Facebook considering doubling size of European HQ in Dublin

FROM: http://www.digitaltrends.com/international/facebook-considering-doubling-size-of-european-hq-in-dublin/

January 20, 2012By Trevor Mogg

With a rumored IPO coming in May and the site close to getting its billionth user, social networking giant Facebook is said to be looking to double the size of its European headquarters in Dublin, Ireland.

Things are happening at Facebook. Well, of course, things are always happening at Facebook, but news emerged on Friday that the social networking giant is considering doubling the size of its European headquarters in Dublin.

If you double something that’s small, it remains pretty small, but Facebook already has a sizable presence in the Irish capital. Indeed, doubling its current 5,000 square meters (54,000 square feet) of office space would take it from fairly big to large.

According to Bloomberg, who cited three people with knowledge of the matter, Facebook is considering leasing around 11,500 square meters (123,000 square feet) at various locations, including the building of the former Bank of Ireland headquarters.

The Dublin office, which was opened by Facebook nearly four years ago, is responsible for all the users of the social networking site based outside the US and Canada, Bloomberg reports.

The Irish Times says the 300 or so Dublin-based Facebook employees are mostly concerned with “advertising, multilingual sales support, finances, human resources, user operations and development.”

Besides the rumored Dublin expansion, a report late last year suggested the company is also set to build an enormous server farm in Sweden, close to the Arctic Circle, to improve site performance for European users.

The reports of further expansion come ahead of a rumored May initial public offering (IPO) which could value the company at around $100 billion.

This year could also see the site welcome its billionth user, astonishing growth for a company that started out less than eight years ago.

Here's Facebook's Q4 Ad Performance In A Set Of Delightful Charts

FROM: http://www.businessinsider.com/facebook-q4-2011-ad-revenues-2012-1

FOR THE CHARTS GO TO http://www.businessinsider.com/facebook-q4-2011-ad-revenues-2012-1#cost-per-click-up-just-1-1

Jim Edwards|Jan. 16, 2012, 7:00 AM

Facebook's cost-per-thousand ad impressions rose 8 percent between Q3 and Q4 2011, and 23 percent since Q1, according to data from TBG Digital, an agency that specializes in placing and serving Facebook advertising.

The numbers bode well for Facebook's IPO, expected in the spring. Cost-per-thousand impressions (CPMs) are the money the social network earns by selling ads. The more it can charge, the greater Facebook's dollar revenue is likely to be.

TBG Digital culled the data from 266 clients and 326 billion impressions it handled during Q4 2011. Its clients include Dell, Coca-Cola and Heineken.

Facebook gets a global average CPM of 22 cents, according to TBG Digital CEO Simon Mansell. "They are driving that CPM up ... to have that CPM number creeping up, that's the important number for them" in terms of pricing the IPO against future revenues.

Mansell (pictured below) declined to say what he thought Facebook's Q4 revenue would look like in actual dollars, but said he thought our earlier estimate -- of about $3.6 billion for 2011 -- was in the right ballpark.

TBG Digital

That's the good news. The not-so good news is that Facebook remains heavily dependent on just a few business sectors for its revenue. Facebook's top advertisers are finance brands and games, at 18 percent and 13 percent of impressions, respectively (see charts in the following slide show).

That doesn't sound too bad until you realize that those shares are calculated after TBG Digital excluded one large gaming client from the analysis: "We've excluded an advertiser here because it skews the numbers," mansell said, cryptically. He declined to name the advertiser but it's probably Zynga, which pays Facebook a 30 percent cut every time someone buys something in a game via Facebook Credits, and is constantly seeking new players on Facebook.

In other words, Facebook remains heavily dependent on Zynga's health for a portion of its revenue.

The other story in the numbers is the effect of Sponsored Stories, the new Like-based ad function that rolled out in Q4. It's working, Mansell says. "Those get a better click-through rate than normal Facebook ads [such as the display boxes you see on the right side of the page]. That allowed advertisers to pay a lower cost-per-click.

