Reaction to the official announcement yesterday about Facebook filing with the Securities and Exchange Commission for its initial public offering was fast and furious.
The media coverage doubtlessly inspired Chief Executive Officer to upload to his profile the picture shown here. Following are some highlights of the reactions we’ve noted online.
Facebook had 845 million monthly active users at the end of 2011, it said today when it filed to go public. That’s an increase of 39 percent from 608 million active users at the end of the previous year. With $3.71 billion in revenue spread across 2011’s users, that gives a rough total of $4.39 in revenue per user, per year.
But how exactly does Facebook’s ad business work? We still don’t know a lot about that part. The S-1 mentions “advertising” 123 times, and “advertisers” another 117 times.
But when it comes to describing how the company actually sells advertising, it is vague. We know that some of Facebook’s ads are sold via an automated self-serve system, and some are sold via sales teams working in 30 offices around the world. And we know that Facebook uses an auction system to price some of its inventory, and that it lets advertisers target users to some degree, based on their demographics and interests.
But Facebook doesn’t break any of that out in its filing. It simply has one big bucket labeled “advertising.” There’s no discussion of click-through rates, or the size of the average ad buy, or what percentage of ad buys come from repeat customers, or how “lumpy” its sales are.
Over the past year, Facebook’s revenue growth has slowed sharply, from 100 percent-plus to 55 percent in the fourth quarter. Revenue growth of 55 percent is impressive, but it’s not nearly as impressive as, say, Google’s growth was at this stage of its development.
And it’s not even as impressive as Apple’s growth is right now (an astonishing 73 percent in the last quarter, off of a vastly larger base).
What’s more, Facebook’s revenue is decelerating fast. Unless something has changed in the business since Q4, revenue growth in Q1 could be sharply slower than in Q4. And that would really begin to hammer the company’s valuation.
If you want to argue that Facebook is worth $100+ billion, meanwhile, you have to believe that Facebook will eventually launch a huge, fast-growing business that it hasn’t yet launched, or radically accelerate one of the two businesses it’s in today (payments and ads). Either of those things is possible, of course.
With Facebook’s astounding user-metrics, it has one hell of a platform to build on. But possible is not the same as probable. And paying a $100+ billion price for Facebook’s stock based on the possibility that it might someday invent an amazing new business would be fairly described as speculative. Or nuts.
Facebook has approved the use of a private plane for Chief Executive Officer Mark Zuckerberg and Chief Operating Officer Sheryl Sandberg. Zuckerberg can also use the private plane for personal purposes as part of the company’s security plan for him. In those cases, they’ll count it as part of his compensation. Last year, the company spent $692,679 this way.
Buried in Facebook’s filing for its much-ballyhooed initial public offering is the sort of contradiction that might sink a lesser company: The more that people use Facebook’s mobile offerings, the worse the company’s bottom line becomes.
That’s because Facebook’s mobile offerings don’t feature display ads. Or, as Texas Gov. Rick Perry was wont to say on another occasion, oops. It’s a pretty big oops.
Facebook has tremendous potential to become a cash-generating machine, but can it capitalize on its opportunities? That’s the question a lot on Wall Street are asking themselves one day after Facebook filed its S-1 IPO prospectus with the Securities and Exchange Commission. The social network boasts an impressively large — and engaged — user base. Yet the company hasn’t fully figured out how to make money off of them.
There’s no doubt that mobile is Facebook’s future. In December, Facebook said that more than 425 million monthly active users accessed Facebook on a mobile device.