http://www.fool.com/investing/general/2011/12/02/is-facebook-worth-100-billion.aspx
So can someone explain why facebook could be worth so much? Sure they point out the many user hours of captive audience but when end is there if that isn't leveraged? After all facebook ads - at least as they currently exist - are pretty low end.
QuoteIt seems clear that Facebook will file its initial public offering sometime early next year. In doing so, it's rumored the social media giant will seek $10 billion for 10% of the company, implying an overall valuation of $100 billion.
As an investor, I can't help but believe that Facebook's IPO will be a notable event. And investors will finally have the opportunity to participate financially in a social network that may, by the time of the offering, eclipse a billion people.
It nevertheless remains to be seen whether a promising yet relatively unprofitable company like Facebook warrants a higher market capitalization than tried-and-true corporate giants such as PepsiCo, McDonald's, and Amazon.com (Nasdaq: AMZN ) .
Putting things in perspective
It's easy to believe that Facebook's social ubiquity translates into monster sales figures. In 2010, for example, its closest online competitor, Google (Nasdaq: GOOG ) , recorded revenues of nearly $30 billion -- Amazon came in at $34 billion.
Can you guess what Facebook's 2010 revenues were? Try a measly $2 billion. Yep, according to sales alone, Facebook is less than half the size of Foot Locker. Heck, even Cracker Barrel Old Country Store had $400 million more in sales than Facebook did last year -- yes, I did just go there.
Thus, at $100 billion, Facebook would be trading for an astounding 50 times sales -- 23 times sales if the company meets this year's expectations. To give you some context, the latter figure is almost twice LinkedIn's (NYSE: LNKD ) multiple, three times Groupon's (Nasdaq: GRPN ) and Pandora's (NYSE: P ) multiples, four times Google's, and seven times Apple's (Nasdaq: AAPL ) . Not to mention, all of these companies, with the exception of Apple and maybe Google, are trading at multiples most investors view as pricy in their own right!
So where's the catch?
Quite simply, I don't think there is one.
On the surface, it's tempting to attribute Facebook's seemingly absurd $100 billion valuation to the company's purported "low float" IPO strategy. Under this approach, explained in a recent video by two Fools, a company restricts the amount of stock available at its IPO. This drives up the price of each share in the short term by reducing supply. The table below illustrates four tech companies that did this earlier in the year. As you can see, while the low float strategy increases value in the short term, it alone cannot sustain value over a longer time horizon, as evidenced by what's happened to these companies' share prices in the meantime.
Unlike these companies, however, I don't believe Facebook needs gimmicks to legitimize its valuation target. In other words, call me crazy, but I think Facebook may very well be worth $100 billion.
Follow my logic for just one second. According to The Wall Street Journal, Facebook will have $4.3 billion of worldwide revenue this year, more than double its 2010 revenues of $2 billion as I mentioned earlier. If it grows revenues by a comparatively measly 60% next year to $7 billion -- and realizes a 50% operating profit similar to Google's -- then it should take home somewhere in the range of $2.3 billion after tax. At $100 billion, that would equate to a price to earnings multiple of 44, well below that of a known-legitimate investment like Amazon, which comes in at 101.
This simple calculation, moreover, ignores the sheer magnitude of Facebook's online ubiquity. According to comScore, Facebook had 790 million unique visitors in October, each of whom spent an average of six hours on the social network. That equates to a cumulative 4.74 billion hours of captive audience in one month. By comparison, Google had 1.1 billion unique visitors, each of whom spent less than four hours on average on the site. LinkedIn, on the other hand, had 92 million unique visitors in October, each of whom spent an average of only 15 minutes on the site, equating to a total of only 23 million hours. Put in these terms, it makes sense that Facebook's valuation would be approaching Google's $186 billion market capitalization and well in excess of LinkedIn's $6.5 billion.
Should you buy in or not?
Getting overly excited about an IPO has left many an investor in dismay once the market's cooler minds prevail. For this reason, you'll want to see Facebook's financial statements, available perhaps as soon as this month, before deciding to jump on the proverbial bandwagon.
The fuck does the guy have against Cracker Barrel?
I'd like to know how they calculate the amount of time each user spends on the site; leaving a Facebook tab open all day while barely looking at it is not uncommon....
Quote from: Ideologue on December 02, 2011, 09:02:25 PM
The fuck does the guy have against Cracker Barrel?
John Maxfield only eats lobster.
Quote from: Capetan Mihali on December 02, 2011, 09:03:45 PM
I'd like to know how they calculate the amount of time each user spends on the site; leaving a Facebook tab open all day while barely looking at it is not uncommon....
you can track active use vs passive. ie refreshing, changing pages, etc. Still, no worth anywhere near 100 billion. did no one learn fromt he last net bust?
Not to me it isn't. :rolleyes:
Quote from: HVC on December 02, 2011, 10:52:23 PM
you can track active use vs passive. ie refreshing, changing pages, etc. Still, no worth anywhere near 100 billion. did no one learn fromt he last net bust?
I was thinking the same thing...a company valued at way over its revenues because of its mighty internetness? Haven't we heard this before? Besides how do we know something newer and better will not come along and Myspace Facebook?
I'd pay $100 billion to end Facebook, sure.
Quote from: Valmy on December 02, 2011, 10:57:58 PM
Quote from: HVC on December 02, 2011, 10:52:23 PM
you can track active use vs passive. ie refreshing, changing pages, etc. Still, no worth anywhere near 100 billion. did no one learn fromt he last net bust?
I was thinking the same thing...a company valued at way over its revenues because of its mighty internetness? Haven't we heard this before? Besides how do we know something newer and better will not come along and Myspace Facebook?
Did Myspace ever have the massively bloated user numbers and penetration in the zeitgeist that facebook does?
Google and Facebook have become concepts in themselves to similar extent as for instance for 50% of the net population Internet Explorer
is The Internet.
I'm curious, has anyone here actually clicked an internet ad to buy something, or been otherwise prompted by an internet ad to make a purchase?
Quote from: Admiral Yi on December 03, 2011, 03:28:41 PM
I'm curious, has anyone here actually clicked an internet ad to buy something, or been otherwise prompted by an internet ad to make a purchase?
I've won about a million IPhones. But buying? No.
Quote from: Admiral Yi on December 03, 2011, 03:28:41 PM
I'm curious, has anyone here actually clicked an internet ad to buy something, or been otherwise prompted by an internet ad to make a purchase?
Yeah, but not for something I wasn't already looking to buy. Last month I was searching for a topcoats and gave up looking for a bit. I found one I liked via an internet ad that suddenly appeared after I suppose google told them I was looking for one.
Topcoat? Are you an immigrant Fate? :hmm:
Unless there's some unknown rot at the core of Facebook, it's worth a whole lot of money yes. Is that amount $100 Billion? I don't know, I have no idea how to properly evaluate a company IPO so I'll have to pass on that. But at this point Facebook is, from my position of unprivileged information, a peer of Amazon and Google. If those companies' values are in the same ballpark as $100 Billion, then yeah, same goes for Facebook.
Facebook is the primary interface for "the internet" for many many people. It has huge reach. The company is in a good position to make a lot more money than it's doing now.
Quote from: Valmy on December 02, 2011, 10:57:58 PMI was thinking the same thing...a company valued at way over its revenues because of its mighty internetness? Haven't we heard this before? Besides how do we know something newer and better will not come along and Myspace Facebook?
You mean like google+?
I think Facebook is going to be hard to dislodge from the position it has in peoples' lives right now. Most users have huge amounts of their lives invested into Facebook at this point. Years worth of photos and contacts all easily accessible and shareable. It won't be easy to convince people to walk away from that.
Quote from: Jacob on December 03, 2011, 07:22:21 PM
Quote from: Valmy on December 02, 2011, 10:57:58 PMI was thinking the same thing...a company valued at way over its revenues because of its mighty internetness? Haven't we heard this before? Besides how do we know something newer and better will not come along and Myspace Facebook?
You mean like google+?
I think Facebook is going to be hard to dislodge from the position it has in peoples' lives right now. Most users have huge amounts of their lives invested into Facebook at this point. Years worth of photos and contacts all easily accessible and shareable. It won't be easy to convince people to walk away from that.
Not saying I disagree but I believe facebook implemented a feature that allows you to quickly download all your stuff.
Quote from: Admiral Yi on December 03, 2011, 03:28:41 PM
I'm curious, has anyone here actually clicked an internet ad to buy something, or been otherwise prompted by an internet ad to make a purchase?
An ad reminded me Futurama was on once.
And I think maybe one time an ad for Papa Johns might've convinced me to buy a pizza. Because that's hard.
Quote from: garbon on December 03, 2011, 07:29:42 PMNot saying I disagree but I believe facebook implemented a feature that allows you to quickly download all your stuff.
It's not really about your stuff, as much as it is about the connections between your stuff and everybody else's stuff. I mean, on Facebook I stay in touch with a number of friends who're far away - someone got a baby in Japan; someone went to a cool show, let's have a look at the pictures; oh, so and so from high school got married, what do they look like now; mom can look at the pictures we took of the dog whenever she wants to; look, my baby sister is partying it up at university - I remember those days, and when we meet I I have a better idea of what's going on in her life since I saw her last; shit, I need a new job - good thing I've kept in contact with a bunch of former colleagues - time to ask around if anyone's hiring; my buddy moved to town and is looking for shared accommodation - Facebook is a good first place to see if anyone has a room available; those guys we suspected were dog-thieves were caught, that's something we want to share with the friends we have in the dog adoption world; hey, we're going to organize a party, what's the easiest way to let people know?
It doesn't really matter that I can download all the assets that go with my profile, what matters is the connection to everybody else's lives. That's something that's grown over the years, and can't (at least not easily) be replaced quickly. So I think they're pretty well ensconced in peoples' lives.
... and Yi, I've bought a couple of things from internet advertisements. There are a handful of other products I bought through other channels after having been made aware of them through online ads. When the time comes for me to buy a car at some point, the advertising that will have had the most effect on me is probably from the internet since that's pretty much the only vector through which car ads reach me.
There's a definite barrier to be breached before someone buys stuff because of an internet ad. There's also a definite barrier to be breached before someone spends money on micro-transactions in a free-to-play game.
Eventually, however, the barrier gets breached for increasingly larger parts of the population. I mean, if you look back at how you felt about buying things on the internet at all, I expect you (like most people) resisted for however long, though now I expect it's an entirely unremarkable thing to do. Same thing with buying downloaded games.
Same thing with buying things through internet ads, I expect.
I bought a Liberator shape from a ad.
Go look it up.
And made in America too. :)
Quote from: Jacob on December 03, 2011, 07:20:17 PM
Unless there's some unknown rot at the core of Facebook, it's worth a whole lot of money yes. Is that amount $100 Billion? I don't know, I have no idea how to properly evaluate a company IPO so I'll have to pass on that. But at this point Facebook is, from my position of unprivileged information, a peer of Amazon and Google. If those companies' values are in the same ballpark as $100 Billion, then yeah, same goes for Facebook.
Facebook is the primary interface for "the internet" for many many people. It has huge reach. The company is in a good position to make a lot more money than it's doing now.
The difference is people send money to Amazon to get stuff. Companies send money to Google so they'll rig people's searches.
I sent money to Amazon just a few hours ago. Bought a toy for my niece.
Quote from: Ed Anger on December 03, 2011, 08:24:55 PM
I bought a Liberator shape from a ad.
Go look it up.
Did you get the model with the built in cuffs?
Quote from: Admiral Yi on December 03, 2011, 08:58:50 PM
The difference is people send money to Amazon to get stuff. Companies send money to Google so they'll rig people's searches.
In broad strokes, yes. What conclusion do you draw from this?
Quote from: Jacob on December 03, 2011, 09:47:35 PM
In broad strokes, yes. What conclusion do you draw from this?
That Amazon and Google have real stock valuations.
It seems like people keep forgetting that exponential growth can't last forever, and that in the Internet realm, yesterday's leader can become tomorrow's laggard in the blink of an eye.
Quote from: Admiral Yi on December 03, 2011, 09:51:21 PM
Quote from: Jacob on December 03, 2011, 09:47:35 PM
In broad strokes, yes. What conclusion do you draw from this?
That Amazon and Google have real stock valuations.
People send money to Facebook for advertising and to buy virtual goods.
Quote from: DGuller on December 03, 2011, 09:54:18 PM
It seems like people keep forgetting that exponential growth can't last forever, and that in the Internet realm, yesterday's leader can become tomorrow's laggard in the blink of an eye.
Yeah, it'll be interesting to see how Zynga goes. They're a lot more vulnerable than Facebook.
For Facebook, I think they're in a good position to make more money than they do now, but it's not a given. They'll need to make the right decisions.
Quote from: Jacob on December 03, 2011, 09:56:48 PM
People send money to Facebook for advertising and to buy virtual goods.
Not enough to justify the current valuation.
What kinds of virtual goods can you buy on Facebook?
Quote from: Jacob on December 03, 2011, 09:46:34 PM
Quote from: Ed Anger on December 03, 2011, 08:24:55 PM
I bought a Liberator shape from a ad.
Go look it up.
Did you get the model with the built in cuffs?
Blondes are evil
Quote from: Admiral Yi on December 03, 2011, 09:59:35 PM
Quote from: Jacob on December 03, 2011, 09:56:48 PM
People send money to Facebook for advertising and to buy virtual goods.
Not enough to justify the current valuation.
What kinds of virtual goods can you buy on Facebook?
Tanks, dresses, bat guano, land, magic potions; it depends on the game you're playing.
Quote from: Ideologue on December 02, 2011, 09:02:25 PM
The fuck does the guy have against Cracker Barrel?
They hate gays.
Quote from: Admiral Yi on December 03, 2011, 09:59:35 PM
Not enough to justify the current valuation.
Agreed. I'm very suspicious of multiples that crazy, as you know. There are way too many things to invest in with good multiples to be risking anything on these outrageous valuations.
Quote from: fahdiz on December 05, 2011, 01:03:36 PM
Quote from: Ideologue on December 02, 2011, 09:02:25 PM
The fuck does the guy have against Cracker Barrel?
They hate gays.
Really? That sucks.
But if I talked shit about every company I think does something morally abhorrent, I wouldn't be done before the sun swallowed this rotten planet; if I boycotted every company I think does something morally abhorrent, I'd probably be dead by next month.
Quote from: Ideologue on December 05, 2011, 01:44:18 PM
Really? That sucks.