TO SEE THE CHARTS GO TO http://www.businessinsider.com/facebook-q4-2011-ad-revenues-2012-1#cost-per-click-up-just-1-1

Facebook rewards advertisers linking back to the social network with a 50% discount

FROM: http://thenextweb.com/facebook/2012/01/16/facebook-rewards-advertisers-linking-back-to-the-social-network-with-a-50-discount/

16th January 2012 by Nancy Messieh

According to All Facebook, the social network is encouraging advertisers to link back to Facebook pages rather than their own sites, by offering them a huge 50% discount on the ads, a figure that has continued to grow over the past year.

Using auction-based pricing, users found that Sponsored Stories which encourage users to Like a page on Facebook or install a Facebook app come a lot cheaper than linking to a site outside of Facebook.

While Google’s recently launched social search was met with a huge backlash and concerns over antitrust issues, Facebook is taking a more subtle approach in doing everything in its power to keep its users locked into the social network.

Facebook itself has already come under fire for using tactics which keep users from leaving the confines of Facebook, with Sir Tim Berners-Lee referring to the social network as a ‘Walled Garden‘.

Speaking to the Financial Times, TBG’s Chief Executive Simon Mansell describes the move as aggressive, but does go on to say, “If brands invest money coming up with campaigns that are social by design, Facebook gives them some money back in lower advertising – that feels fair to me.”

Analysing 326 billion impressions from 266 clients in 205 countries, TBG also revealed how these changes were met by its audience – the Facebook user. Click-through rates on ads rose 18% from the first to to fourth quarter, and cited the example of France, where click-through rates doubled in the last quarter after an increased use in Sponsored Stories. This could imply that users are far more interested in clicking ads that lead more Facebook and less web.

On the flip side, in the US, where Sponsored Stories have been in use for a while, the figure actually dropped by 2%. While linking back to Facebook itself might earn advertisers a discount, the cost per thousand impressions actually saw a 23% increase.

Facebook recently made a pretty big move, beginning to drop Sponsored Stories in users’ news feeds, which will likely have a positive effect on click-through rates for the coming quarter.

About Facebook's Potential $100B IPO

FROM: http://www.therainmakerblog.com/2012/01/articles/law-firm-marketing-1/social-media-marketing-for-lawyers-about-facebooks-potential-100b-ipo/

Posted at 9:00 AM on January 15, 2012 by Stephen Fairley

Yes, you read that headline right: Facebook is anticipating a $100 Billion IPO, reportedly scheduled for sometime between April and June.

This would make the Facebook offering the largest in tech company history, with only three other U.S. companies in the same category: AT&T, GM and VISA.

This infographic produced by AccountingDegreeOnline.net shows what this mammoth IPO looks like:

Facebook Adds In-Game Offers Option For All Developers, Hoping To Further Diversify Revenue

FROM: http://techcrunch.com/2012/01/08/facebook-adds-in-game-offers-option-for-all-developers-hoping-to-further-diversity-revenue/
BY ERIC ELDON

Facebook has just started letting any developer on its platform run advertising offers that pay out directly in the native currency of their games. Let’s say you’re playing Ravenskye City, a new simulation-exploration game from Lolapps, and you want to get some more of its Skye virtual currency without buying Credits. You can now take a selection of offers — signing up for a Flixster movie account, for example — just by clicking through the “Earn Skye Credits” interface.

This is a big deal for many developers, because for the past year or so Facebook has restricted in-game, native curency offers to only the largest companies on the platform. That is, Zynga, EA’s Playfish, Playdom, and a few of the others who had signed on to the exclusive five-year commitment to use Facebook Credits as their exclusive virtual currency in games.

The restriction had given these big developers an advantage in making money on the platform, because users are more likely to want to take an offer if they can see that it’s directly linked to buying virtual goods in the game they’re playing.

The big picture is this.

A final chapter is closing in the long-running drama around virtual currencies and offers. Everything is now back to the way it was when developers first started running offers in their games back in 2007 — except that these offers are not scams, and that Facebook is taking a 30% cut of everything.

Considering that Facebook is going public soon, this move could also help it further diversify the sources of its Credits revenue beyond Zynga and a few other big developers. That’s something public investors would like to see.

Time for a little history. Before developers had fully figured out how to get users to pay money directly for virtual currencies on Facebook, they’d discovered that some users were willing to take offers to obtain them. As the virtual goods business model evolved with the Facebook platform over 2007 and 2008, developers began optimizing offers for revenue in the same in-game native currency form that is once again available today.

