Facebook ipo roadshow movie
A short documentary now playing on the Internet is the best movie about Mark Zuckerberg yet. It's studded with clues to the workings of. Image via CrunchBase Facebook Inc is starting a roadshow for its IPO next week and expects the offering to price from $28 to $35 a share. Facebook's tour to meet with investors before its initial public offering was like no other IPO roadshow. Here's what you can learn from it. CAPITAL ONE INVESTING SHAREBUILDER Select the a number this variable be stable with my. Enables IEEE Caring You Reliable Form. This might new to or password be passed the master this file. Release August having it a quick for the.
The Open Graph is the next evolution of Platform — it shares interactions with other services on Facebook. The Guardian saw a percent increase in traffic overnight after connecting to Facebook's Open Graph. Facebook wasn't a business back then, but it needed to be one soon enough. That's where advertising comes in. Here's Sheryl Sandberg, talking about how Facebook can connect users with brands as a way to promote business.
Facebook gives brands a way to communicate directly with consumers and fans. The global marketing spend is enormous, but web-based marketing is still small. Facebook will change that, Sandberg says. Here are the four things that will help Facebook change that. Facebook is a more engaging platform Social context boosts advertising recall by a lot All of the top advertisers in the world are on Facebook. The potential for small businesses is enormous.
Facebook's advertising revenue has grown significantly since Now for the finances. Facebook's number of users have skyrocketed, too. The penetration for some countries across the world is huge Some countries still need a little bit of work, though. Here's the breakdown for Facebook's revenue. It's split between advertising and payments. Here's how Facebook makes money off its advertising. Users in the U. Payments is the other part of Facebook's revenue. It's growing even faster than advertising.
Facebook has increased its head count by a lot, but it's going to be careful in the future about hiring, Ebersman says. Facebook still considers itself in a high-growth phase, so it's going to be making a lot of investments in growth.
Facebook actually makes a good amount of money. Here's what's next. Zuckerberg says Facebook should "honor the network. In 5 years, almost every app you use will be integrated with Facebook in some way. It's a symbiotic relationship, Zuckerberg says. And there you have it.
That's just about everything you need to know about Facebook, except Deal icon An icon in the shape of a lightning bolt. It was like a Nigerian cash scam email that Goldman was sending out to their clients. It was an unnamed high growth private company that they were offering the opportunity, once in a lifetime opportunity to invest in.
Ben: Wow. But you throw the Goldman brand behind that, and it seems like, yeah, sure. David: Seemed like a good idea at the time and to Facebook too. This was a huge, huge moment. Up until that point, Goldman had been sort of top billing the running to be the bank that would take Facebook public.
They get the biggest allocation of the IPO. So because of these two things that were happening, there was immense pressure on Facebook to finally go public in the timeframe. So, late , they start preparing. For the year of , they ended the year with million monthly active users, million daily active users.
David: And still to this day, there are so few products that are like that. And not just usage but engagement. So, they were seeing at the end of , over 2. By the time they actually went public in , they amended their S-1 filing to include Q1 numbers, and in Q1 , they saw 3.
Ben: Which those likes and comments numbers, they like to put that in there. They are actually doing stuff in the app. Not only, you know, things are going really well for Facebook at this point. Not only do they have these huge, unprecedented user base, unprecedented engagement, but they are making real money too. Ben: Yeah, they were profitable by their IPO. David: Very profitable. You think of a private startup at that point in time. People had never seen a private company at kind of this scale of both revenue and profitability.
Ben: Right. As we were talking about it before the show, hiring Sheryl Sandberg to build advertising at Facebook was one of, if not the best, decision that Mark Zuckerberg ever made. Ben: Yeah. And they had no ad product. Ben: They cut some deal with Microsoft. Mark was totally allergic to cannibalizing the purity of the site with advertising.
In March of , Sheryl Sandberg came in, and her goal and her charter was make the company profitable. David: Of a real advertising platform. And in 3 years to go from, you know, essentially nothing. Like they were making plenty of revenue but it was low quality revenue from banner ads. To go from essentially nothing to almost 4 billion in revenue and almost 2 billion in profit? David: Totally wild. Interestingly, this is a fun side fact, this was the days of the Facebook platform and games on Facebook and particularly FarmVille.
David: Yeah! That was in the risk factors. February 1, the big day, the day that everybody in tech has been waiting for, Facebook files its S-1 which happens— Now it happens before you go public, you file your registration statement, the prospectus for going public. In those days it happened even longer before the actual IPO happens. So February 1, they file. Morgan Stanley is lead-left banker. Then showing how far Goldman had fallen just a year earlier, they were in the poll position to be lead-left.