But if I talked shit about every company I think does something morally abhorrent, I wouldn't be done before the sun swallowed this rotten planet; if I boycotted every company I think does something morally abhorrent, I'd probably be dead by next month.
Yeah. Probably the most pragmatic tack is to find fewer things morally abhorrent.
The most pragmatic tack would be to exchange money for their goods and services, but complain about them anyway.
Quote from: Ideologue on December 05, 2011, 02:25:24 PM
The most pragmatic tack would be to exchange money for their goods and services, but complain about them anyway.
No, complaint takes effort, even if it's minimal.
I think you minimize the effort required to change one's moral beliefs, Karma Chameleon.
Anyway, I applied for a job at a Cracker Barrel. I don't think it involves hitting homosexuals with truncheons. I'll ask if I get an interview.
Quote from: Ideologue on December 05, 2011, 05:12:06 PM
I think you minimize the effort required to change one's moral beliefs, Karma Chameleon.
Anyway, I applied for a job at a Cracker Barrel. I don't think it involves hitting homosexuals with truncheons. I'll ask if I get an interview.
Chick Fil A doesn't like the gays either. Plus you'll get sunday off.
Quote from: Ideologue on December 05, 2011, 05:12:06 PM
I think you minimize the effort required to change one's moral beliefs, Karma Chameleon.
Anyway, I applied for a job at a Cracker Barrel. I don't think it involves hitting homosexuals with truncheons. I'll ask if I get an interview.
I think the issue was that they had some discriminatory hiring policies. So as long as you don't appear to be gay you should be fine.
Quote from: fahdiz on December 05, 2011, 05:15:36 PM
Quote from: Ideologue on December 05, 2011, 05:12:06 PM
I think you minimize the effort required to change one's moral beliefs, Karma Chameleon.
Anyway, I applied for a job at a Cracker Barrel. I don't think it involves hitting homosexuals with truncheons. I'll ask if I get an interview.
I think the issue was that they had some discriminatory hiring policies. So as long as you don't appear to be gay you should be fine.
Do I appear gay?
Quote from: garbon on December 05, 2011, 05:17:32 PM
Quote from: fahdiz on December 05, 2011, 05:15:36 PM
Quote from: Ideologue on December 05, 2011, 05:12:06 PM
I think you minimize the effort required to change one's moral beliefs, Karma Chameleon.
Anyway, I applied for a job at a Cracker Barrel. I don't think it involves hitting homosexuals with truncheons. I'll ask if I get an interview.
I think the issue was that they had some discriminatory hiring policies. So as long as you don't appear to be gay you should be fine.
Do I appear gay?
You appear fabulous.
Quote from: fahdiz on December 05, 2011, 05:15:36 PM
Quote from: Ideologue on December 05, 2011, 05:12:06 PM
I think you minimize the effort required to change one's moral beliefs, Karma Chameleon.
Anyway, I applied for a job at a Cracker Barrel. I don't think it involves hitting homosexuals with truncheons. I'll ask if I get an interview.
I think the issue was that they had some discriminatory hiring policies. So as long as you don't appear to be gay you should be fine.
I'm a thin, attractive man in his late twenties who smokes. That's as straight as straight can look, right?
QuoteSWOON
Gross. At least at Cracker Barrel I could eat my weight in French toast. Chick-Fil-A? OH WOW WAFFLE FRIES
Even when I ate meat, I avoided that place like the plague, except when Korea wanted to eat garbage.
Quote from: garbon on December 05, 2011, 05:17:32 PM
Do I appear gay?
No clue. But I'm not Cracker Barrel; they obviously are on the lookout whereas I'm not.
Quote from: Ideologue on December 05, 2011, 05:19:38 PM
Gross. At least at Cracker Barrel I could eat my weight in French toast.
What's hilarious is the irony here. :D
When I take over the world, Ide is first against the wall.
Damn chicken sandwich haters.
Quote from: Ed Anger on December 05, 2011, 05:23:08 PM
When I take over the world, Ide is first against the wall.
Damn chicken sandwich haters.
You're dictatorship needs an Ironic punishments division. Force feed Ide meat till he dies.
Quote from: Ed Anger on December 05, 2011, 05:23:08 PM
When I take over the world, Ide is first against the wall.
Damn chicken sandwich haters.
I really liked Hardee's spicy chicken sandwich. It was a dollar, compared to like three for a Chick-Fil-A sandwich. I used to eat four or five at a time.
My ire is reserved for Chick-Fil-A specifically.
Quote from: Razgovory on December 05, 2011, 05:24:38 PM
Quote from: Ed Anger on December 05, 2011, 05:23:08 PM
When I take over the world, Ide is first against the wall.
Damn chicken sandwich haters.
You're dictatorship needs an Ironic punishments division. Force feed Ide meat till he dies.
Hmmm. My adviser and dog robber Raz gave me an idea.
No sweets for Ide when I'm God Emperor.
Quote from: Razgovory on December 05, 2011, 05:24:38 PM
Quote from: Ed Anger on December 05, 2011, 05:23:08 PM
When I take over the world, Ide is first against the wall.
Damn chicken sandwich haters.
You're dictatorship needs an Ironic punishments division. Force feed Ide meat till he dies.
Eddie: Well sure it was a war. And anybody that showed up was gonna join Lem Lee in the Hell of Being Cut to Pieces.
Jack Burton: Hell of being what?
Eddie: Chinese have a lot of Hells.
We only need about two dozen Facebooks to solve the European sovereign debt crisis. :)
Quote from: Ed Anger on December 05, 2011, 05:26:30 PM
Quote from: Razgovory on December 05, 2011, 05:24:38 PM
Quote from: Ed Anger on December 05, 2011, 05:23:08 PM
When I take over the world, Ide is first against the wall.
Damn chicken sandwich haters.
You're dictatorship needs an Ironic punishments division. Force feed Ide meat till he dies.
Hmmm. My adviser and dog robber Raz gave me an idea.
No sweets for Ide when I'm God Emperor.
I repent. :(
Quote from: Ideologue on December 05, 2011, 05:28:46 PM
Quote from: Ed Anger on December 05, 2011, 05:26:30 PM
Quote from: Razgovory on December 05, 2011, 05:24:38 PM
Quote from: Ed Anger on December 05, 2011, 05:23:08 PM
When I take over the world, Ide is first against the wall.
Damn chicken sandwich haters.
You're dictatorship needs an Ironic punishments division. Force feed Ide meat till he dies.
Hmmm. My adviser and dog robber Raz gave me an idea.
No sweets for Ide when I'm God Emperor.
I repent. :(
Kicked him right in the Reese's :(
Quote from: Ideologue on December 05, 2011, 05:28:46 PM
Quote from: Ed Anger on December 05, 2011, 05:26:30 PM
Quote from: Razgovory on December 05, 2011, 05:24:38 PM
Quote from: Ed Anger on December 05, 2011, 05:23:08 PM
When I take over the world, Ide is first against the wall.
Damn chicken sandwich haters.
You're dictatorship needs an Ironic punishments division. Force feed Ide meat till he dies.
Hmmm. My adviser and dog robber Raz gave me an idea.
No sweets for Ide when I'm God Emperor.
I repent. :(
To fully recant, you must eat this in front of a starving family:
http://www.dailymail.co.uk/news/article-2070246/Wealthy-businessman-buys-worlds-expensive-dessert-cheer-dumped.html
Quote from: Ed Anger on December 05, 2011, 05:18:55 PM
Quote from: garbon on December 05, 2011, 05:17:32 PM
Quote from: fahdiz on December 05, 2011, 05:15:36 PM
Quote from: Ideologue on December 05, 2011, 05:12:06 PM
I think you minimize the effort required to change one's moral beliefs, Karma Chameleon.
Anyway, I applied for a job at a Cracker Barrel. I don't think it involves hitting homosexuals with truncheons. I'll ask if I get an interview.
I think the issue was that they had some discriminatory hiring policies. So as long as you don't appear to be gay you should be fine.
Do I appear gay?
You appear fabulous.
I'm not sure why but for a hot second, I thought this comment was by Raz. :Embarrass:
Quote from: garbon on December 05, 2011, 06:10:12 PMI'm not sure why but for a hot second, I thought this comment was by Raz. :Embarrass:
That was hot? :huh:
It means like for a New York second, i.e. not long.
Quote from: Jacob on December 05, 2011, 06:23:43 PM
Quote from: garbon on December 05, 2011, 06:10:12 PMI'm not sure why but for a hot second, I thought this comment was by Raz. :Embarrass:
That was hot? :huh:
:lol:
What Yi said. :)
Quote from: Ed Anger on December 05, 2011, 05:34:08 PM
To fully recant, you must eat this in front of a starving family:
http://www.dailymail.co.uk/news/article-2070246/Wealthy-businessman-buys-worlds-expensive-dessert-cheer-dumped.html
Isn't gold poisonous? Saw that on an episode of House once. :unsure:
Quote from: Peter Wiggin on December 05, 2011, 09:57:40 PM
Isn't gold poisonous? Saw that on an episode of House once. :unsure:
It's not very reactive at all, so no, it is generally not toxic.
Quote from: Peter Wiggin on December 05, 2011, 09:57:40 PM
Quote from: Ed Anger on December 05, 2011, 05:34:08 PM
To fully recant, you must eat this in front of a starving family:
http://www.dailymail.co.uk/news/article-2070246/Wealthy-businessman-buys-worlds-expensive-dessert-cheer-dumped.html
Isn't gold poisonous? Saw that on an episode of House once. :unsure:
http://en.wikipedia.org/wiki/Goldschl%C3%A4ger
Also...
http://www.luxist.com/2007/11/08/serendipity-3-creates-the-worlds-most-expensive-dessert/
Quote from: Peter Wiggin on December 05, 2011, 09:57:40 PM
Quote from: Ed Anger on December 05, 2011, 05:34:08 PM
To fully recant, you must eat this in front of a starving family:
http://www.dailymail.co.uk/news/article-2070246/Wealthy-businessman-buys-worlds-expensive-dessert-cheer-dumped.html
Isn't gold poisonous? Saw that on an episode of House once. :unsure:
some gold alloys are. Pure gold just goes right through ya.
Actually, i guess if you ate/drank a gold solution, rather then solid gold, it would collect just like any other heavy metal in your organs.
Or if the gold were stuck in your body tissue for a long time rather than moving through your digestive tract. Or injected in the blood stream, maybe.
Quote from: HVC on December 06, 2011, 12:24:06 PM
Actually, i guess if you ate/drank a gold solution, rather then solid gold, it would collect just like any other heavy metal in your organs.
Other substances, like arsenic or mercury, react with various chemicals in the blood, which is how they can accumulate. Gold, being non-reactive, would not.
It isn't worth $100 billion; otherwise my now dormant/deactivated account and the shell/dummy one I use just for maintaining a politics page would be 'worth' about $650 to investors. :hmm:
Quote from: Peter Wiggin on December 05, 2011, 09:57:40 PM
Quote from: Ed Anger on December 05, 2011, 05:34:08 PM
To fully recant, you must eat this in front of a starving family:
http://www.dailymail.co.uk/news/article-2070246/Wealthy-businessman-buys-worlds-expensive-dessert-cheer-dumped.html
Isn't gold poisonous? Saw that on an episode of House once. :unsure:
That's what killed all those Jews: gold fillings. :yes:
Continuing this topic...
http://news.yahoo.com/inside-facebooks-ipo-social-reshape-economy-101000715.html
QuoteFacebook's initial public offering later this spring will create a billion-dollar windfall for its founders and early investors, so it's easy to be cynical and view the IPO as another example of insiders cashing in on the latest web phenomenon. But the significance -- and symbolism -- of Facebook's IPO goes much deeper. Facebook's astonishing rise is an apt metaphor for the emergence over the last two decades of the Internet itself as a tool for individual self-expression and collective organization. It's also a dramatic example of a generational shift taking place among the entrepreneurial class, one that elevates social change as a priority along with commercial success. Perhaps most importantly, Facebook's success is a powerful argument to the transformational impact that a free, open Internet can have on society and commerce.
Facebook's IPO -- the largest in Internet history -- is a once-in-a-generation milestone in the evolution of the web. It represents a coming-of-age moment for the second major phase in the development of the Internet as a widespread platform: the rise of the social web. In the initial phase, large portals such as America Online and Yahoo established the web as a repository for vast amounts of information. It wasn't until Google indexed the web with its search engine that this phase reached maturity, allowing users to quickly find information across the Internet, beyond the borders of these centralized communities. But even as Google democratized the web by enabling ordinary people to exercise their voices and become accessible to the broader online world, the Internet remained a largely individualized experience. (More: Read Facebook CEO Mark Zuckerberg's IPO Letter)
The emergence of social networks like Friendster, MySpace and Facebook gave rise to the second major phase of the web by establishing it as a platform for social interaction. For the first time, these social networks allowed users to establish personal identities on highly-scaled platforms in order to connect and share with others. These services delighted and empowered users by making them feel ownership of their own pieces of digital real-estate, which they could use as personal calling cards to project themselves into cyberspace. Thanks to savvy marketing and engaging design, Facebook caught on like wildfire, first among college students, and later among the public at large. As it grew, Facebook leveraged the network effect of millions of people connected to each other to create an unstoppable momentum that vanquished its social networking foes.
Facebook's ascendance demonstrates the power of the Internet as a force for social connection and, over the last few years, for social and political change. This new power has three main features: it's democratic, because everyone in the free world has access to the same internet; it's meritocratic, because success on this platform is a function of the power of one's ideas, not traditional categories of wealth or class; and it's viral, because the web enables good ideas to spread at light-speed and reach millions. The democratic, meritocratic, and viral nature of the web has shaken existing power structures worldwide, so it's not surprising that repressive regimes have responded by trying to crack down on web activity in order to clamp down on dissent. This push-and-pull between old-world, legacy power structures and upstart digital communities will continue for some time, but if you believe the digital idealists -- and Zuckerberg clearly is one -- history is on their side. (More: Mark Zuckerberg: TIME Person of the Year 2010)
It's no coincidence that Facebook's recent rise as a cultural phenomenon has mirrored the Internet's emergence as a powerful social and political tool. Reformers in Tunisia and Egypt used Facebook to organize unprecedented protests against dictators who had held power for decades. Activists in the United States used social networks to launch the Occupy Wall Street movement, which has focused national attention on income inequality and made it a central issue in the 2012 presidential election. Most recently, a viral, web-based campaign against anti-piracy legislation in the U.S. Congress helped convince dozens of lawmakers to withdraw their support. The Internet is emerging as a potent socio-political force in its own right -- and social networks like Facebook and Twitter are the glue that holds this force together.