The problem, then, was that the offers that brought in the most revenue were basically the sorts of online ad scams that you can find elsewhere on the web, like ringtone subscriptions that you can’t unsubscribe from. Some users have wanted virtual currency so badly that they’d take these offers, then discover crazy charges on their credit cards later on.

Instead of trying to provide offers from legitimate companies — the ethical and sustainable thing to do — many developers and offer providers focused only on making as much money as possible. They disregarded the occasional critiques from bloggers including myself during this period, until TechCrunch founder Michael Arrington went after them in his extensive ScamVille series… at which point Facebook started regulating the market.

Facebook’s solution proved to be on a much bigger scale, though. It decided to introduce its own virtual currency, Credits, over the course of 2009 and 2010, ultimately making it mandatory for all developers. The single currency both helped build user trust around virtual goods purchases, and gave Facebook a way to take a 30% cut of all the revenue that developers were bringing in. That’s something it hadn’t had a way to do before.

Offers weren’t an inherently flawed concept, they’d just been amorally implemented by developers and offers service providers. Facebook ultimately brought them back — within Credits — via a special arrangement with Trialpay, the company that sources most of the legitimate offers you see on the site today. The main reason Trialpay got this deal was that it was an experienced offer provider on the web, that was relatively new to the Facebook platform, that had been running quality offers with Playfish.

Developers have been able to use their own branded currencies within the Credits system since last year (where the currency you buy looks like its in the game, even though Facebook is still running the system and taking a cut). So why did it take so long for Facebook to bring the rest of the platform up to parity with the big developers for native offers? Technical issues created some delays, apparently, say industry sources, although that doesn’t really explain the long time lag.

The change on Friday means big newer developers, like Kabam, Wooga, Kixeye and Lolapps and King.com, will now be able to bring new revenue through the native integration (and so make money for Facebook).

The entire virtual goods business on the platform (mostly direct payments for currency, but some offers) will be worth $1.6 billion in 2012, according to the Inside Virtual Goods report. Zynga has dominated. A calculation of AppData numbers by Lazard Capital Markets shows that Zynga’s market share among users of the top thirty games on the platform went from 50% in October of 2009 to 58% last month. Meanwhile, its advertising revenues grew 224% in the first 9 months of 2011, according to its S-1 filing, and around half of that was offers, according to an industry insider.

So, after all the drama and years of Facebook is now headed towards an IPO with a platform that’s cleanest and most level that it’s ever been, that’s providing it with approximately $500 million in annual revenue — and about to go up because of the change.

Eager for Facebook's IPO? Take a look at what's happening to Groupon and Zynga shares

FROM: http://m.itworld.com/mobile-wireless/238385/eager-facebooks-ipo-take-look-whats-happening-groupon-and-zynga-shares

Shares of social media companies that went public late last year struggle

By Chris Nerney Add a new comment

January 06, 2012, 11:44 AM — As Wall Street awaits Facebook's highly anticipated initial public offering, which could come as early as April, investors eager to snap up shares of the social networking giant on the first day of trading might want to do a little research first.

There were two major IPOs last year from companies associated with social media -- daily-deals site Groupon and social games site Zynga. Both have been flops on the stock market (so far), in large part because investors fully recognize the potentially huge flaws in each company's business plan.

Groupon (NASDAQ: GRPN), of course, was a shaky bet from the start. The Chicago-based company is losing money, it ran into problems with the Securities and Exchange Commission last summer over how it counts revenue (it was overcounting), and it's in an untested market that already is showing signs of oversaturation and customer fatigue.

Perhaps most ominous of all, a recent study by Susquehanna Financial Group and daily-deals aggregator Yipit found that more than half of the merchants (52%) who have done daily deals through Groupon don't plan any more for at least the next six months, and another 24% plan to run just one deal during that time.

Which means two things:

1) Groupon is having serious customer retention problems. In a market with many competitors and low barriers for entry, that's dangerous.

2) For Groupon to continue growing revenue, it needs to keep finding new merchants or rely on the 24% that are regular, repeat customers.

Wall Street apparently isn't confident that's going to happen. Groupon shares were trading at 17.63 early Friday (after hitting a new low of 17.50), down 43.4% from the 31.14 that some shrewd investors paid on November 4, when the company went public. The stock also is down 32.5% from the first-day close and 23.5% from December 27.

