most bloated PHP website.
The Khan Academy in particular, though, is a non-profit. I don't even resemble an expert on the subject, but I think that would make acquisition difficult to (practically) impossible. And even if it were legally easy, Salman Khan's success and ambitions makes it extremely unlikely he would agree to it (eg move from CC to "sign in using your facebook ID?").
A partnership might fall in line with their mission, though.
http://allthingsd.com/20111121/the-facebook-phone-its-finall...
I'm cool with iPad apps, with iPhone apps and Android apps, but stopping using websites and just focus on Facebook apps seems to be a false step, maybe good for now, but not very envisioning. Unless...
...unless Facebook starts mutating towards an actual product. To be clear like the blackberry with the old blackberry chat, you'll buy one (of the many) Facebook things, like a Facebook pad, and you'll have your Facebook OS with all the Facebook apps running on it.
And I think this is the direction they are headed to... but still, they can't take down the house (the whole world), sooner or later something else will need to put some checks and balances.
They can't become infinitely rich, I don't think the market and the planet will allow it. They can be a little dominant, but not like emperor dominant.
Plus, it's still a website based on participation, if the people get bored or there is some wikileaks kinda breach (think of some crazy attempt to make public all the private messages and pictures on a mirror evil site), many many users could leave is a second... (although ultimately we are just going to be forced to redefine what we consider privacy, in general, not just in this unlikely case)
Chat and games are excluded, as Facebook was doing that before having a global network of users assembled.
http://en.wikipedia.org/wiki/Greater_fool_theory http://en.wikipedia.org/wiki/Keynesian_beauty_contest
August 2004:
Gold $405
Google $85/share (thought it was $100/share, huh)
Now:
Gold $1735
Google $576/share
1735/405 ~= 4.27
85*4.27 ~= 364
So no, Google's shares are not worth 5 times more. They value went up some 50% in six years, which is great but nothing scary.
August 2004:
Orange Juice Concentrate Futures $61
Google $85/share
Now:
Orange Juice Concentrate Futures $211
Google $576/share
211/61 ~= 3.45
85*4.27 ~= 293.25August 2004:
AAPL $16
Google $85/share (thought it was $100/share, huh)
Now:
AAPL $447
Google $576/share
447/16 ~= 27.94
85*27.94 ~= 2374.90
So no, Google's shares are not worth 5 times more. Their value went down a massive amount in six years.
Comparing one asset (share of GOOG) vs. another, namely, gold is silly when you contrast to assigning currency value.
Last I checked, food hasn't become 4x more expensive, so things still revolve around currency (or currencies), not the value of gold.
I know nothing of valuation, but by that logic the price of gold would never be worth more.. than.. the price of gold?
I thought you'd value the gain in the market currency, aka dollars. No?
http://online.wsj.com/article/SB1000142405297020457370457718...
Since they are going to go through most of the downside involved with an IPO anyways, they might as well get some cash too.
Plus, share/option holders (employees, investors, etc) are probably clamoring for liquidity. It's great if you own a hundred million dollars of FB stock on paper - but it's even better if you have the option to sell and diversify your holdings.
In other words, they NAT'ed the shares.
It could have advantages in hiring, where now, people can actually realize the value by selling their options/stock.
Sometimes it's not about the product, but the people. Maybe the current Apple board /really/ wants Zuck to run the show. Best way to do that is to buy FB.
I agree with you, though. Apple buying FB would be a not-so-small mistake.
Didn't the same happen when Google IPO'd?
Is anyone paying attention? Just because a company has a massive user base, big popularity, and lots of VCs, doesn't mean it has a great business model.
Sure,you can buy shares, watch them triple in the first 24 and dump them, but when the dust settles, what really happens?
Groupon is trading at $20.04. It IPO'd at $20. Zynga is trading at $10.05. It IPO'd at $10.
Good for the VC's, finally getting a return on their money and all, but it doesn't seem that the companies are really doing much to deserve the hype.
Facebook is presumably making money, and has a crap-load of user-data, but 100 Billion dollar valuation? Maybe based on what people are willing to pay for it, in the hype to get some of it's stock, but its revenues were 2.5 Billion last year. A valuation that's 50x their revenues seems a little steep to me - but again, that could just be me.
Insanity.
(Disclaimer, I have a vested interest in this stock going down.)
Or you could buy Facebook, with $2-3bn in revenue and a big database of users which they haven't really worked out how to monetise yet.
http://news.ycombinator.com/item?id=689993
http://news.ycombinator.com/item?id=1163144
Would still be happy to take $200 in Facebook stock instead. :)
http://www.bloomberg.com/news/2011-09-20/facebook-revenue-wi...
http://www.quora.com/How-long-does-it-take-between-a-company...
ZNGA: 6.5X sales
LNKD: 16.2X sales
P: 8.7X sales
S&P 500: 1.3X sales.
It appears that valuations are very high right now. The stocks are down from their peaks—-in other words, investors are not at a record level of optimism about these companies. But a fair assessment is that they've gone from "Wildly optimistic" to "Optimistic."
Google's Retargeting product drives insanely strong conversions for clients vs. their traditional adwords.
You're able to re-reach folks that, by arriving on your site in the first place, have categorized themselves as interested and, as a result, close at a much higher rate.
Google's recent move to consolidate privacy policies, and in effect, sets of customer data is going to provide massively better targeting capabilities.
As a result they'll be able to sell the exact same ad-space to advertisers and yet advertisers will see better results, thanks to better targeting.
In the "bid-for-space" model this will translate to higher ECPM to Goog, to site owners, etc.
Now, enter FB, coiner of the "Social graph" and consolidator of all the things and people.
They are doubtlessly working to build and improve their advertising products.
They are going to earmark a lot of that $100b to buy large advertising businesses, just like Goog bought AdMob etc, that they believe they can improve ECPMs on.
Is it speculative? Absolutely.
Does $100b already have a lot of this expected upside baked-in? No doubt.
But still, I have seen the future of online advertising and it be profitable.
He with the most customer data wins, and FB has that in abundance.
Does anyone know what normal IPO timelines are? My uneducated expectation is that shares begin trading something like 3-6 months after filing the prospectus.
http://www.streetinsider.com/IPOs/Entire+Social,+Online+Medi...
So I'm going to buy shares.
tweets - https://twitter.com/search?q=facebook+ipo
google results for past 24 hrs - https://www.google.com/search?q=facebook%20ipo&tbs=qdr:d