Facebook's commercial success, meanwhile, demonstrates the potency of the Internet as a platform for building wildly successful businesses from the ground up, as well as a vehicle for established businesses to engage with existing customers and reach new ones. Facebook's IPO prospectus contains several stunning figures that illustrate the immense reach of the service, and the potential for businesses to engage with users. The company now has 845 million monthly active users -- or nearly half of the estimated 2 billion Internet users worldwide -- and 483 million of them log in every day. The remarkable thing is that Facebook is just scratching the surface of its commercial possibilities. But Zuckerberg has made it clear that the singular pursuit of profit is not what's driving him. "We don't build services to make money," he writes in Facebook's IPO letter, "we make money to build better services." Facebook's service, in turn, is designed to further what he describes as a "social mission" -- "to make the world more open and connected." (More: Is Facebook Really Worth $100 Billion?)
Facebook has been criticized for encroaching on the boundaries of individual privacy, and the company's increasing ubiquity will require vigilance by civil liberty watchdogs and, if necessary, the federal government. But Zuckerberg has been nothing if not consistent: He deeply believes that making the Internet more social will, in turn, make society more democratic. "People sharing more -- even if just with their close friends or families -- creates a more open culture and leads to a better understanding of the lives and perspectives of others," Zuckerberg writes. In this respect, Zuckerberg is clearly an idealist of the first order, and he's not alone. Increasingly, young entrepreneurs, particularly in technology, are looking to create businesses that contribute to the public good as well as make money. And it's not just entrepreneurs who feel this way, but also consumers. "These days I think more and more people want to use services from companies that believe in something beyond simply maximizing profits," he says.
Finally, Facebook's triumph is an important reminder of the importance of a free, open Internet. When Zuckerberg launched the service as a Harvard sophomore in 2004, it's unlikely he imagined that eight years later he would be leading a company poised to go public with over 800 million users and a $100 billion valuation. Such an outcome would never have been possible if the web were not the open, fertile environment for innovation that we've all come to take for granted. In less than two decades, the Internet has established itself as one of the most transformative economic and social platforms in history. It has created the spawning ground for new, disruptive companies that have created billions of dollars in wealth and economic activity, and changed the way we live forever. And as the web becomes more social, platforms like Facebook and Twitter will have greater impact on politics around the world. Facebook's IPO is one of the most important business stories of the year, but the company's success should also serve as a powerful reminder of why it's crucial to maintain the Internet as a free, open platform. If we, as a society, can do that, there's no telling where the next Mark Zuckerberg may appear.
1) This description of facebook seems rather grandiose.
2) How long does facebook get to continue to say that it is just scratching the surface of its commercial possibilities? If those "possibilities" are never acted upon, how does one know if they were ever truly viable?
On the drive in today I heard on NPR that in order to justify its current valuation Facebook would have to capture 1/4 of the ad revenue of *all* types in the whole world. That's not just internet advertising, that's everything.
Forbes (blog?) against - http://www.forbes.com/sites/toddganos/2012/02/01/is-facebook-really-worth-100-billion/
Times article in support - http://moneyland.time.com/2011/12/06/is-facebook-really-worth-100-billion/
What I don't understand is that didn't we already do the whole internet bust thing? I guess investors are so excited about making money that they'll chase after phantoms to make quick short term gains? -_-
Quote from: Admiral Yi on February 02, 2012, 10:43:57 AM
On the drive in today I heard on NPR that in order to justify its current valuation Facebook would have to capture 1/4 of the ad revenue of *all* types in the whole world. That's not just internet advertising, that's everything.
That's inside the box thinking. Why limit the advertising just to this world?
Quote from: garbon on February 02, 2012, 10:40:09 AM
1) This description of facebook seems rather grandiose.
2) How long does facebook get to continue to say that it is just scratching the surface of its commercial possibilities? If those "possibilities" are never acted upon, how does one know if they were ever truly viable?
Even if it just scratches the surface as it's doing now it'll make tons of cash. IIRC when I was watching Bloomberg this morning they said they cleared a cool billion in revenue last year.
Quote from: jimmy olsen on February 02, 2012, 11:00:03 AM
Quote from: garbon on February 02, 2012, 10:40:09 AM
1) This description of facebook seems rather grandiose.
2) How long does facebook get to continue to say that it is just scratching the surface of its commercial possibilities? If those "possibilities" are never acted upon, how does one know if they were ever truly viable?
Even if it just scratches the surface as it's doing now it'll make tons of cash. IIRC when I was watching Bloomberg this morning they said they cleared a cool billion in revenue last year.
Yeah Facebook isn't some late 90s dotcom scam - they are bringing in a ton of money and I think they are profitable already.
The question is simply whether the valuation is anywhere near reasonable.
Quote from: Barrister on February 02, 2012, 11:41:47 AM
Quote from: jimmy olsen on February 02, 2012, 11:00:03 AM
Quote from: garbon on February 02, 2012, 10:40:09 AM
1) This description of facebook seems rather grandiose.
2) How long does facebook get to continue to say that it is just scratching the surface of its commercial possibilities? If those "possibilities" are never acted upon, how does one know if they were ever truly viable?
Even if it just scratches the surface as it's doing now it'll make tons of cash. IIRC when I was watching Bloomberg this morning they said they cleared a cool billion in revenue last year.
Yeah Facebook isn't some late 90s dotcom scam - they are bringing in a ton of money and I think they are profitable already.
The question is simply whether the valuation is anywhere near reasonable.
I don't really see how that's very different then. In both cases you had a company that was way overvalued.
Quote from: garbon on February 02, 2012, 11:57:53 AM
I don't really see how that's very different then. In both cases you had a company that was way overvalued.
The difference is that Facebook is worth *something.*
Quote from: garbon on February 02, 2012, 11:57:53 AM
Quote from: Barrister on February 02, 2012, 11:41:47 AM
Quote from: jimmy olsen on February 02, 2012, 11:00:03 AM
Quote from: garbon on February 02, 2012, 10:40:09 AM
1) This description of facebook seems rather grandiose.
2) How long does facebook get to continue to say that it is just scratching the surface of its commercial possibilities? If those "possibilities" are never acted upon, how does one know if they were ever truly viable?
Even if it just scratches the surface as it's doing now it'll make tons of cash. IIRC when I was watching Bloomberg this morning they said they cleared a cool billion in revenue last year.
Yeah Facebook isn't some late 90s dotcom scam - they are bringing in a ton of money and I think they are profitable already.
The question is simply whether the valuation is anywhere near reasonable.
I don't really see how that's very different then. In both cases you had a company that was way overvalued.
because the dotcom bubble companies never actually had any success.
Quote from: garbon on February 02, 2012, 11:57:53 AM
Quote from: Barrister on February 02, 2012, 11:41:47 AM
Quote from: jimmy olsen on February 02, 2012, 11:00:03 AM
Quote from: garbon on February 02, 2012, 10:40:09 AM
1) This description of facebook seems rather grandiose.
2) How long does facebook get to continue to say that it is just scratching the surface of its commercial possibilities? If those "possibilities" are never acted upon, how does one know if they were ever truly viable?
Even if it just scratches the surface as it's doing now it'll make tons of cash. IIRC when I was watching Bloomberg this morning they said they cleared a cool billion in revenue last year.
Yeah Facebook isn't some late 90s dotcom scam - they are bringing in a ton of money and I think they are profitable already.
The question is simply whether the valuation is anywhere near reasonable.
I don't really see how that's very different then. In both cases you had a company that was way overvalued.
The dotcom bubble had people investing in companies that had no present income, or no business plan. They were companies that nobody should ever have invested in. I was reading up on pets.com the other day - the company was loosing money on every bag of cat or dog food they shipped, they sold pet food for one third the price they bought it for! After they came out with their ad campaign business increased - and they were losing even more money as a result. They went from IPO to liquidation in under a year.
Facebook apparently is already fabulously profitable. It's a question of valuation, not a question of having no route to profitability.
Quote from: Admiral Yi on February 02, 2012, 11:59:43 AM
Quote from: garbon on February 02, 2012, 11:57:53 AM
I don't really see how that's very different then. In both cases you had a company that was way overvalued.
The difference is that Facebook is worth *something.*
That is an excellent and succinct way to put it. -_-
Quote from: Barrister on February 02, 2012, 12:07:01 PM
Quote from: Admiral Yi on February 02, 2012, 11:59:43 AM
Quote from: garbon on February 02, 2012, 11:57:53 AM
I don't really see how that's very different then. In both cases you had a company that was way overvalued.
The difference is that Facebook is worth *something.*
That is an excellent and succinct way to put it. -_-
But it seems to me just that goalpost/stakes are at higher valuations. Let's say dotcom company valued at 100 million but was really worth 0. Then you have facebook which might really be worth 5-10 billion valued at 100 billion (or even if we want to be generous 33 billion). Either way aren't you looking at a) a big discrepancy between actual value and the "valuation" and b) in this case even a bigger cash loss potential?
Unless that return on the 1 billion in yearly revenue justifies pumping in 100 billion worth of investments...
Quote from: garbon on February 02, 2012, 12:32:03 PM
Quote from: Barrister on February 02, 2012, 12:07:01 PM
Quote from: Admiral Yi on February 02, 2012, 11:59:43 AM
Quote from: garbon on February 02, 2012, 11:57:53 AM
I don't really see how that's very different then. In both cases you had a company that was way overvalued.
The difference is that Facebook is worth *something.*
That is an excellent and succinct way to put it. -_-
But it seems to me just that goalpost/stakes are at higher valuations. Let's say dotcom company valued at 100 million but was really worth 0. Then you have facebook which might really be worth 5-10 billion valued at 100 billion (or even if we want to be generous 33 billion). Either way aren't you looking at a) a big discrepancy between actual value and the "valuation" and b) in this case even a bigger cash loss potential?
Unless that return on the 1 billion in yearly revenue justifies pumping in 100 billion worth of investments...
Valuations are all about setting the proper multiple. Most commonly price / earnings, but others exist.
When a company is literally worth nothing though, no multiple no matter how high will make it worth something. A million times zero is still zero.
Quote from: garbon on February 02, 2012, 12:32:03 PM
But it seems to me just that goalpost/stakes are at higher valuations. Let's say dotcom company valued at 100 million but was really worth 0. Then you have facebook which might really be worth 5-10 billion valued at 100 billion (or even if we want to be generous 33 billion). Either way aren't you looking at a) a big discrepancy between actual value and the "valuation" and b) in this case even a bigger cash loss potential?
Unless that return on the 1 billion in yearly revenue justifies pumping in 100 billion worth of investments...
Facebook would be hugely overvalued at $100bn if its revenues were $1bn.
But as they are $3.7bn with profits of $1.7bn before tax the point doesn't arise.
Quote from: Gups on February 02, 2012, 01:30:21 PM
Quote from: garbon on February 02, 2012, 12:32:03 PM
But it seems to me just that goalpost/stakes are at higher valuations. Let's say dotcom company valued at 100 million but was really worth 0. Then you have facebook which might really be worth 5-10 billion valued at 100 billion (or even if we want to be generous 33 billion). Either way aren't you looking at a) a big discrepancy between actual value and the "valuation" and b) in this case even a bigger cash loss potential?
Unless that return on the 1 billion in yearly revenue justifies pumping in 100 billion worth of investments...
Facebook would be hugely overvalued at $100bn if its revenues were $1bn.
But as they are $3.7bn with profits of $1.7bn before tax the point doesn't arise.
So that change of 3 billion then makes it? I've no idea that's why I'm asking.
It's a P/E of about 28/1 which is high but not outrageously so for a company which has shown rapid revenue and profit growth and shows every sign of being able to continue its expansion.
If it were a mature company, like Shell it would be too high.
Correct me if I'm wrong Gups, but I don't think P/Es look at total revenue.
Quote from: Admiral Yi on February 02, 2012, 01:42:44 PM
Correct me if I'm wrong Gups, but I don't think P/Es look at total revenue.
P/E, no. Price / earnings looks at profit.
If working with valuation expert accountants has taught me anything, it's that when you ask them "How much this thing is worth?", in 9 cases out of 10, their response is "And how much would you like it to be worth?"
GAAP can be stretched enough to arrive at virtually any result.
Quote from: Gups on February 02, 2012, 01:30:21 PM
Quote from: garbon on February 02, 2012, 12:32:03 PM
But it seems to me just that goalpost/stakes are at higher valuations. Let's say dotcom company valued at 100 million but was really worth 0. Then you have facebook which might really be worth 5-10 billion valued at 100 billion (or even if we want to be generous 33 billion). Either way aren't you looking at a) a big discrepancy between actual value and the "valuation" and b) in this case even a bigger cash loss potential?
Unless that return on the 1 billion in yearly revenue justifies pumping in 100 billion worth of investments...
Facebook would be hugely overvalued at $100bn if its revenues were $1bn.
But as they are $3.7bn with profits of $1.7bn before tax the point doesn't arise.
That's still in the area of 30xEBITDA, which is pretty insane.
Indeed, P/E's is market cap divided by profit. So more like 59 than 28. Which seem stupidly high for any company, though less so if profits are expected to grow very quickly.
Quote from: Gups on February 02, 2012, 01:37:34 PM
It's a P/E of about 28/1 which is high but not outrageously so for a company which has shown rapid revenue and profit growth and shows every sign of being able to continue its expansion.
If it were a mature company, like Shell it would be too high.
I think it's quite outrageous, to be honest. 15 x EBITDA is considered optimistic but acceptable. That's twice that amount.
Quote from: Martinus on February 02, 2012, 01:50:03 PM
Quote from: Gups on February 02, 2012, 01:30:21 PM
Quote from: garbon on February 02, 2012, 12:32:03 PM
But it seems to me just that goalpost/stakes are at higher valuations. Let's say dotcom company valued at 100 million but was really worth 0. Then you have facebook which might really be worth 5-10 billion valued at 100 billion (or even if we want to be generous 33 billion). Either way aren't you looking at a) a big discrepancy between actual value and the "valuation" and b) in this case even a bigger cash loss potential?
Unless that return on the 1 billion in yearly revenue justifies pumping in 100 billion worth of investments...
Facebook would be hugely overvalued at $100bn if its revenues were $1bn.
But as they are $3.7bn with profits of $1.7bn before tax the point doesn't arise.
That's still in the area of 30xEBITDA, which is pretty insane.
I thought EBITDA had gone out of fashion these days.
My private equity clients still use it.
Quote from: Martinus on February 02, 2012, 01:59:38 PM
My private equity clients still use it.