Zynga (NASDAQ: ZNGA), meanwhile, on Friday set its own new low since going public on December 16. Shares reached 8.64, or 24.9% below the 11.50 they peaked at in their first day of trading.

(Click this link for my thoughts on IPO first-day investing.)

Zynga had the largest Internet IPO since Google's in 2004, and while it raised $1 billion, shares finished the first day below the offer price, an almost unheard-of occurrence in the big-time Internet IPO game.

Unlike Groupon, Zynga is profitable. But like Groupon, Zynga's business plan carries sizable risks. Particularly, about 94% of Zynga's revenues come from people who play its games (FarmVille, CityVille, Mafia Wars, etc.) on Facebook.

In addition, as Zynga itself notes, a small percentage of its players account for nearly all of the company's revenue.

What happens when these get-a-lifers have to find jobs, or merely get bored with the games that are consuming all their time and energy?

That's the perpetual threat facing Zynga, which is now in the position of having to crank out more titles to keep the simpletons amused. The problem is, many people think Zynga is sacrificing quality for speed to market. The company's latest offering, Hidden Chronicles, is a lazy ripoff of an existing game, according to Forbes contributor Paul Tassi, who writes:

Zynga has had time and money to make their game more polished than their competitors, but once again, it shows that the company refuses to innovate in any way, and is merely a follower when it comes to ideas and game design.

Of course, you can be a follower and still be successful merely by meeting the low expectations of your customers. The problem with that strategy is low expectations also can easily be met by competitors.

So what does this mean to potential Facebook investors? It means they must resist getting swept up by the hype and excitement over the "biggest IPO we've seen in years," as one analyst put it, and look at the numbers when Facebook files its S-1.

And what they'll see, if they read carefully, is that Facebook's alleged 800 million users are a mirage. Facebook defines "active users" as people who "have logged in during the past 30 days." Are they kidding? How many of those 800 million log in every day? That's an active user, not someone who logs in once a month.

Further, and I've been beating this drum for awhile, what's to stop heavy Facebook users from eventually burning out on the service or gravitating to another social networking site that is more attractive than Facebook in some way? It's hardly unprecedented (right, Myspace?).

Facebook's underwriters will do everything they can to stoke rabid interest in this IPO. They will tell you Facebook is the greatest, most promising, world-changing, dominating, profitable and enduring company in the history of the planet.

Great. Then Facebook should still be here a month after the IPO, when shares can be had a more reasonable price. At the very least, investors, remember that.

Google Plus vs. Facebook: not a zero-sum game

FROM: http://tech.fortune.cnn.com/2012/01/05/google-plus-vs-facebook-not-a-zero-sum-game/

By Dan Mitchell, contributor January 5, 2012: 1:40 PM ET

 

Google Plus is growing fast. How much business it takes away from Facebook will depend -- but it's easy to imagine both thriving and competing with each other for years to come.

FORTUNE -- Whenever the subject of traffic or membership on social-media sites comes up, a caveat should be offered: it's really difficult to tell which numbers to believe, if any. Facebook claims 800 million "active users," but I know lots of people -- myself included -- who have more than one account. So, active accounts, maybe. But the number of users is not likely to really be approaching 1 billion of Earth's 6.8 billion inhabitants.

The numbers are even murkier when it comes to Google Plus. Since Google (GOOG) hasn't disclosed its own numbers lately, we must rely on those from outside observers. But the evidence suggests that Google's answer to Facebook is growing fast. Paul Allen, the founder of Ancestry.com who calls himself an "unofficial statistician" for Google Plus, offers an optimistic prediction: that Google Plus will have 400 million users by year's end. Right now, it has just over 60 million, he says. He bases his prediction on his claim that nearly a quarter of all of Google Plus's users signed up in December, indicating a rather breathtaking rate of growth.

Some observers say Google Plus's growth rate is actually higher than that. The last official word from Google itself came in October, when CEO Larry Page said Google Plus had 40 million users. The company didn't give any more information than that, such as how those users were counted: Active monthly users? Did it include people who signed up for the service but have never used it?