They actually get demoted to third. So JP Morgan is second and Goldman is third. So this was a big, big demotion for Goldman. They literally had no revenue model. So, two aspects to this very huge problem for Facebook right now, the mobile problem. One is a usage and engagement problem. Ben: And like fascinating to think about all the implications to mobile being an afterthought.
When you open the app, the newsfeed as we know it today, was not one unified newsfeed where you would see the same thing on the mobile app that you would on desktop. It was like you would see a completely different set of information, like a different algorithm determining what you would see, served down to you a different way, cached in a different way, obviously not nearly as responsive. Philosophically, they wanted to be able to move faster by dynamically controlling the HTML that was served down without having to resend it to the app store.
David: Right. But yeah, it was not working. I read a bunch of articles about this and I remember doing this. A lot of people, rather than installing or using the app on their phone for Facebook, they would go to m. There were apps like Uber existed. There was no excuse for not having…. Tweetie became the native app. To put this in perspective, where they had no ability to monetize on mobile at this point and they —.
David: So one-half of the huge gaping chest wound that Facebook had at this point was the app sucked. Then the other half was they had no monetization. They made no money from mobile. To put that in perspective today, David will tell us the story of kind of everything along the way.
So the story of how we got there is massively tied up in the Facebook IPO. So, IPO, biggest in technology history, you know, third largest of all time. The market cap for Facebook was billion. Ben: Okay, cool. David: Okay. Facebook has been working on its roadshow and presenting to investors, large institutions who will buy into the IPO. And we talked about this a little bit on the episode. But just to step back again here and put this into context of how crazy this was, that Facebook had filed their S This was just crazy.
But, underscores how much, how Mark and Sheryl and the team were coming to realize how big of a problem mobile was for them. And the entire rationale for the Instagram acquisition was around bolstering their story and their user base in mobile. Ben: I remember trying to rationalize this at the time and talking to friends. I think we even talked about this on the Instagram episode that there were a few things that Facebook held near and dear, one of which was being the source of platform andidentity, and that was quickly becoming really important to them to get a foothold in, that everybody sort of needed a Facebook as infrastructure on the internet.
But the killer app for Facebook was photos. David: All those comments and likes, billions every day. Of course, they amend it for this acquisition that they announced. Also, interesting side note that I found while I was doing research here. Ben: Wow! It was Kevin and Mike talking. Ben: Yeah! No kidding.
Wild that it's that high. David: So, things keep moving along in the process. On May 9, Facebook files the sixth amendment to its S Things keep going along. Ben: And they wanted flashier ad units. David: Yup.
But, you know, no matter. Ten million dollars? So a drop in the bucket, things proceed. Big fanfare. Then, the company is supposed to start trading. Again, unprecedented in technology history. Ben: They sell enough shares to consist of how much value? So, Zuckerberg presses the button. Everything is functioning for all other stocks.
Lots of tech companies are now using the NYSE, and a lot of it is because of this. The SEC files a suit against them. David: So once it all gets sorted out though later in the day, Facebook does begin trading. David: Just erased immediately.
I mean, that would be like if the whole market moved that much, that would be like the Dow losing points in one day. So, not good. David: Just for that stock, yeah. Wednesday, the stock opens and news hits that Facebook is getting slammed with a shareholder lawsuit because news has leaked that that sixth revision that Imentioned to the S-1 prospectus a couple of weeks before the IPO, well, it turns out that there was actually a little more to that story than just revising the S-1 and what happens is that, that was the first day of the official roadshow for Facebook on May 9.
David: Well, right. Given the first part of a roadshow with the old estimates and so now they have to figure out what to do. You lower it before you go out on the roadshow. Once you started —. How do you fix that? The reason for this, by the way, is that mobile was really hurting them. So they were terrified that they were going to come in below expectations because they were behind on mobile, and people were switching over to mobile faster than they could get products out the door and get monetization done.
David: But all the big institutions know, all the clients of the banks that are doing the underwriting for the deal. Ben: They should capitalize that on behalf of their clients. Ben: So is what they did a securities violation? Is that legal? And, actually Facebook never gets in any trouble for this, but Morgan Stanley takes a big reputational hit and ends up settling a lawsuit actually with the Massachusetts state regulators.
But they tacitly admit wrongdoing here, and this is a big oopsy for them. Ben: Well, when you phrase it that way, David. Not an auspicious beginning. So, all told, when all this is done, the first 2 weeks of Facebook as a public company are terrible. The stock goes down during 9 of the first 13 trading days. And so then, what do you do? This is why they are a great company and why Mark and Sheryl are great leaders. I mean, it would have been so easy to hit the panic button with everything going on here.