Not challenging you on it or anything, but I tend to associate EBITDA with the whole late 90s dotcom bubble - a rather misleading metric people have moved away from.
No.
My 'evidence' this stolen from another forum:
Quote
The writing is on the wall... #
Andrew Moore said on Thursday 2nd February 2012 15:25 GMT
My 10 year old daughter described someone yesterday as being 'so lame, she has a Facebook page'.
Zuck better sell those shares of his sooner rather than later...
Nice! #
5.antiago said on Thursday 2nd February 2012 15:30 GMT
Haha! Really? That's funny
It's not that I'm *massively* anti-FB, just that it seems so obvious that websites like this will simply go out of fashion. Being cool builds the crowds, the crowds make it mainstream, mainstream makes it uncool.
Just so long as we don't have to bail out any investment banks that buy FB shares
Same here #
Uncle Slacky said on Thursday 2nd February 2012 16:10 GMT
My younger daughter (13) hasn't bothered to join - she texts her immediate friends anyway, and she corresponds with the more remote ones by email. Elder daughter is on FB but has been keener on G+ on late. Her presence on both is mainly in order to plug her own self-built website & merchandise, however.
EddieD said on Thursday 2nd February 2012 16:42 GMT
Similar here - my 13 and 18 year old nieces have practically abandonded Facebook in favour of BBM - which might explain the Q4 surge in blackberry shipments in the UK
While we're talking about accounting, whatever happened to Alfred Russell? :hmm:
There is no question that the value of FB is not driven by current revenue or earnings, but by their potential. So talking about current EBITDA or P/E doesn't really make much sense. Those are valuation metrics for traditional companies that expect traditional growth models over the short to mid term.
If FB is worth anything "special", they are worth, well, a lot. They have a truly unique position, not just in their market, but in human commercial history. What is the value of a company that has as its customer base 1/5th of the population of the planet, with every expectation that that fraction will grow over time?
Should we value them based on the possibility that in another ten years they could have half the population of the planet as their customer base? What would that be worth?
What ways of leveraging that penetration are going to come about that haven't even been thought up yet?
FB is "worth" $100 billion because the possibility that it is a truly "special" company that *might* be able to leverage their penetration to truly astounding profitability. Even if they fail to do so, the return if they do makes it a compelling investment.
I would quibble with describing 1/5 of the world as their "customer" base. Customer usually means someone who pays. They have a lot of users who don't directly contribute any revenue.
Quote from: Admiral Yi on February 02, 2012, 02:09:19 PM
I would quibble with describing 1/5 of the world as their "customer" base. Customer usually means someone who pays. They have a lot of users who don't directly contribute any revenue.
Certainly a fair point, but it just illustrates why it is so hard to really evaluate their worth. Sure, am *I* a customer? I've never once clicked on an ad, on the other hand, I am a reason why those who do pay them are willing to do so.
The problem is that there really isn't a way to define what I am to them - clearly I am something, and something special to them that nobody else has (Google is the only thing that comes close, and it isn't that close).
We can agree that they have a user base that is 1/5th of the world population though - and that is certainly something special. How special? Dunno, really.
I think they are worth it because I don't even think we've figured out the ways in which you can extract revenue from a user base like that. Hell, 5 years ago nobody thought that Farmville/Thisville/Thatville would be a means of making millions of dollars, right?
If I owned Facepalm stock I would be screaming at Zuckerberg to charge companies that maintain a presence on the site.
How ironic that a jude is not interested in profit.
Facebook users aren't their customers. They've merely created a market for others to advertise their wares to. Simlarly with Google. Both are more like owners of a shopping mall or a stock bourse than an actual retailer.
Amazon OTOH would be classified as a retailer (or more accurely internet mail-order company).
Quote from: Berkut on February 02, 2012, 02:06:25 PM
There is no question that the value of FB is not driven by current revenue or earnings, but by their potential. So talking about current EBITDA or P/E doesn't really make much sense. Those are valuation metrics for traditional companies that expect traditional growth models over the short to mid term.
If FB is worth anything "special", they are worth, well, a lot. They have a truly unique position, not just in their market, but in human commercial history. What is the value of a company that has as its customer base 1/5th of the population of the planet, with every expectation that that fraction will grow over time?
Should we value them based on the possibility that in another ten years they could have half the population of the planet as their customer base? What would that be worth?
What ways of leveraging that penetration are going to come about that haven't even been thought up yet?
FB is "worth" $100 billion because the possibility that it is a truly "special" company that *might* be able to leverage their penetration to truly astounding profitability. Even if they fail to do so, the return if they do makes it a compelling investment.
:hmm: How much FB stock do you own, Berk?
Quote from: Ideologue on December 02, 2011, 09:02:25 PM
The fuck does the guy have against Cracker Barrel?
That's what the fuck I wanna know.
Quote from: Ideologue on December 05, 2011, 05:19:38 PM
I'm a thin, attractive man in his late twenties who smokes. That's as straight as straight can look, right?
:lol:
Fuck Facebook. In the face. You need to find me, I'm in the phone book.
Quote from: Berkut on February 02, 2012, 02:15:36 PM
I think they are worth it because I don't even think we've figured out the ways in which you can extract revenue from a user base like that. Hell, 5 years ago nobody thought that Farmville/Thisville/Thatville would be a means of making millions of dollars, right?
I guess I'm just wondering how long we are going to sit around thinking about ways to "extract revenue from a user base like that". Seems like facebook has had a colossal user base for a while now but I haven't seen much concrete on who that user base will actually be used. And then of course the potential attrition of users depending on usage...
Quote from: garbon on February 02, 2012, 03:32:29 PM
Quote from: Berkut on February 02, 2012, 02:15:36 PM
I think they are worth it because I don't even think we've figured out the ways in which you can extract revenue from a user base like that. Hell, 5 years ago nobody thought that Farmville/Thisville/Thatville would be a means of making millions of dollars, right?
I guess I'm just wondering how long we are going to sit around thinking about ways to "extract revenue from a user base like that". Seems like facebook has had a colossal user base for a while now but I haven't seen much concrete on who that user base will actually be used. And then of course the potential attrition of users depending on usage...
They're not thinking about ways to extract revenue. There revenue was three billion dollars last year. Theyr'e already extracting bucketfulls of revenue.
Quote from: Barrister on February 02, 2012, 03:43:58 PM
Quote from: garbon on February 02, 2012, 03:32:29 PM
Quote from: Berkut on February 02, 2012, 02:15:36 PM
I think they are worth it because I don't even think we've figured out the ways in which you can extract revenue from a user base like that. Hell, 5 years ago nobody thought that Farmville/Thisville/Thatville would be a means of making millions of dollars, right?
I guess I'm just wondering how long we are going to sit around thinking about ways to "extract revenue from a user base like that". Seems like facebook has had a colossal user base for a while now but I haven't seen much concrete on who that user base will actually be used. And then of course the potential attrition of users depending on usage...
They're not thinking about ways to extract revenue. There revenue was three billion dollars last year. Theyr'e already extracting bucketfulls of revenue.
My article was about how they have only scratched the surface and it has already been expressed here that the valuation of $100 billion doesn't make sense if they aren't being seen as having the potential to tap all sorts of revenue streams.
Quote from: garbon on February 02, 2012, 03:32:29 PM
Quote from: Berkut on February 02, 2012, 02:15:36 PM
I think they are worth it because I don't even think we've figured out the ways in which you can extract revenue from a user base like that. Hell, 5 years ago nobody thought that Farmville/Thisville/Thatville would be a means of making millions of dollars, right?
I guess I'm just wondering how long we are going to sit around thinking about ways to "extract revenue from a user base like that".
I imagine for as long as they keep coming up with ways of doing so - it's not like this is completely specualtive. They are extracting revenue right now, quite a lot of it in fact, and it is growing quickly.
Quote
Seems like facebook has had a colossal user base for a while now but I haven't seen much concrete on who that user base will actually be used. And then of course the potential attrition of users depending on usage...
Huh? They are very profitable already.
Quote from: Berkut on February 02, 2012, 03:54:03 PM
Quote from: garbon on February 02, 2012, 03:32:29 PM
Quote from: Berkut on February 02, 2012, 02:15:36 PM
I think they are worth it because I don't even think we've figured out the ways in which you can extract revenue from a user base like that. Hell, 5 years ago nobody thought that Farmville/Thisville/Thatville would be a means of making millions of dollars, right?
I guess I'm just wondering how long we are going to sit around thinking about ways to "extract revenue from a user base like that".
I imagine for as long as they keep coming up with ways of doing so - it's not like this is completely specualtive. They are extracting revenue right now, quite a lot of it in fact, and it is growing quickly.
Quote
Seems like facebook has had a colossal user base for a while now but I haven't seen much concrete on who that user base will actually be used. And then of course the potential attrition of users depending on usage...
Huh? They are very profitable already.
Please see my post above.
Quote from: garbon on February 02, 2012, 03:52:55 PM
My article was about how they have only scratched the surface and it has already been expressed here that the valuation of $100 billion doesn't make sense if they aren't being seen as having the potential to tap all sorts of revenue streams.
A lot of internet companies seem to operate on the "if you build it, they will come" sort of business plan - put together a big enough base of users and then we'll figure out how to make money (Twitter, I'm looking at you).
But FB has been figuring this out, and is already enormously popular. The valuations thrown around don't mean FB has to invent revenue where none existed - but if does have to triple (or more) revenue, which is no easy task but at least imaginable.
http://finance.yahoo.com/blogs/breakout/3-ways-facebook-ipo-exploit-users-172215377.html
Here's something that gets at the question I'm asking as future revenue generation.
Quote3 Ways Facebook Plans to Exploit Users
1. Facebook is going to "sell" users for $120 each
According to their filing, Facebook had 850 million Monthly Active Users (MAU) at the end of 2011. From that user base the company generated roughly $3.7b in revenue, or just under $4.50 for every member. Nearly 90% of this number comes from selling your information to advertisers who, in turn, try to sell you things Facebook says you want.
That may seem like a reasonable trade until we get to the IPO. "If this thing goes public at the price they're expecting (Facebook) will get $120 per user," Matt Nesto notes. Said another way, Facebook is going to sell you for 120 bucks. Wall Street bankers will get a cut of this figure, with Facebook getting the bulk of the money. FB users get nothing.
2. Facebook users are about to become billboards
In the first line of a 2,000 word letter from Mark Zuckerberg, the Facebook founder announces the following: "Facebook was not originally created to be a company. It was built to accomplish a social mission — to make the world more open and connected."
Noble stuff from a guy about to be worth nearly $30 billion. Regardless of the original inspiration, once Facebook goes public Zuckerberg's job is to create value for shareholders. That means getting more than $4.50 a year for selling each user's information to advertisers. One of the ways Facebook is going to go about this value extraction is turning your every click into a sponsorship.
If you feel exploited now you ain't seen nothing yet. Post-IPO, everything you "Like", suggest or link is going to be packaged and sold. Anyone you "Friend" will be pitched stuff you like. People with whom you have common friends will be sold goods on the basis of your unwitting recommendation. You won't just be connecting with people anymore, you'll be infecting them with spam, pop-ups, and network.
If that sounds something like a social disease it's because that's exactly what it is.
3. The IPO is as much a Public Relations coup as a Share offering
Typically when a company goes public it gives the shareholders something in return. Under normal circumstances that means management giving up some degree of control, either in the form of voting rights or via an independent board of directors charged with looking out for shareholder interests. At least that's the basic idea.
In the case of Facebook, the company is surrendering nothing. Zuckerberg will retain control of the company both in matters of day-to-day business as well as anything requiring a shareholder vote (buyouts, mergers etc). Should Zuckerberg become incapacitated his controlling interest will pass "to a person or entity he designates as his successor." Mark Zuckerberg could bequeath control of Facebook to his dog, Beast, and there isn't thing one shareholders could do about it.
Regardless of the company line about enhancing user experiences and fostering openness, the Facebook IPO will result in more ads and exploitation of user information. The shares may go up or down upon issuance but that's almost an afterthought. Buyers of the stock are simply cashing out VC's and funding the exploitation of whatever information they and their friends choose to share.
Like it or not your Facebook experience is about to change in a way that makes more money for the company. It's not a reason to avoid the shares, just a reason to be realistic about any idea of Facebook having a lofty mission.
Is Facebook selling out by going public? Let us know what you think in the comment space below; I personally promise not to sell your observations to the highest bidder.
I don't get how it is the IPO that means Facebook is selling out. I mean - Facebook is doing all of that stuff already. It's just going to do more of it.
Also they're still counting on increasing its user base.
Quote from: Barrister on February 02, 2012, 05:21:28 PM
I don't get how it is the IPO that means Facebook is selling out. I mean - Facebook is doing all of that stuff already. It's just going to do more of it.
Also they're still counting on increasing its user base.
I wasn't really think about it in terms of selling out although that's the terms the article uses. I just want to know what methods are suggested for tapping these untapped opportunities.
Quote from: CountDeMoney on February 02, 2012, 03:20:26 PM
Fuck Facebook. In the face. You need to find me, I'm in the phone book.
I don't even bother picking up my copy of the phonebook that they leave in the entry way.
I don't get the moral indignation at Facebook "selling users" or whatnot. It never claimed to be a charity.
Quote from: garbon on February 02, 2012, 05:27:53 PM
Quote from: CountDeMoney on February 02, 2012, 03:20:26 PM
Fuck Facebook. In the face. You need to find me, I'm in the phone book.
I don't even bother picking up my copy of the phonebook that they leave in the entry way.
What the hell do you use for door stops then?
Quote from: CountDeMoney on February 02, 2012, 05:40:55 PM
Quote from: garbon on February 02, 2012, 05:27:53 PM
Quote from: CountDeMoney on February 02, 2012, 03:20:26 PM
Fuck Facebook. In the face. You need to find me, I'm in the phone book.
I don't even bother picking up my copy of the phonebook that they leave in the entry way.
What the hell do you use for door stops then?
Why would I need/want a door stop? :huh:
Quote from: garbon on February 02, 2012, 05:44:15 PM
Quote from: CountDeMoney on February 02, 2012, 05:40:55 PM
Quote from: garbon on February 02, 2012, 05:27:53 PM
Quote from: CountDeMoney on February 02, 2012, 03:20:26 PM
Fuck Facebook. In the face. You need to find me, I'm in the phone book.
I don't even bother picking up my copy of the phonebook that they leave in the entry way.
What the hell do you use for door stops then?
Why would I need/want a door stop? :huh:
Oh, I don't know, nice spring day, open the windows, make sure a sudden breeze doesn't slam a bedroom door accidentally or something.