But if Google Plus really does reach Allen's estimate for this year, it would turn around what is a troubling trend for the search giant: as a whole, the company is still ahead of everybody in terms of unique visits, but it's being crushed by Facebook in terms of time spent on any given Google property, such as search and YouTube. By that metric, Facebook beats Google, YouTube, Yahoo (YHOO) and AOL (AOL) combined. No wonder Google is putting so much money and effort into social media. Too bad it happened so late.

Still, Google is not easily dismissed. Too often, Google Plus vs. Facebook is presented as a zero-sum game, as if the success of one must result in the downfall of the other. But there's no reason that they can't both thrive, competing with each other (and with Twitter, et al) for users and ad dollars. They share many of the same users now, and that will likely continue to be the case. It's easy to imagine them each claiming different demographics to appeal to different advertisers. Perhaps Google Plus will end up being the network of professionals, techies and creative types, while Facebook continues on as the network of the mainstream. Maybe Google Plus will end up with fewer members and less traffic, but higher CPMs.

Anyway, that's one scenario. One big risk for Facebook in what is fast becoming a real competition is that it will lose more members the more often it creates obnoxious features like the Ticker, carelessly invades users' privacy, or radically revamps the site, as it has done several times recently, culminating in the new Timeline feature. The more friends someone has on Google Plus, and the more features that site adds, the lower the cost to users of switching over from Facebook, or at least of adding Google Plus and going to Facebook less often.

Unless it is careful, Facebook will, if anything, be more prone to muck about with the site once it has billions of dollars of the investing public's money at its disposal after its expected IPO this year. Better Facebook should use the cash to improve service and make deals with more media and gaming companies to add to the site's features. That is, to work on making it more attractive to users rather than less so.

2012 Prediction No. 1: Facebook Goes Public, But Won't Start IPO Landslide

FROM: http://www.forbes.com/sites/roberthof/2012/01/04/2012-prediction-no-1-facebook-goes-public-but-wont-start-ipo-landslide/

Robert Hof, Contributor

This is one of a series of 2012 predictions I’m making for Internet media and advertising. You can see the rest compiled here once I get them all posted with links.

Facebook will make the signature stock offering of the decade, one that reportedly will value the social network at up to $100 billion. But it won’t launch a thousand IPOs as a gazillion venture capitalists and angel investors hope.

Of course, the first part of that prediction is a gimme. But I can’t go without mentioning it because the Facebook IPO will be one of the biggest stories of 2012. Assuming Goldman Sachs or Morgan Stanley don’t stumble in pricing and selling the offering, Facebook’s IPO will be every bit as important as Google’s in 2004. It will be a sign that Facebook is a real, sustainable company (if there was any doubt left by now), but also a sign that social networking is getting woven into the fabric of our entire online experience.

The second part of the prediction depends less on how the Facebook IPO goes than on how (or whether) the economy recovers. If the recover remains slow to nonexistent and the stock market reflects that, IPOs will be sparse. If we get the slow but growing economic improvement we seem to be seeing now, more companies will go public but not a gusher. But the point is that Facebook is such a singular success that it’s not going to set the tone for lesser (often far lesser) Internet companies.

The Red Giant (Five Reasons Facebook is Over)

FROM:http://www.thereformedbroker.com/2012/01/02/the-red-giant-five-reasons-facebook-is-over/

Joshua M Brown, January 2nd, 2012

One of the biggest market events of the coming year will undoubtedly be the Facebook IPO. You will read seven million articles about it in the next three months (sorry about that). It will likely come public as one of the largest IPOs in history, with a starting valuation somewhere in the vicinity of $100 billion. It is a tech giant to be sure, one of the most important companies in world right now.

But there is a major difference between Facebook and the other tech giants of the past and present like Microsoft, Apple, Google, Oracle, IBM, Yahoo, Netscape and Cisco. The difference is that Facebook will be the first tech giant to have come public after its growth rate peaks. it will be the first almost-mature tech giant to IPO at the end of it's biggest growth phase rather than in the early stages. The others offered public investors the chance to invest ahead of the Golden Age - but in this new era, the lion's share of valuation growth has been awarded to a relatively small handful of early stage investors and people need to accept that.

Facebook is a Red Giant, a star larger than the sun - but a dying star nonetheless. Red Giants are mid-sized stellar bodies that have already exhausted the hydrogen within their cores. They begin to live off the hydrogen surrounding them, burning it in a lower-intensity process called thermonuclear fusion. Similarly, Facebook is likely peaking right now in terms of new users, page views per user, engagement and so on - it will burn brightly off of the massive scale it's already built and that's pretty much it going forward.

