Today will be a great day for hoodie wearing Facebookers
everywhere. Facebook (
) is going public and expected to price at $38 a share, valuing
the company more than $100 billion. This will place Facebook in
top 40 companies by market cap
Facebook's stated mission is to make the world more open and
connected. The strategy has been working so far which has created
a fair amount of excitement in the IPO.
Below are some of the key stats from Facebook Amended S1:
Facebook has 901 million monthly active users (MAUs) as of
March 31, 2012, an increase of 33% as compared to 680 million
MAUs as of March 31, 2011. And 488 million MAUs used Facebook
mobile products in March 2012.
The users stats and growth are impressive. Facebook is huge.
But translating users into revenue isn't easy. All of these users
are happily interacting with friends and sharing photos. The last
thing that many users want to do is work on a "virtual farm" from
), which is profitable for Facebook. Many have to date played the
game - but will the continue? Facebook generates 15% of its
revenue from Zynga. From the S1, "If Zynga does not maintain its
level of engagement with our users or if we are unable to
successfully maintain our relationship with Zynga, our financial
results could be harmed".
Not sure if more people will be growing virtual farms in the
future but a reasonable investor may see some risk here. The rest
of the revenue is generated from advertising which has proven to
be a tough business for most, including Google.
Many retail investors who aren't selling shares in the IPO
like Facebook insiders and Goldman Sachs (
) are looking to buy some shares to pick up the "next Google".
You might want to review the performance of some of the recent
technology IPOs before trying this.
When Google (
) went public, revenue and profits where growing and there were
hundreds of thousands of businesses that used Google AdWords to
build their businesses. Businesses could buy ads on Google and
generate leads or sales with a proven positive ROI. The data for
Facebook advertisers is much less convincing at this point. Just
ask General Motors (
In addition, Google priced at a much lower valuation, even
though the business model was arguably more stable and growth
rates were higher. You can see this in the Google chart
Facebook said, "we expect our rates of growth will decline in
the future. We believe that our rates of user and revenue growth
will decline over time. For example, our revenue grew 154% from
2009 to 2010, 88% from 2010 to 2011, and 45% from the first
quarter of 2011 to the same period in 2012."
Google's IPO generated huge profits for retail investors that
bought the IPO at $85 a share. This was made possibile by the
amazing business performance after the IPO. Google continued to
expand revenue and profits at a rate of more than 50% after the
GOOG Revenue Growth
If you feel like you need to be a part of the Facebook IPO, go
ahead and buy but keep in mind that you aren't buying the "next
From the editors of YCharts.
YCharts Pro Investor Service