But hey, fuck you then, you nasty bitch.
Quote from: CountDeMoney on February 02, 2012, 05:46:30 PM
Oh, I don't know, nice spring day, open the windows, make sure a sudden breeze doesn't slam a bedroom door accidentally or something.
But hey, fuck you then, you nasty bitch.
My apartment isn't that breezy and isn't very big. :P
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fmedia.economist.com%2Fsites%2Fdefault%2Ffiles%2Fimagecache%2Ffull-width%2Fimages%2Fprint-edition%2F20120204_FBM911.gif&hash=d2d16f371456989aa1bb9ad2acfd00a7d9c2b97d)
http://www.economist.com/node/21546020
Quote from: PJL on February 02, 2012, 02:29:21 PM
Facebook users aren't their customers. They've merely created a market for others to advertise their wares to. Simlarly with Google. Both are more like owners of a shopping mall or a stock bourse than an actual retailer.
Amazon OTOH would be classified as a retailer (or more accurely internet mail-order company).
Actually, from a business point of view, both users and advertisers are their customers. You don't have to pay money to be considered a customer.
And a shopping mall comparison is not exactly a good one since there is no immediate legal relationship between the shopping mall owner and a shopper. A better comparison is a phone directory publisher - they have dual customer base - people who read phone directories and people who advertise in them, the former usually getting the product for free. However it still helps for the company to think of them in terms of customers - because if they get shitty product, they will go elsewhere, thus affecting the ability to monetize the product vis-a-vis the second group.
Also, what really works in Facebook favor is the network effect (which again makes the business different from shopping mall owners, where the fact that a person X goes to shopping mall A does not necessarily translate into a greater incentive for a person Y to go to the shopping mall).
I think Facebook is rightfully valued more than just their current revenue would suggest. Like many, I'm skeptical if that valuation is $100bn, however even if Facebook is overvalued that doesn't necessarily mean it is in the same category as pre-dot com bust companies. As long as it keeps a profit margin it's not going to kill the company if, over time, the share price declines to reflect a more appropriate valuation. (It won't be grand for the people who buy early stock, though.) Depending on Facebook's stance on things like dividends it could still end up early investors don't get totally fleeced.
It's also possible that the share price mostly stays static for a long time due to investor optimism and maybe eventually Facebook's revenue will be such that there won't be a fear of a market correction to a lower share price.
Two things are now a given when it comes to Facebook, they are going to need to expand their customer base and increase revenue per customer to justify their present valuation. However, neither of those is as easy as flicking on a light switch. In terms of customer base, Facebook is going to eventually reach a point where its customer growth will no longer be very fast, for the simple fact that the internet is only so big and the portion of internet users who want to engage in social networking is only so big and it's likely Facebook is already brushing against the upper limit of this. Internet users will grow as more people come online, but even that has its limits. Further, Facebook's ability to capture users in new internet markets is not guaranteed, countries like China (through its tightly controlled internet) which will be the single biggest market for internet users after the rest of the world is saturated, have spurned major internet trends in the past. The major search engine in China is Baidu, for example, and it's possible a Chinese brand of social networking site will become China's facebook.
Squeezing more money out of existing customers is something every company wants to do, but it's not like you can just say "we'll do it" and make it so. In Facebook's case, from what I've heard until they hire their COO they weren't really interested in making money at the executive level. They were interested in making a cool website, keeping it running, and attracting more users. Their COO is the reason they posted over $1bn in revenue the past few years ($3.7bn most recently), and I do think because they weren't really fully exploiting their potential revenue streams they will be able to get that $/customer number up higher. How easily they get it high enough to justify their valuation is questionable, though. Something worth noting is that something like half of Facebook's revenue comes from microtransactions within Zynga-published games. So if Zynga went under Facebook would be hurt very, very badly.
One thing I think it is worth thinking about is how we look at Facebook. I don't necessarily think they are the same as just another website in the veins of Amazon. Amazon is a tried and true business model and they are a great company making tons of money at it. But I think Facebook is sort of like the internet's version of AT&T in the late 19th century. Meaning, Facebook has created a new network that is almost akin to the telephone in that it's becoming a key piece of society's "infrastructure." The reason it is unlikely Facebook will be eliminated by competitors is because a social network's value is in its user base, and I think the time for the big pioneering social network to establish itself has essentially already passed and Facebook won. In essence I think a natural monopoly has developed. For Facebook to be totally undone another paradigm shift will have to happen, akin to how the internet and cell phones has made it so that in the next few decades regular land line telephones will probably cease to exist.
The problem is that paradigm shifts in the Internet industry happen every couple of years. IMO, not only do investors typically overvalue the growth potential of Internet companies, not realizing that exponential growth cannot last forever, but they also don't factor in the possibility that something new would enter the market and make the existing giant obsolete overnight.
In ten years time, facebook will resemble one of those ghost mining towns in Rockie mountains; people will have moved onto the next great thing.
I've lost count of the number of people who've recently told me they're looking for something different/better/less intrusive/something that isn't such a time sink etc, some people are poised to start the next migration.
I'd make an outside bet that many people might decide to engage more with real life and cut back on their internet use, we are after all still in the first flush of internet use/overuse, well at least for most people. Most lLanguishites are the exception in being such early adopters of the interwebs social characteristics
Quote from: mongers on February 05, 2012, 08:24:42 PM
I'd make an outside bet that many people might decide to engage more with real life and cut back on their internet use,
Many will, more won't.
Quote from: mongers on February 05, 2012, 08:24:42 PM
I'd make an outside bet that many people might decide to engage more with real life and cut back on their internet use, we are after all still in the first flush of internet use/overuse, well at least for most people. Most lLanguishites are the exception in being such early adopters of the interwebs social characteristics
Except that many users are youth who have always grown up with technology mixed into their social lives (from web to phone). I can see them giving up facebook but internet use?
Quote from: Admiral Yi on February 02, 2012, 02:09:19 PM
I would quibble with describing 1/5 of the world as their "customer" base. Customer usually means someone who pays. They have a lot of users who don't directly contribute any revenue.
Well, all the users are the recipients of the company's provided service, the compensation just comes through an intermediary. Would you not consider someone a customer for using PayPal as an intermediary to pay?
Also, your strict definition pretty much precludes anybody who pays with a credit card- the credit card financier directly contributes the revenue, while the customer simply incurs a debt with the financier.
845 million people is not even 1/8th the world.
Quote from: Peter Wiggin on February 05, 2012, 09:37:48 PM
Quote from: mongers on February 05, 2012, 08:24:42 PM
I'd make an outside bet that many people might decide to engage more with real life and cut back on their internet use,
Many will, more won't.
Not even many will. mongers, as always, is advancing some bullshit luddite idiot argument - as garbon rightly points out, for more and more people, internet is part of daily life the same way electricity or telephones are for older generations.
What's even more funny is that he seems to imply you need to be "inside" in order to consume internet content - he seems to be stuck in 1990s.
Quote from: DontSayBanana on February 06, 2012, 12:31:26 AM
Quote from: Admiral Yi on February 02, 2012, 02:09:19 PM
I would quibble with describing 1/5 of the world as their "customer" base. Customer usually means someone who pays. They have a lot of users who don't directly contribute any revenue.
Well, all the users are the recipients of the company's provided service, the compensation just comes through an intermediary. Would you not consider someone a customer for using PayPal as an intermediary to pay?
Also, your strict definition pretty much precludes anybody who pays with a credit card- the credit card financier directly contributes the revenue, while the customer simply incurs a debt with the financier.
Wow, that's more bullshit analogy than the worst one I've ever made.
In a credit card situation, you are being charged for this - the intermediation is a technicality, but you are the one who incurrs the economic cost of the purchase. It's really boneheaded to see this otherwise.
Obviously, the situation is completely different with Facebook where you are not paying for the use.
Quote from: DGuller on February 05, 2012, 03:50:03 PM
The problem is that paradigm shifts in the Internet industry happen every couple of years. IMO, not only do investors typically overvalue the growth potential of Internet companies, not realizing that exponential growth cannot last forever, but they also don't factor in the possibility that something new would enter the market and make the existing giant obsolete overnight.
This I agree with. Facebook seems quite well entrenched today, but noone remembers MySpace or Friendster (or however the fuck you spelled it). Now, it might very well become dominant for years to come, but past experiences with various dot com bubbles and whatnot would suggest one should be conservative rather than overly optimistic about it - and this valuation is the exact opposite of conservative.
I can see myself leaving Facebook for something better, but I doubt I'll ever give up on internet access. The only time I don't use it is when I am abroad on vacation. And that's just because roaming is so expensive.
Quote from: Zanza on February 06, 2012, 04:32:09 AM
I can see myself leaving Facebook for something better, but I doubt I'll ever give up on internet access. The only time I don't use it is when I am abroad on vacation. And that's just because roaming is so expensive.
There are enough wifi hotspots out there (except perhaps in the middle of the wilderness) that this is not an issue anymore either.
I like travelling to the middle of the wilderness though. ;)
Quote
I've lost count of the number of people who've recently told me they're looking for something different/better/less intrusive/something that isn't such a time sink etc, some people are poised to start the next migration.
But how many people actually do move elsewhere?
I'm increasingly disliking facebook and I wish something else would pop up and knock it down but facebook is just everywhere these days, everyone is on facebook because everyone is on facebook.
The only way I could ever see facebook being taken down is if everyone makes an account elsewhere for other reasons and this elsewhere slowly shifts into taking over what people use facebook for since everyone is already there for this other thing. What this other thing could be though...who knows- probally facebook and they'll install it on their site.
What was it which undid myspace I wonder?
The crappy photo handling? Lack of privacy? As on paper...it was better. Having the music angle too. Especially since facebook got rid of networks.
Quote from: Tyr on February 06, 2012, 08:57:55 AM
What was it which undid myspace I wonder?
The crappy photo handling? Lack of privacy? As on paper...it was better. Having the music angle too. Especially since facebook got rid of networks.
Facebook was clean, uniform, and uncluttered. No customization. No ads. People used their *real names* as part of exclusive real networks (required confirmed .edu e-mail address). No photo limit. *tags* etc.
Quote from: Tyr on February 06, 2012, 08:57:55 AM
What was it which undid myspace I wonder?
The crappy photo handling? Lack of privacy? As on paper...it was better. Having the music angle too. Especially since facebook got rid of networks.
Well myspace definitely had very crappy infrastructure. Thing was often quite slow and often loaded funky because of the customization features. Plus it got mad annoying to have web music start up everytime you went to someone's page.
And Phillip - facebook lost that .edu bit a long time ago before it became with with the wider population.
Quote from: Martinus on February 06, 2012, 04:21:09 AM
Not even many will.
I was being generous and using many in an absolute quantitative rather than relative sense.
Quote from: garbon on February 05, 2012, 11:32:05 PM
Quote from: mongers on February 05, 2012, 08:24:42 PM
I'd make an outside bet that many people might decide to engage more with real life and cut back on their internet use, we are after all still in the first flush of internet use/overuse, well at least for most people. Most lLanguishites are the exception in being such early adopters of the interwebs social characteristics
Except that many users are youth who have always grown up with technology mixed into their social lives (from web to phone). I can see them giving up facebook but internet use?
Good job I didn't say that, then. ;)
You are aware of what cut back means ?
In this context, cut back could mean reducing by 20% or a quarter, a third or halving ones use, all of these reductions could be described as cutting back.
My favourite post in this thread so far:
Quote
Martinus
Re: Is Facebook Worth $100 Billion?
You are ignoring this user. Show me the post.
:cool:
Quote from: mongers on February 06, 2012, 01:24:38 PM
Quote from: garbon on February 05, 2012, 11:32:05 PM
Quote from: mongers on February 05, 2012, 08:24:42 PM
I'd make an outside bet that many people might decide to engage more with real life and cut back on their internet use, we are after all still in the first flush of internet use/overuse, well at least for most people. Most lLanguishites are the exception in being such early adopters of the interwebs social characteristics
Except that many users are youth who have always grown up with technology mixed into their social lives (from web to phone). I can see them giving up facebook but internet use?
Good job I didn't say that, then. ;)
You are aware of what cut back means ?
In this context, cut back could mean reducing by 20% or a quarter, a third or halving ones use, all of these reductions could be described as cutting back.
The same freaking difference. :rolleyes:
Why would individuals who have grown up "connected" all their lives suddenly cut the amount of time that they spend connected? What sense would that make?
Quote from: garbon on February 06, 2012, 01:26:53 PM
Quote from: mongers on February 06, 2012, 01:24:38 PM
Quote from: garbon on February 05, 2012, 11:32:05 PM
Quote from: mongers on February 05, 2012, 08:24:42 PM
I'd make an outside bet that many people might decide to engage more with real life and cut back on their internet use, we are after all still in the first flush of internet use/overuse, well at least for most people. Most lLanguishites are the exception in being such early adopters of the interwebs social characteristics
Except that many users are youth who have always grown up with technology mixed into their social lives (from web to phone). I can see them giving up facebook but internet use?
Good job I didn't say that, then. ;)
You are aware of what cut back means ?
In this context, cut back could mean reducing by 20% or a quarter, a third or halving ones use, all of these reductions could be described as cutting back.
The same freaking difference. :rolleyes:
Why would individuals who have grown up "connected" all their lives suddenly cut the amount of time that they spend connected? What sense would that make?
So if I showed you ways of cutting back on your electricity usage, say 20 or 30%, to save money, that would have exactly the same out come as if you just said "to hell with it, I'm cancelling my contract with electricity supplier" ? :hmm:
Is this the deflect so that you can deflect from your mistake in suggesting that the youth of today are going to start cutting back their internet usage?
Anyway, I often leave my lights on when not home.
Quote from: garbon on February 07, 2012, 08:20:15 AM
Is this the deflect so that you can deflect from your mistake in suggesting that the youth of today are going to start cutting back their internet usage?
Anyway, I often leave my lights on when not home.
Me too. Besides, it's ridiculous to compare electricity use to internet use. We don't "use electricity" as an entertainment or to work - sure, it powers our ability to be entertained or work, but it does not directly translate into fun or productivity. On the other hand, usage of the internet is the activity we actually do for fun or work.
Sorry didn't mean to say deflect twice. :blush:
Quote from: garbon on February 07, 2012, 08:20:15 AM
Is this the deflect so that you can deflect from your mistake in suggesting that the youth of today are going to start cutting back their internet usage?
Anyway, I often leave my lights on when not home.