This does not mean that the company won't become wildly profitable as they turn on the engines and monetize what's already there (which is obviously a huge amount of web real estate and mindshare at the moment). What it does mean is that, like the Red Giant, Facebook already is what it is. It is highly doubtful that the company's web presence and engagement can get any bigger or better.

In fact, it is more likely that:

1. Something new comes along - It is laughable how seamlessly, completely and quickly Facebook supplanted MySpace - let's not act like anything on the web is permanently dominant forever. Facebook is picking up major steam in countries like Indonesia and Brazil right now, the rate of new users signing up is breathtaking. But consider that they are pulling people from Google-owned network Orkut and that one day someone else will do the same to them.

2. Users lose interest in the faddish social games - The dirty secret of the early days of Web 1.0 is that pornography was the only revenue source that allowed companies to survive until real business models evolved. Social gaming has thus far provided the same service to Web 2.0. We are currently in an Air Pocket of Retardedness where kids and housewives have figured out how to submit their credit card information for utter stupidity like Farmville and Mafia Wars but haven't yet realized how dumb they are for having done so. It is only a matter of time before the spell wears off and people realize how utterly ridiculous it is to be buying virtual crops and power-ups with money that can otherwise be used in the physical world. Remember ringtones? How about The Sims? Or Garbage Pail Kids or Pogs or Pokemon or Texas Hold'em or Beanie Babies or any of the other "flush your money down the toilet" fads of the past 20 years? These things pass and we eventually laugh at ourselves. That moment is coming soon for social games that require continual charges on our credit cards.

3. Kids rebel against a social network that includes their dorky parents - Can you imagine being 15 years old and being involved in any kind of socializing that involved your parents and aunts and uncles and Sunday school teachers and god knows who else from the dark side? There is a Facebook hipness hourglass somewhere and it has already been turned over...it is only a matter of time before the grains of sand slipping from the top to the bottom become noticeable and the tide turns. The kids will be first, the advertisers will follow. In the end, Facebook will be comprised of dormant and inactive profiles with a majority of its "engagement" coming from people in their forties stalking their exes from high school in the late 80's. For the younger generation, talking about Facebook at all will become painfully lame. Every generation mocks the one that came before. This moment rapidly approaches, the emptying of that hipness hourglass is inexorable.

4. My life, my content - This will be the rallying cry of Gen Y, then the Millenials, then each successive generation after. People will wake up and realize that every minute spent in Zuckerberg's walled garden is a minute that they are creating content for "Facebook Inc" that they do not own themselves. And who the hell would do that other than people who have no choice? Eventually, Twitter and Instagram and Google Plus and Tumblr and WordPress and About.me and a host of other platforms and services become way more interesting. The initial appeal of creating a Facebook profile for the average person was that the ability to code or "understand" the web or HTML was completely unnecessary. Which was brilliant, it allowed users to generate a page with next to zero knowledge about the ways of the web. The problem is, as time marches on, ignorance turns into curiosity and then experience. The web is now a native environment to the kids born in the 1990's, they don't know a world without it. And their ability to create their own blogs, web pages and websites will place them at the vanguard of an eventual mass exodus from the closed-off, institutionalized Facebook.

5. Monetization will be both a blessing and curse - Facebook is going to make a sh*tload of money. Unfortunately, this monetization push will alienate the user base and involve more aggressive and invasive tactics as surely as night follows day. There is no way around it. Have you seen what Gmail looks like these days? There's not a centimeter of the page that isn't covered with advertisements of some kind. But I can't think of a single one I've ever noticed or clicked. Because like you, I've subconsciously trained myself not even to see them. I know they're there but I would wash my eyes out with bleach if I ever accidentally read one and would seek to have my mouse hand amputated should I ever - gasp - click one. And don't give me this bullsh*t about "contextually targeting the ads to each user". You don't know me, man. Facebook, like other web companies before it, will find new ways of monetizing. But don't you ever forget what the product is. It's you. As has been remarked before, if you aren't paying Facebook to use their service, then you aren't the customer - you're the product, homeboy.