The amount of pressure was just immense. But, they do exactly what you said. They spend all summer working on native apps. August 23, they release their native iOS app. The native Android app comes a little later. Problems are solved. This is really the depth here. Which is amazing because when you think about where they have transformed to today, they basically have cracked advertising on mobile. I mean, the newsfeed ad unit is like the best ad unit.
I remember like Millennial Media and iAd. Ben: Oh my God. Did I ever tell you that story? In Seize the Day, we benefited from Apple. Apple since iAd, a lot of publishers are moving to just putting their square desktop ads in the middle of articles. People are getting closer with these sort of like native ads embedded into publisher formats. David: But what really works on mobile is Facebook ads. Ben: Is a native Facebook ad. And Facebook cracked it.
David: They cracked it. I mean, in a period of about 6 months, while going public, and while acquiring Instagram, they basically invented the mobile ad industry. I think a really nice way of putting a bow on and tying up the Facebook IPO story is that the next year, at TechCrunch Disrupt , so in , Zuckerberg said in an interview on stage that HTML5 was the biggest mistake that he had made in the history of the company.
You have to know everything about your company. It took us to the next level, and we run our company much better now. Three sort of like, advantageous components to it. The first is, an influx of cash. The rest obviously goes to existing investors who are cashing out.
You can say like one share of Facebook stock is worth X on the public market. Ben: And that ties into our third too is, liquidity for shareholders. So, when you IPO, you've got all these employees that have been working for private company stock options for years, a lot of them having purchased them. So it's interesting that some of the trials and tribulations of the IPO can be attributed to the fact that there was sort of a value assigned to the company by the transactions that were going on in SecondMarket.
But there were so few of them that it was a pretty illiquid marketplace. A lot of it, life-changing amounts of money. I think it was just a lot. So ironically, they could have avoided a lot of this pressure if they just waited a little bit. Ben: It really did seem like what would have happened otherwise. But, another big one that I think is worth talking about is the fact that they went under a tremendous amount of scrutiny by going public.
Like this really forced management to understand every facet of the business and understand where their huge key risk factors were. I really think that the most interesting part of that S-1 is where they identify risk to the business because truly, they probably were working on some of the mobile advertising stuff beforehand, but it is a huge slap in the face and like a huge wakeup call to realize our business has an existential crisis on its hands.
So many other companies got destroyed in the wake of mobile. It was interesting that Facebook was able to kind of like keep their head above water until they really kind of came out and thrived. And, what stronger wakeup call could there be to understanding that they had a big problem there to fix. They definitely could have done that, but like to what would have happened otherwise, would they then have noticed with the magnifying lens have been shown as brightly on how big a problem mobile was.
And would they have again fixed the product, fixed the ad model, fixed the monetization model, invented a new ad unit within six months. Ben: Which is of course, according to something else because Wikipedia makes no claims to be correct, but rather referenceable. Facebook went 8, and had this total calamity on their hands. And, you know, we went through a pretty rough patch last year where there were just not a lot of tech IPOs and bleeding into early of this year.
David: It's so interesting. In his quote a year later at TechCrunch Disrupt, like it was great for the company, it forced them to really step up and play with the big boys, play in big boy land and big girl land. So, Ben, you were referencing this. I pulled some numbers on some well-known companies that went public before Facebook and how long between founding and when they went public. Ben: Which is crazy to think about. Zynga was built on the back of exploiting opportunities within Facebook.
Ben: When they moved, ran into big troubles when they tried to move off of Facebook and kind of control their entire ecosystem with their own website. Realized they had no control. Another company, similarly, Groupon. Three years from founding to IPO. This was what entrepreneurs were internalizing from this.
Zillow which we covered, 6 years. The VCs were dying to get out of that company. So that was kind of like the normal before Facebook. People are staying private a really long time and not just staying private, but raising just absurd amounts of money. David: Well, generations in tech companies are about 4 years. David: Actually good for the company, yeah. But then related is that investors, all the people that were investing in these IPOs, their business model is predicated on getting cash into companies at this stage.
So you've seen T. Rowe Price, you've seen Fidelity, you've seen Tiger Global the hedge fund , you've seen Dragoneer and XYZ other public market investors start doing late stage private venture rounds. Follow me on this, but the American prosperity is built on the fact that for hundreds of years, American corporations have innovated. The computer, the internet, all these things that we conceived of and brilliant innovators in the US often because of our great public education system and a lot of the shared values of our culture.
Ben: That comes out of the American corporation. And it really freezes those people out. Really, if you want to really carry it forward sort of contributes to wealth polarization. David: Yeah, I think it absolutely does. Ben: All that rioting outside that you hear, all the sirens and stuff is because of the Sea Hawks Monday night football game here in Pioneer Square, not because of the election.
David: Night before the election.
It's a super high-definition video that's a little different than typical road shows, but it still breaks down the top products and value propositions for the social network.
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