Do please carry on attacking that strawman, you've constructed around some of my words. ;)
Oh and where did I say the youth, oops my bad, that's the foundations of perhaps your next project a wicker man.
You said people. A big portion of people - especially as time rolls forward, are the youth of today or those that were youth when the internet became a big thing. Saying that it is a strawman to suggest the youth play a big role in the future of internet use might be a convenient dodge but ultimately futile as it is something that needs to be addressed.
Quote from: garbon on February 07, 2012, 02:41:30 PM
it is something that needs to be addressed.
Not really. :contract:
Quote from: Peter Wiggin on February 07, 2012, 02:43:42 PM
Quote from: garbon on February 07, 2012, 02:41:30 PM
it is something that needs to be addressed.
Not really. :contract:
Well it is true that the whole topic doesn't but if you are going to posit the decline of internet use (as in number of minutes spent online), your argument is weaker if you don't address the tech-obsessed youth.
Lulz, Facebook's trading barely above $19 today.
LA Times has an article that suggests Zuck should step down as CEO.
Quote from: garbon on August 17, 2012, 08:41:33 AM
LA Times has an article that suggests Zuck should step down as CEO.
IIRC he has enough stock that nobody can force him out.
Quote from: garbon on August 17, 2012, 08:41:33 AM
LA Times has an article that suggests Zuck should step down as CEO.
What would that achieve?
Quote from: Barrister on August 17, 2012, 09:18:49 AM
Quote from: garbon on August 17, 2012, 08:41:33 AM
LA Times has an article that suggests Zuck should step down as CEO.
IIRC he has enough stock that nobody can force him out.
It wasn't saying he should be forced out, that he should voluntarily step down.
@GF - They cited that his been disdainful/not skillful at courting investors.
Here you go:
http://www.latimes.com/business/la-fi-zuckerberg-future-20120817,0,2667542.story
QuoteThe deepening slide in Facebook Inc.'s stock is fueling talk once considered implausible on Wall Street and in Silicon Valley.
Should Mark Zuckerberg, the social media visionary but neophyte corporate manager, step aside as CEO to let a more seasoned executive run the multibillion-dollar company?
In that scenario, Zuckerberg would remain as the creative force propelling Facebook's technological innovation. But the 28-year-old would cede the CEO title to someone better suited to overseeing operations and building rapport with finicky investors — mundane but essential duties for which Zuckerberg has shown little appetite or aptitude.
"There is a growing sense that Mark Zuckerberg, talented though he may be, is in over his hoodie as CEO of a multibillion-dollar public company," said Sam Hamadeh, head of research firm PrivCo. "While in many cases a company founder can, and does, grow into the job, things are happening so quickly that there is precious little time here for Zuckerberg to do that."
Doubts about the Facebook founder intensified Thursday as the stock closed below $20 for the first time. The shares, which slipped to $19.87, have shed nearly half their value since Facebook's disastrous initial public offering three months ago.
Thursday's selling was driven by the expiration of provisions that had barred Facebook's venture capital backers from unloading their shares. Trading volume was abnormally heavy, a sign of the fury with which some of the company's earliest investors ran for the exits as soon as they could.
"This was the most anticipated IPO in many years and it was like an exploding cigar," said Barry Ritholtz, head of research firm Fusion IQ. "Every investor thought they were about to become wealthy beyond their wildest dreams, and they had this blow up in their face."
The danger, Ritholtz said, is that the drooping stock price could tag the company itself with a "stink of failure" that could make advertisers less willing to use Facebook.
Facebook's troubles stem from numerous factors, including investors' overinflated expectations, the company's unproven strategy for mobile advertising and an IPO that was mangled by both the Nasdaq stock market and Facebook's investment banks. Its first-ever earnings as a public company, released last month, beat analysts' expectations as revenue grew 32% year over year. Still, the stock plunged as investors were spooked by rising costs and slowing growth.
Only some of those problems are attributable to Zuckerberg, analysts say. And given that he is the company's largest shareholder, with ironclad control over all decisions, nothing would happen without Zuckerberg's assent.
Still, restless investors blame Zuckerberg for several missteps, such as pricing the IPO at a stratospheric $100-billion valuation.
Facebook boosted its IPO price days before the offering, with several large shareholders selling unexpectedly large chunks of their holdings. The moves were seen as siphoning extra profit for the company and big shareholders at the expense of subsequent investors.
The enormous valuation left Facebook little room for error, and was seen as hubris by a company that at the time saw few obstacles in its path.
Zuckerberg's indifference to traditional corporate etiquette — he wore sneakers and his trademark hoodie for Facebook's first big investor meeting — is viewed as disrespectful of the corporate world he needs to win over.
"His behavior is what I would expect of someone his age — the hoodies and everything else," said Chris Whalen, senior managing director at Tangent Capital Partners in New York. "He's trying to appeal to his audience instead of being responsible to his investors. His job now is to run the company."
Even Apple Inc.co-founder Steve Jobs, who was known for favoring turtlenecks and jeans, donned a suit in his early days when he was touting his upstart.
Some experts say the criticism of Zuckerberg is overdone.
The stock has fallen because investors have realized that Facebook's growth potential isn't as great as they had thought, analysts said.
"Is it possible that management changes could improve those prospects? Maybe, but I don't think it's a sure bet," said Dan Alpert at New York investment bank Westwood Capital. "Zuckerberg appears to be a decent guy who the market should give a little bit longer to prove his mettle."
There is precedent for iconic founders to hand off CEO duties.
Ah.
I approve of his attitude, fuck the corporate world.
QuoteZuckerberg's indifference to traditional corporate etiquette — he wore sneakers and his trademark hoodie for Facebook's first big investor meeting — is viewed as disrespectful of the corporate world he needs to win over.
"His behavior is what I would expect of someone his age — the hoodies and everything else," said Chris Whalen, senior managing director at Tangent Capital Partners in New York. "He's trying to appeal to his audience instead of being responsible to his investors. His job now is to run the company."
Meh, he's a borderline autistic script kiddie, not a CEO. Investors knew that coming in.
Quote from: CountDeMoney on August 17, 2012, 08:27:58 AM
Lulz, Facebook's trading barely above $19 today.
But who were the investors who paid so well over the odds in the initial IPO, your pension funds amongst them ?
Quote from: mongers on August 17, 2012, 10:18:59 AM
But who were the investors who paid so well over the odds in the initial IPO, your pension funds amongst them ?
Doubtful, as I have no pension fund.
WTF is a pension fund anyway??
Quote from: derspiess on August 17, 2012, 10:41:11 AM
WTF is a pension fund anyway??
Probably the stuff you blame unions for.
Quote from: CountDeMoney on August 17, 2012, 10:25:25 AM
Quote from: mongers on August 17, 2012, 10:18:59 AM
But who were the investors who paid so well over the odds in the initial IPO, your pension funds amongst them ?
Doubtful, as I have no pension fund.
:cheers:
:hmm:
:unsure:
Quote from: garbon on August 17, 2012, 09:24:16 AM
@GF - They cited that his been disdainful/not skillful at courting investors.
This should not have come as that much of a shock. There were stories in the press during the IPO process of how the investment bankers felt insulted by how he treated them.
The initial IPO investors had visions of the old tech boom days dancing in their heads and forgot about the basics.
Quote from: derspiess on August 17, 2012, 10:41:11 AM
WTF is a pension fund anyway??
A secure retirement for those who belong to it, even if they aren't rich or savvy investors.
Quote from: Habbaku on August 17, 2012, 11:58:59 AM
Quote from: derspiess on August 17, 2012, 10:41:11 AM
WTF is a pension fund anyway??
:huh:
Sorry, I've never worked anywhere that has offered these "pension" things ;)
Quote from: Jacob on August 17, 2012, 11:46:25 AM
Quote from: derspiess on August 17, 2012, 10:41:11 AM
WTF is a pension fund anyway??
A secure retirement for those who belong to it, even if they aren't rich or savvy investors.
Secure might be overstating it. After all, it involves the stock market, and thus is ultimately worthless.
Quote from: Neil on August 17, 2012, 12:02:00 PM
Quote from: Jacob on August 17, 2012, 11:46:25 AM
Quote from: derspiess on August 17, 2012, 10:41:11 AM
WTF is a pension fund anyway??
A secure retirement for those who belong to it, even if they aren't rich or savvy investors.
Secure might be overstating it. After all, it involves the stock market, and thus is ultimately worthless.
Secure also requires that whoever's responsible for the pension fund is actually funding the damn thing.
Quote from: derspiess on August 17, 2012, 12:01:44 PM
Quote from: Habbaku on August 17, 2012, 11:58:59 AM
Quote from: derspiess on August 17, 2012, 10:41:11 AM
WTF is a pension fund anyway??
:huh:
Sorry, I've never worked anywhere that has offered these "pension" things ;)
:console:
2030 is when mine vests. Only 18 to go...
Quote from: CountDeMoney on August 17, 2012, 09:53:05 AM
Meh, he's a borderline autistic script kiddie, not a CEO. Investors knew that coming in.
Facebook took over from myspace and is the global leader in sharing embarrassing pictures and deploying "like" buttons. Someone was doing more than writing script to get facebook where it is.
Quote from: alfred russel on August 17, 2012, 12:59:36 PM
Quote from: CountDeMoney on August 17, 2012, 09:53:05 AM
Meh, he's a borderline autistic script kiddie, not a CEO. Investors knew that coming in.
Facebook took over from myspace and is the global leader in sharing embarrassing pictures and deploying "like" buttons. Someone was doing more than writing script to get facebook where it is.
He's a pretty ruthless and efficient CEO from what I've read.
I'm pretty sure he just doesn't care if the corporate world doesn't accept him. He doesn't really need the corporate world. And because he still personally owns a controlling interest in Facebook he doesn't really need to care if the share price drops
Quote from: Barrister on August 17, 2012, 01:03:02 PM
And because he still personally owns a controlling interest in Facebook he doesn't really need to care if the share price drops
I'd rather have a controlling interest in a company worth more than a company worth less.
Quote from: garbon on August 17, 2012, 01:04:09 PM
Quote from: Barrister on August 17, 2012, 01:03:02 PM
And because he still personally owns a controlling interest in Facebook he doesn't really need to care if the share price drops
I'd rather have a controlling interest in a company worth more than a company worth less.
Why? It only matters to Zuckerberg what the share price is if he is trying to sell.
What's the point of going public if you don't care about investors?
Quote from: garbon on August 17, 2012, 01:08:41 PM
What's the point of going public if you don't care about investors?
$$$.
Quote from: Barrister on August 17, 2012, 01:06:25 PM
Quote from: garbon on August 17, 2012, 01:04:09 PM
Quote from: Barrister on August 17, 2012, 01:03:02 PM
And because he still personally owns a controlling interest in Facebook he doesn't really need to care if the share price drops
I'd rather have a controlling interest in a company worth more than a company worth less.
Why? It only matters to Zuckerberg what the share price is if he is trying to sell.
He's lost billions hasn't he?
Quote from: Darth Wagtaros on August 17, 2012, 01:15:19 PM
Quote from: Barrister on August 17, 2012, 01:06:25 PM
Quote from: garbon on August 17, 2012, 01:04:09 PM
Quote from: Barrister on August 17, 2012, 01:03:02 PM
And because he still personally owns a controlling interest in Facebook he doesn't really need to care if the share price drops
I'd rather have a controlling interest in a company worth more than a company worth less.
Why? It only matters to Zuckerberg what the share price is if he is trying to sell.
He's lost billions hasn't he?
fake billions. it wasn't his until he sold the stock.
Quote from: garbon on August 17, 2012, 01:08:41 PM
What's the point of going public if you don't care about investors?
Apparently he didn't have much of a choice...once you cross a certain number of shareholders you have to file, and facebook was at that limit for a while, with a bunch of early investors/workers that had stock options to exercise.
Quote from: alfred russel on August 17, 2012, 01:22:03 PM
Quote from: garbon on August 17, 2012, 01:08:41 PM
What's the point of going public if you don't care about investors?
Apparently he didn't have much of a choice...once you cross a certain number of shareholders you have to file, and facebook was at that limit for a while, with a bunch of early investors/workers that had stock options to exercise.
Gotcha, gotcha. I was wondering if there was something like that.
Quote from: garbon on August 17, 2012, 01:23:32 PM
Quote from: alfred russel on August 17, 2012, 01:22:03 PM
Quote from: garbon on August 17, 2012, 01:08:41 PM
What's the point of going public if you don't care about investors?
Apparently he didn't have much of a choice...once you cross a certain number of shareholders you have to file, and facebook was at that limit for a while, with a bunch of early investors/workers that had stock options to exercise.
Gotcha, gotcha. I was wondering if there was something like that.
Plus some of the early VC wanted to cash out, I think.
I kind of admire Zuckerberg for not really wanting to go public, and then taking a "who gives a fuck" attitude toward the whole thing when he had to. Although now he is getting sued by half the law firms in new york and is getting a ton of bad press. Our country sucks sometimes.
Quote from: alfred russel on August 17, 2012, 02:23:21 PM
I kind of admire Zuckerberg for not really wanting to go public, and then taking a "who gives a fuck" attitude toward the whole thing when he had to. Although now he is getting sued by half the law firms in new york and is getting a ton of bad press. Our country sucks sometimes.
I'm not sure I admire the attitude bit. If you're going to have to do something, do it well - otherwise you're just fucking over lots of other people.
Quote from: garbon on August 17, 2012, 02:25:44 PM
I'm not sure I admire the attitude bit. If you're going to have to do something, do it well - otherwise you're just fucking over lots of other people.
The people fucked over were those who thought Facebook was worth over a hundred billion for some reason. They should probably just stay out of the stock market altogether.
Quote from: garbon on August 17, 2012, 02:25:44 PM
Quote from: alfred russel on August 17, 2012, 02:23:21 PM
I kind of admire Zuckerberg for not really wanting to go public, and then taking a "who gives a fuck" attitude toward the whole thing when he had to. Although now he is getting sued by half the law firms in new york and is getting a ton of bad press. Our country sucks sometimes.
I'm not sure I admire the attitude bit. If you're going to have to do something, do it well - otherwise you're just fucking over lots of other people.
He owned a controlling stake in the company, and was always upfront that priority one wasn't maximizing profits. When regulatory requirements made it basically mandatory to go public, he made a rather public show that it was going to be on his own terms, he was going to keep a controlling stake in the company and effectively not be answerable to anyone else, and was going to run the company according to what he valued rather than just providing cash returns to shareholders.
The people getting "fucked over" really only have themselves to blame. That is my opinion at least.