***

So god bless the soon-to-be billionaires who got involved in Facebook early. They will win (and have won) regardless. But in terms of the IPO this spring, I can't find an answer to any of these five threats that would make me want to buy in at a $100 billion initial valuation.

Can you?

The Facebook IPO: Everything We Know

FROM: http://www.businessinsider.com/the-facebook-ipo-what-we-know-and-when-we-knew-it-2011-12

The year is ending with yet another flurry of speculation on some of the details of Facebook's potential IPO.

As the stories go over the same ground again and again, we thought it would be useful to step back and look at what we know about the most anticipated transaction of 2012.

Will Mark Zuckerberg cash in without Wall Street bank's help? What will the IPO value Facebook at? When will the social site finally go public?

Read this and when the next round of reporting comes along, you'll know what's new, what's not and what's important.

 

Which Banks Will Lead The IPO?

The two leading contenders to be 'lead left': Goldman Sachs and Morgan Stanley.

After the public scrutiny of Facebook's private offering run by Goldman, there were reports that the bank's relationship with Facebook was 'frayed' (or just fine) but it has nonetheless been consistently linked to the transaction, as has the leading participant in 2011 tech IPO's, Morgan Stanley.

 

Or Will The Answer Be "None"

This could be the big twist in the story. 

There is an outside chance that Facebook, because of the anticipated strong demand for its shares, could bypass the investment banks by using a 'Dutch auction.'

If Facebook went this route, shares would be allocated based on bids entered by potential investors. While there is likely to be continued speculation on this point, it has an outside chance of happening at best.

Why? Risk aversion. Founders get to go public once. Yes, using banks increases the costs of doing so on several fronts (fees, artificially low pricing, etc.). But Google's attempt to go it alone were less than successful. And when incremental costs are compared to the risks posed by the Dutch auction, a founder will take Wall Street any day. 

Basically, the Dutch auction is rarely used, whereas the traditional process happens on a weekly basis. When billions of your capital are at stake, it's not crazy to lose a few million, or tens of millions, in order to ensure your cash in stays in the realm of nine zeros.

 

How Much Will A Public Facebook Be Worth?

 

Around $100 billion seems to be the going estimate, with the initial public float being around $10 billion.

But really, this won't be finalized until the size of the stake sold and share price are finalized. 

 

How Much Will Wall Street Make Off The IPO?

 

In the range of $200 million in upfront fees.

Another advantage to leading an IPO that's often overlooked: early dominance in trading public shares, because bank's traders and salespeople have know what clients are interested in the stock at specific price levels.

Also, because Goldman Sachs bought about $375 million in equity when the company was valued at $50 billion, a successful IPO by Facebook at the $100 billion level would double their money. That would add another $375 million in profits for the bank.

 

How Much Will Mark Zuckerberg Be Worth?

Assuming a valuation of $100 billion, Mark Zuckerberg would make $24 billion from an IPO.

Other estimates:

Dustin Moskovitz - $6 billion

Eduardo Saverin - $6 billion

Sean Parker - $4 billion

Peter Thiel - $3 billion

One wildcard: Sheryl Sandberg, who joined Facebook in 2008. She is understood to have a small ownership stake but its size is unclear. 

 

How Much Is Facebook Making Now?

As reported earlier this month, Facebook is not blowing away the numbers that leaked early in the year.

Through the first three quarters of 2011, it brought in $2.5 in revenue.

That's impressive but slightly behind the pace of the $4 billion annually that was expected. It will take a big fourth quarter for Facebook to reach their target.

EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) weren't leaked, but other metrics of profitability were. Cash flow and operating income through three quarters were $1 billion and $1.2 billion, respectively. Again, this is impressive results but indicates that Facebook may miss its $2 billion annual EBITDA target.

 

Can You Make Quick Profits On The Facebook IPO?

 

Probably not.

Taking a look at the short-term performance of recent tech IPOs is not heartening.

You can chalk it up to a number of dynamics, from aggressive initial pricing to the underlying economics of the companies, but the if Facebook follows in these companies' footsteps, investors will not be happy in the short term.

But then, Facebook's IPO is the most anticipated in years and will be an event unto itself.

 

When Will The IPO Happen?

The second quarter of 2012 seems like the best bet. 

The most recent reporting indicates that Facebook will file offering documents with the SEC early in the New Year.