Who was fucked over?
Quote from: alfred russel on August 17, 2012, 02:36:03 PM
Quote from: garbon on August 17, 2012, 02:25:44 PM
Quote from: alfred russel on August 17, 2012, 02:23:21 PM
I kind of admire Zuckerberg for not really wanting to go public, and then taking a "who gives a fuck" attitude toward the whole thing when he had to. Although now he is getting sued by half the law firms in new york and is getting a ton of bad press. Our country sucks sometimes.
I'm not sure I admire the attitude bit. If you're going to have to do something, do it well - otherwise you're just fucking over lots of other people.
He owned a controlling stake in the company, and was always upfront that priority one wasn't maximizing profits. When regulatory requirements made it basically mandatory to go public, he made a rather public show that it was going to be on his own terms, he was going to keep a controlling stake in the company and effectively not be answerable to anyone else, and was going to run the company according to what he valued rather than just providing cash returns to shareholders.
The people getting "fucked over" really only have themselves to blame. That is my opinion at least.
Weren't various employees given stock? Kinda sucks for them.
Quote from: The Brain on August 17, 2012, 02:36:36 PM
Who was fucked over?
People who bought into the IPO, or paid anything near the opening price. But then I agree with AR in that they really fucked themselves over if they didn't think Facebook was overvalued.
I did think of that. Declining stock price makes stock options not so valuable.
But I think it's better to say that Zuckerberg doesn't care about short-term share price. He's clearly dedicated to growing FB, which in the end will increase stock value.
Quote from: garbon on August 17, 2012, 02:43:19 PM
Weren't various employees given stock? Kinda sucks for them.
Not really, I doubt many of them are hurting right now. But in any event, if they want stock based compensation and aren't happy with the company's mission statement and leadership, they are always able to move to a more stockholder friendly company, or at least theoretically negotiate a compensation package that isn't stock based.
Quote from: derspiess on August 17, 2012, 02:50:17 PM
Quote from: The Brain on August 17, 2012, 02:36:36 PM
Who was fucked over?
People who bought into the IPO, or paid anything near the opening price. But then I agree with AR in that they really fucked themselves over if they didn't think Facebook was overvalued.
Yes, I don't believe they were fucked over.
Quote from: alfred russel on August 17, 2012, 02:53:00 PM
Quote from: garbon on August 17, 2012, 02:43:19 PM
Weren't various employees given stock? Kinda sucks for them.
Not really, I doubt many of them are hurting right now. But in any event, if they want stock based compensation and aren't happy with the company's mission statement and leadership, they are always able to move to a more stockholder friendly company, or at least theoretically negotiate a compensation package that isn't stock based.
http://www.businessinsider.com/dear-facebook-employees-heres-the-truth-about-your-stock-price-2012-8
QuoteAnd the stock price is now well below the level at which most employees have been granted stock in the past 18 months.
This means that most current and former Facebook employees are worth far less than they were a few months ago.
Facebook's stock crash is also hurting morale at the company, and damaging perception of the company's business and brand. The impact is big enough that Facebook CEO Mark Zuckerberg, who has been crystal clear about his desire to ignore the stock price, admitted at a company meeting that the stock crash has been "painful" for everyone.
Rest of article is about putting that into perspective for current employees - but it isn't hard to see that Z's devil may care attitude is painful for those below him - as in fact he said it himself. :D
As to the rest of what you said - that just further points out that he isn't doing such a great job if employees should leave to get better compensation...
My company focuses on shareholder return, so any facebook employee that wants to trade their equity compensation for mine the last few years is welcome to do so. :(
The past year or so aside, Facebook has done incredibly well for its employees.
Quote from: alfred russel on August 17, 2012, 02:53:00 PMor at least theoretically negotiate a compensation package that isn't stock based.
It took Microsoft's employees more than ten years of complaining to get them to balance in more cash and start paying a dividend.
Quote from: Barrister on August 17, 2012, 01:06:25 PM
Quote from: garbon on August 17, 2012, 01:04:09 PM
Quote from: Barrister on August 17, 2012, 01:03:02 PM
And because he still personally owns a controlling interest in Facebook he doesn't really need to care if the share price drops
I'd rather have a controlling interest in a company worth more than a company worth less.
Why? It only matters to Zuckerberg what the share price is if he is trying to sell.
that may be precisely the problem.
There is good reason Zuckerberg doesn't care about the stock price, that money is basically fake money to him. On IPO day Zuckerberg sold enough shares at $38 or whatever stupid number the shares were trading at so that he'd basically have $5bn in actual cash. He basically is now permanently uber-rich no matter what.
He maintained enough shares in the company that he kept control, so he's got a pile of cash and still controls the company, why should he be obsessed with share price? The reality is lots of analysts have said for a long time the fair value of Facebook stock is like $18-19, and we're about there right now. I do not necessarily believe Zuckerberg should be stepping down simply because a tremendously over-inflated stock price has adjusted to a fair valuation. Zuckerberg benefited immensely from the overblown valuation, but he is not the one who made tons of investors buy in at that price and various other prices from $25-38 as the stock has gone down.
I believe a lot of long term employees who had stock options were made rich by IPO day, so I don't really know that he has done bad by long term employees, either. I mean keep in mind those stock options are in addition to the salary and benefits they received. Facebook hasn't been a fly-by-night internet startup in a long time, and in fact they are famous for "stealing" employees away from more established companies like Google by offering them better pay...so the guys working at Facebook were not underpaid techies who were promised big stock options to make it all right in the end.
Zuckerberg hasn't lied about Facebook's revenues or its profit, and he hasn't lied about the long term risks his company faces. It was all there in the prospectus, he's basically blameless in what has happened with the share price. Now, all that being said if Zuckerberg wants to keep Facebook profitable he needs to either cut costs or go balls out focusing on increasing revenue per user, because the history of their quarterly returns suggests if one of those things doesn't happen the business will become fiscally unsustainable.
Zuckerberg, the VCs, and long-term employees also were not the only ones who benefited from that IPO by the way. The company raised billions of capital which it can use for strategic purposes, it was a generally smart move and probably the best time to do it.
I believe the limit on shareholders in a private corporation before you have to essentially go public is 500, and I think Facebook has a corporate culture where they wanted to give more of the newer employees stock options and were unable to do that, and they were running up against that limit for things like attracting any outside capital.
If you want to keep it private you have to keep it very tightly held. The Mars company I believe 80-90% of their assets are controlled by 5 members of the Mars family (all multi-billionaires) with a small remainder owned by I believe the descendants of another candy-family that somehow ended up with a share.
Koch Industries is like 90% owned by the two most famous Koch brothers, that's basically the model to follow if you want to keep a big business private.
Quote from: alfred russel on August 17, 2012, 12:59:36 PM
Quote from: CountDeMoney on August 17, 2012, 09:53:05 AM
Meh, he's a borderline autistic script kiddie, not a CEO. Investors knew that coming in.
Facebook took over from myspace and is the global leader in sharing embarrassing pictures and deploying "like" buttons. Someone was doing more than writing script to get facebook where it is.
Until the next fave-rave comes on the scene; gambling on internet bullshit is about as wise as gambling on perishable produce.
Quote from: OttoVonBismarck on August 17, 2012, 06:38:51 PM
There is good reason Zuckerberg doesn't care about the stock price, that money is basically fake money to him. On IPO day Zuckerberg sold enough shares at $38 or whatever stupid number the shares were trading at so that he'd basically have $5bn in actual cash. He basically is now permanently uber-rich no matter what.
That is a good reason why Zuckerberg should not be the CEO. Your argument boils down to "dont blame him for the share collapse. He got his and now he doesnt care what happens to the share price."
Now that is prime CEO material right there. :thumbsup:
I'm sure Zuckenberg is still bound by some laws. In this country, you can't do whatever you want just because you own 50%+1 shares of the company.
No, my argument as to why Zuckerberg shouldn't personally care is because he's already cashed out. But you don't replace a CEO for no reason at all, can you point to anything Zuckerberg has done since the IPO that would justify his removal as CEO? (A moot point by the way, since he controls the board he cannot be removed against his will.)
The assumption is if the share price went down, the CEO has done something wrong?
That's stone cold retarded, and in general CEOs often have little control over share price. In some ways if I was an investor I'd prefer a CEO who isn't overly concerned with share price. There is an oft-repeated argument that because bonus schemes are tied to stock performance, CEOs will manipulate things to maximize the stock performance to the detriment of the overall company's long term competitive advantages. That argument isn't really that apt, if you actually look at CEO compensation plans at big companies they tend to be based on a nexus of performance metrics such as EPS, corporate free cash flow, total revenue etc...basically corporate boards aren't typically so stupid as to just base it on simple market price of the company's shares. So while the argument doesn't really apply to real world situations, it comes from the right place...namely that fluctuations in a company's share price can happen for any number of reasons. Many of them actually have little or nothing to do with that company individually, and for that reason it is foolhardy for an executive to obsess on them.
Profit is the lifeblood of a company, you need enough to remain a going concern, and then enough to maintain your business or grow your business against your competitors. If a CEO does boneheaded things, like make big bets on poorly designed new products (and for fun taking out lots of debt to finance it) and runs the company deep into the red that is time for action. If the CEO burns bridges with import supply chain partners, is allowing market share to be lost and isn't responding aggressively...those are all reasons to fire a CEO. If the CEO is just generally inept, that's a reason to fire the CEO. However, lots of very good companies have weird stock fluctuations that don't really affect the underlying value of the company itself. In this case you had a very high IPO price that was essentially the result of "media hype" and in fact that was good for Facebook; because of all that media hype Facebook the company (not Mark Zuckerberg) raised billions of dollars it can now use to make capital improvements or invest in new technologies or etc to increase revenue. On the balance sheet I'd be surprised if Facebook is not doing better right now than it was before the IPO just because it has more cash laying around. (I am aware they had a revenue decline in their first earnings report after the IPO.)
Quote from: DGuller on August 17, 2012, 10:30:21 PM
I'm sure Zuckenberg is still bound by some laws. In this country, you can't do whatever you want just because you own 50%+1 shares of the company.
I don't think anyone is arguing Zuckerberg can buy slaves or launch missiles at the White House, but a normal stock-issuing corporation is overseen by a board of directors. The board is selected by shareholders and a majority of the board can make decisions like hiring and firing a CEO. As long as Zuckerberg controls enough shares to elect a majority of the board, there is little reason to assume he could be remove for any reason whatsoever. I'm sure there might be some really rare exceptions, but I'd be surprised if in general a majority owner of a company can be forced out of the position of CEO. If the minority stakeholders don't like it their recourse is to sell their shares. Now sure there are shareholder lawsuits that can arise over various things.
Plus, what exactly do you guys think Zuckerberg has done? He made the investment bankers who handled the IPO mad? That's not against any sort of government imposed corporate regulation I've ever heard of. He didn't give shareholders the time of day? Again, what regulation is he violating? That's perhaps bad business, but if he owns a controlling stake in the company it doesn't really matter, their recourse is to sell their shares. I know there is some weird law out there now about CEOs not performing "good service" or something, but I'd need to see that statute before I'd conclude Zuckerberg was in violation of it.
Quote from: OttoVonBismarck on August 17, 2012, 10:42:46 PM
Quote from: DGuller on August 17, 2012, 10:30:21 PM
I'm sure Zuckenberg is still bound by some laws. In this country, you can't do whatever you want just because you own 50%+1 shares of the company.
I don't think anyone is arguing Zuckerberg can buy slaves or launch missiles at the White House, but a normal stock-issuing corporation is overseen by a board of directors. The board is selected by shareholders and a majority of the board can make decisions like hiring and firing a CEO. As long as Zuckerberg controls enough shares to elect a majority of the board, there is little reason to assume he could be remove for any reason whatsoever. I'm sure there might be some really rare exceptions, but I'd be surprised if in general a majority owner of a company can be forced out of the position of CEO. If the minority stakeholders don't like it their recourse is to sell their shares. Now sure there are shareholder lawsuits that can arise over various things.
Plus, what exactly do you guys think Zuckerberg has done? He made the investment bankers who handled the IPO mad? That's not against any sort of government imposed corporate regulation I've ever heard of. He didn't give shareholders the time of day? Again, what regulation is he violating? That's perhaps bad business, but if he owns a controlling stake in the company it doesn't really matter, their recourse is to sell their shares. I know there is some weird law out there now about CEOs not performing "good service" or something, but I'd need to see that statute before I'd conclude Zuckerberg was in violation of it.
Doesn't matter how much stock you own, I'm sure you can't agree to sell the entire company for 1 cent per share to another entity happened to be owned entirely by you, even if the majority of the shareholders (i.e. you) votes for it.
Quote from: crazy canuck on August 17, 2012, 10:25:05 PM
Quote from: OttoVonBismarck on August 17, 2012, 06:38:51 PM
There is good reason Zuckerberg doesn't care about the stock price, that money is basically fake money to him. On IPO day Zuckerberg sold enough shares at $38 or whatever stupid number the shares were trading at so that he'd basically have $5bn in actual cash. He basically is now permanently uber-rich no matter what.
That is a good reason why Zuckerberg should not be the CEO. Your argument boils down to "dont blame him for the share collapse. He got his and now he doesnt care what happens to the share price."
Now that is prime CEO material right there. :thumbsup:
It is a rather Orwellian concept that a guy founds a company with priorities ostensibly beyond the bottom line, is forced by law to go public, and is then forced out because he has priorities other than the bottom line.
It is worth remembering that facebook made a billion dollars after taxes last year--and Zuckerberg founded the company in his dorm room not too long ago. Whatever his focus is, he has produced some really remarkable returns in a very short period of time.
Quote from: alfred russel on August 18, 2012, 02:13:20 AM
It is a rather Orwellian concept that a guy founds a company with priorities ostensibly beyond the bottom line, is forced by law to go public, and is then forced out because he has priorities other than the bottom line.
Predatory capitalism has a food chain all its own.
Quote from: crazy canuck on August 17, 2012, 10:25:05 PM
Quote from: OttoVonBismarck on August 17, 2012, 06:38:51 PM
There is good reason Zuckerberg doesn't care about the stock price, that money is basically fake money to him. On IPO day Zuckerberg sold enough shares at $38 or whatever stupid number the shares were trading at so that he'd basically have $5bn in actual cash. He basically is now permanently uber-rich no matter what.
That is a good reason why Zuckerberg should not be the CEO. Your argument boils down to "dont blame him for the share collapse. He got his and now he doesnt care what happens to the share price."
Now that is prime CEO material right there. :thumbsup:
Isn't it?
Quote from: DGuller on August 17, 2012, 10:47:42 PMDoesn't matter how much stock you own, I'm sure you can't agree to sell the entire company for 1 cent per share to another entity happened to be owned entirely by you, even if the majority of the shareholders (i.e. you) votes for it.
Why are you sure of that? I don't doubt it, but you don't actually have anything I've seen to back up that assertion. I've owned decent sized (for regular people like myself) stakes in companies that got bought out before, and the documents I got about it always basically indicated the shareholders would vote and if the majority approved the buyout price then I'd receive that value in cash or equivalent shares of the acquiring company.
It seems like the nature of corporate governance has changed. Where once the CEO's job was to maximize profits in pursuit of the company's goals, these days it seems that most people feel that the only thing a CEO should be concerned with is maximizing shareholder value and laying off CdM.
Quote from: Neil on August 18, 2012, 09:06:25 AM
Where once the CEO's job was to maximize profits in pursuit of the company's goals, these days it seems that most people feel that the only thing a CEO should be concerned with is maximizing shareholder value and laying off CdM.
Yeah, that's the view from here.
Quote from: Neil on August 18, 2012, 09:06:25 AM
It seems like the nature of corporate governance has changed. Where once the CEO's job was to maximize profits in pursuit of the company's goals, these days it seems that most people feel that the only thing a CEO should be concerned with is maximizing shareholder value and laying off CdM.
everybody wants a quick buck now. if its what the shareholders and public wants, then thats what happens.
Quote from: OttoVonBismarck on August 17, 2012, 10:35:29 PM
No, my argument as to why Zuckerberg shouldn't personally care is because he's already cashed out. But you don't replace a CEO for no reason at all, can you point to anything Zuckerberg has done since the IPO that would justify his removal as CEO? (A moot point by the way, since he controls the board he cannot be removed against his will.)
The assumption is if the share price went down, the CEO has done something wrong?
That's stone cold retarded, and in general CEOs often have little control over share price. In some ways if I was an investor I'd prefer a CEO who isn't overly concerned with share price. There is an oft-repeated argument that because bonus schemes are tied to stock performance, CEOs will manipulate things to maximize the stock performance to the detriment of the overall company's long term competitive advantages. That argument isn't really that apt, if you actually look at CEO compensation plans at big companies they tend to be based on a nexus of performance metrics such as EPS, corporate free cash flow, total revenue etc...basically corporate boards aren't typically so stupid as to just base it on simple market price of the company's shares. So while the argument doesn't really apply to real world situations, it comes from the right place...namely that fluctuations in a company's share price can happen for any number of reasons. Many of them actually have little or nothing to do with that company individually, and for that reason it is foolhardy for an executive to obsess on them.
Profit is the lifeblood of a company, you need enough to remain a going concern, and then enough to maintain your business or grow your business against your competitors. If a CEO does boneheaded things, like make big bets on poorly designed new products (and for fun taking out lots of debt to finance it) and runs the company deep into the red that is time for action. If the CEO burns bridges with import supply chain partners, is allowing market share to be lost and isn't responding aggressively...those are all reasons to fire a CEO. If the CEO is just generally inept, that's a reason to fire the CEO. However, lots of very good companies have weird stock fluctuations that don't really affect the underlying value of the company itself. In this case you had a very high IPO price that was essentially the result of "media hype" and in fact that was good for Facebook; because of all that media hype Facebook the company (not Mark Zuckerberg) raised billions of dollars it can now use to make capital improvements or invest in new technologies or etc to increase revenue. On the balance sheet I'd be surprised if Facebook is not doing better right now than it was before the IPO just because it has more cash laying around. (I am aware they had a revenue decline in their first earnings report after the IPO.)
This.
Quote from: alfred russel on August 18, 2012, 02:13:20 AM
Quote from: crazy canuck on August 17, 2012, 10:25:05 PM
Quote from: OttoVonBismarck on August 17, 2012, 06:38:51 PM
There is good reason Zuckerberg doesn't care about the stock price, that money is basically fake money to him. On IPO day Zuckerberg sold enough shares at $38 or whatever stupid number the shares were trading at so that he'd basically have $5bn in actual cash. He basically is now permanently uber-rich no matter what.
That is a good reason why Zuckerberg should not be the CEO. Your argument boils down to "dont blame him for the share collapse. He got his and now he doesnt care what happens to the share price."
Now that is prime CEO material right there. :thumbsup:
It is a rather Orwellian concept that a guy founds a company with priorities ostensibly beyond the bottom line, is forced by law to go public, and is then forced out because he has priorities other than the bottom line.
It is worth remembering that facebook made a billion dollars after taxes last year--and Zuckerberg founded the company in his dorm room not too long ago. Whatever his focus is, he has produced some really remarkable returns in a very short period of time.
Your premise is that Zucker was forced to go on the IPO marketing spree, make a bunch of money by selling to the public and therefore the people that bought those shares are precluded from complaining that he has done a piss poor job since then.
Because why he is the founder. You do know that most founders do a poor job after their companies make a transition like this. Zucker is just the latest example of that. Of course rarely is such big money involved. But you know what the are calling the people that bought into the hype right... here is a hint it rhymes with Zucker...
I believe Garbon called it in the very first post in this thread.
Like I said, people had to suspend disbelief to think the initial valuation was valid. And Zucker took all the suckers for all they were worth. Hardly the type worthy of defending I would say.
Quote from: OttoVonBismarck on August 18, 2012, 07:48:32 AM
Quote from: DGuller on August 17, 2012, 10:47:42 PMDoesn't matter how much stock you own, I'm sure you can't agree to sell the entire company for 1 cent per share to another entity happened to be owned entirely by you, even if the majority of the shareholders (i.e. you) votes for it.
Why are you sure of that? I don't doubt it, but you don't actually have anything I've seen to back up that assertion. I've owned decent sized (for regular people like myself) stakes in companies that got bought out before, and the documents I got about it always basically indicated the shareholders would vote and if the majority approved the buyout price then I'd receive that value in cash or equivalent shares of the acquiring company.
Because I know that this country has minority shareholder protections, and doing what I described would be the most obvious and egregious scam. If doing what I described isn't illegal, then there are no such things as minority shareholder protections.
He could have done a lot in the beginning to keep the valuation from going too high, but my understanding from others who have gone through the IPO process is that it takes on a life of its own and you have little input after a while. Especially if it's hyped.
Quote from: DGuller on August 18, 2012, 02:04:24 PM
Because I know that this country has minority shareholder protections, and doing what I described would be the most obvious and egregious scam. If doing what I described isn't illegal, then there are no such things as minority shareholder protections.
You're basically talking about self-dealing. Zuck sells all of Facebook's assets to a shell company he also owns. Regular shareholders are left with nothing. That's how a lof of the Russian oligarchs made their money originally.
Quote from: OttoVonBismarck on August 18, 2012, 07:48:32 AM
Quote from: DGuller on August 17, 2012, 10:47:42 PMDoesn't matter how much stock you own, I'm sure you can't agree to sell the entire company for 1 cent per share to another entity happened to be owned entirely by you, even if the majority of the shareholders (i.e. you) votes for it.
Why are you sure of that? I don't doubt it, but you don't actually have anything I've seen to back up that assertion. I've owned decent sized (for regular people like myself) stakes in companies that got bought out before, and the documents I got about it always basically indicated the shareholders would vote and if the majority approved the buyout price then I'd receive that value in cash or equivalent shares of the acquiring company.
I don't about the US legal system, but in the EU, minority shareholders can challenge any resolution that is done to an obvious prejudice of minority shareholders or the company. Plus it's a crime for the management to act obviously to the detriment of the company even if this is approved by the majority shareholder. Both would apply here.
Quote from: crazy canuck on August 18, 2012, 10:27:10 AM
Your premise is that Zucker was forced to go on the IPO marketing spree, make a bunch of money by selling to the public and therefore the people that bought those shares are precluded from complaining that he has done a piss poor job since then.
Because why he is the founder. You do know that most founders do a poor job after their companies make a transition like this. Zucker is just the latest example of that. Of course rarely is such big money involved. But you know what the are calling the people that bought into the hype right... here is a hint it rhymes with Zucker...
I believe Garbon called it in the very first post in this thread.
My premise is that he made very clear what the focus of the company would be and what its priorities were prior to going public, and those definitely did not involve a focus on short term stock performance. So people that bought in at the IPO price aren't precluded from complaining about the short term stock performance, but I tend to think they had it coming. It also seems silly to judge Zuckerberg against metrics he was never setting out to measure himself against (ie, short term stock performance).
QuoteLike I said, people had to suspend disbelief to think the initial valuation was valid. And Zucker took all the suckers for all they were worth. Hardly the type worthy of defending I would say.
I disagree. For whatever reason the market felt that an IPO price of $38 a share (or whatever it was) was a fair price. Morgan Stanley offered to underwrite at that price. Why would facebook price the IPO at $20 a share in that environment? That would just mean Morgan Stanley and short term speculators would get the extra $18 a share.
If DGuller is so sure about things, I'd love to see him actually produce some evidence. I agree Zuckerberg would probably face suit if he tried to sell the whole company off at $0.01 per share. However the original contention, that Zuckerberg here in the real world has done anything that any court in America or any regulatory body in America would view as such a breach of fiduciary duty to the shareholders that he have his company taken away from him it is on you to prove that silly assertion. Or is that not what you were asserting? Because if not, your basic premise is...what? Zuckerberg should resign? Well if he just should resign, but doesn't have to, then why would he?
Quote from: OttoVonBismarck on August 18, 2012, 03:42:36 PM
If DGuller is so sure about things, I'd love to see him actually produce some evidence. I agree Zuckerberg would probably face suit if he tried to sell the whole company off at $0.01 per share. However the original contention, that Zuckerberg here in the real world has done anything that any court in America or any regulatory body in America would view as such a breach of fiduciary duty to the shareholders that he have his company taken away from him it is on you to prove that silly assertion. Or is that not what you were asserting? Because if not, your basic premise is...what? Zuckerberg should resign? Well if he just should resign, but doesn't have to, then why would he?
:unsure:
Also, in terms of the valuation, I'm not supporting the valuation, and I realize this is a crude way of looking at it, but the rate on 10 year US treasuries is under 2%. Those aren't indexed to inflation, and are subject to full income tax rates.
Facebook earned $1 billion last year. A $100 billion valuation means earnings of 1% a year, which even without growth in the core business should keep pace with inflation. Returns to shareholders are also taxed at the capital gains rate.
Of course an internet company has more risk than a government bond, but then also such a new company probably hasn't developed all its revenue streams and global internet access is exploding.
Quote from: alfred russel on August 18, 2012, 03:30:36 PM
My premise is that he made very clear what the focus of the company would be and what its priorities were prior to going public, and those definitely did not involve a focus on short term stock performance. So people that bought in at the IPO price aren't precluded from complaining about the short term stock performance, but I tend to think they had it coming. It also seems silly to judge Zuckerberg against metrics he was never setting out to measure himself against (ie, short term stock performance).
QuoteLike I said, people had to suspend disbelief to think the initial valuation was valid. And Zucker took all the suckers for all they were worth. Hardly the type worthy of defending I would say.
I disagree. For whatever reason the market felt that an IPO price of $38 a share (or whatever it was) was a fair price. Morgan Stanley offered to underwrite at that price. Why would facebook price the IPO at $20 a share in that environment? That would just mean Morgan Stanley and short term speculators would get the extra $18 a share.
I have no idea who you are talking to but your points do not address the fact the guy cant do what a CEO in his position needs to do and that is communicate will with the investment community - especially after such a high initial public offering price.
Also it is striking that Otto knows nothing about minority shareholder rights but feels perfectly qualifies to say that others who raise it are idiots.
Is there some kind of wierd facebook apologist coolaid going around.
Quote from: crazy canuck on August 18, 2012, 06:37:15 PM
Is there some kind of wierd facebook apologist coolaid going around.
I think it's hard for people to side with the financial orthodoxy on any issue, as they are bad people who have made decisions that have devastated the global economy while enriching themselves.
Of all CEOs of publicly traded companies in the world Zuckerberg has the least need to communicate well with investors, with the exception of CEOs that own even larger shares of their company like the Kochs. He doesn't need their approval to remain as CEO. They can exit the stock and bid down the price, but Zuckerberg has publicly stated he's indifferent to the share price and as was already mentioned he's already sitting on a mountain of cash.
Quote from: crazy canuck on August 18, 2012, 06:37:15 PMI have no idea who you are talking to but your points do not address the fact the guy cant do what a CEO in his position needs to do and that is communicate will with the investment community - especially after such a high initial public offering price.
Also it is striking that Otto knows nothing about minority shareholder rights but feels perfectly qualifies to say that others who raise it are idiots.
Is there some kind of wierd facebook apologist coolaid going around.
No, I've just yet to hear you or DGuller explain why Zuckerberg should step down, or present evidence that he's done something that would allow minority shareholders to force him out.
Do you:
1. Think minority shareholders could force him out over anything he's done?
2. If so, please point us to some printed regulation or code that would support your assertion.
If not, why should Zuckerberg care? :huh:
I don't think the suggestion is because Z needs to but rather that the company would be better off if he focused on the creative and let someone else take up CEO now.
Quote from: crazy canuck on August 18, 2012, 06:37:15 PM
I have no idea who you are talking to but your points do not address the fact the guy cant do what a CEO in his position needs to do and that is communicate will with the investment community - especially after such a high initial public offering price.
I don't think that this is relevant to the job of a modern American CEO. For your larger public companies, investment presentations by the CEO are prepared for him and are heavily vetted if not written by legal. For the Q&A sessions, companies anticipate the questions that will be ask and provide the CEO with responses--also vetted if not written by legal, and when a question is not anticipated the CEO usually falls back on talking points.
Facebook has made a strategic decision not to concern themselves with the short term move in the stock price, which seems a legit decision to me. In the longer term, any effect of Zuckerberg wearing a hoodie to meetings on Wall Street is going to be overwhelmed by the financial results of the company.
Quote from: Barrister on August 17, 2012, 12:55:03 PM
Quote from: derspiess on August 17, 2012, 12:01:44 PM
Quote from: Habbaku on August 17, 2012, 11:58:59 AM
Quote from: derspiess on August 17, 2012, 10:41:11 AM
WTF is a pension fund anyway??
:huh:
Sorry, I've never worked anywhere that has offered these "pension" things ;)
:console:
2030 is when mine vests. Only 18 to go...
It may not vest til then, but it pleated long ago...