Pinterest users not only buy the products they pin, but spend more on average than their Facebook counterparts, according to new data from Shopify.
Pinterest just picked up a cool $100 million in funding led by Japanese online shopping giant Rakuten, placing its value in the region of $1.5 billion. That's huge--bigger than Instagram--but perhaps justified if the Pinteresting effect is reverberating through e-commerce sites. Here's some proof that it is: Shopify, which supplies the e-commerce back end to 25,000 online stores, asked its partners whether Pinterest users are buying anything. The results are impressive.
Click Image To Enlarge
A few highlights from the above Pinterest infographic:
Pinterest is now the third biggest referral source to Shopify's partner sites after Facebook, and on par with Twitter.
Pinterest users shop big--the average price tag is $80.00 or double that of a buy from a Facebook user.
Pinterest user visit have jumped 145% since January 2012.
Pinterest as a source of revenue for stores now contributes 17% of social media traffic--up from 1% in Q2 last year.
Pinterest orders generated from pins have quadrupled and then some during the last six months.
COMMENTARY: That's what I call absolutely impressive numbers. That $100 billion they just raised from that Japanese ecommerce site Rakuten probably means that Pinterest users will be seeing a whole lot of Rakuten merchandise being pinned on the social ecommerce pinning site.
Here's another interesting infographic of Pinterest that describes the sites demographics and user interests.
Click Image To Enlarge
According to AppData.com, Pinterest has been on a hot streak this year. Or should we say hype streak?
In February, comScore reported that the site had passed 10 million monthly unique users faster than any standalone site ever. Then we started to hear from sources on Sand Hill that the company has attracted interest at a $1 billion valuation. But numbers from third-party sources like Facebook app tracking service, AppData, are pinning a slightly different picture on the image and link-sharing site.
Pinterest’s monthly active users on Facebook — or the number that has connected to Facebook over the past thirty days — have dropped to 8.3 million, from around 12.2 million a month ago when the site did a major redesign. Daily Active Users are also down but not by as much: on April 21 they were 930,000, from 1.1 million on March 22.
Click Images To Enlarge
AppData tracked Pinterest's traffic numbers Between April and May 2012, and the numbers have improved. Monthly active users on May 8, 2012 increased to 10 million from 8.3 million on April 22, 2012. Daily active users on May 8, 2012 increased to 2.5 million from 930 million on April 22, 2012. Incredible turnaround, in such a short period of time.
Whether Pinterest can maintain this traffic momentum going into June remains to be seen. I like the site. It's different, and its meteroic rise is unprecedented. Sort of reminds one of foursquare. The big negative that I see is that Pinterest, which is 80% female, cannot sustain its growth without signing up more males. foursquare has a similar problem, only in the reverse. 70% of foursquare members are male, and the sites total number of registers users reached 15 million, but growing a lot slower than in it was in 2011.
I do have a feeling that Pinterest could become an acquisition candidate for Facebook, which seriously needs to find ways to increase revenues. With the viability of F-commerice brought into serious question when The Gap, Nordstroms and Penneys abruptly closed their F-commerce sites only after a few months, Facebook needs a way to make money off of ecommerce. Pinterest definitely meets that requirement.
Courtesy of an article dated May 18, 2012 appearing in Fast Company
Facebook fails as an ad company, although it generates the majority of revenue from advertising. The technology has not kept pace with explosive user growth, falling short in ad-targeting options and formats, according to analyses released Tuesday.
WordStream compared the format and ad performance of ads running on Facebook and Google Display Network. In a report card, Facebook received the following grades:
Advertisnig Reach/Revenue Growth - A+ and A-, respectively.
Advertising Performance - B+ for "good effort,"
Ad-Targeting Options - C
Ad Formats - D+
Google received the following grades for the same items:
Advertisnig Reach/Revenue Growth - A+ and A, respectively.
Advertising Performance - A
Ad-Targeting Options - B
Ad Formats - A
It cost Facebook more than $1 billion last year to deliver ads, when factoring in engineers, technology and more, according to a Facebook video.
More than half of Facebook users -- 901 million monthly as of March 31 -- access the social site through a mobile device.The social site estimates more than 500 million mobile monthly active users as of April 20 -- yet no mobile ad-targeting options exist, according to Larry Kim, founder of WordStream, a search engine marketing firm. He said.
"The site also lacks engaging ad formats critical to driving relevance, experience and click-through rates, such as animation or video ads."
The industry average for click-through rates on banner ads stands at one-tenth of a percent. On Facebook, that average stands at half of the industry average, while the Google Display Network generates four times the amount. Larry Kim, founder of WordsStream said.
"CTRs measure relevancy, so if you have good targeting options and engaging ad formats, you would expect more people to click on ads."
The average Facebook user spends 20 minutes per day on the site, but for the company to flourish as an ad platform to generate revenue it must keep better pace with the growth of technology. Forrester Research analyst Nate Elliott believes
In a U.S. Securities and Exchange Commission filing updated on May 9, Facebook explains that the "substantial majority" of its revenue comes from third parties advertising on Facebook.
"In 2009, 2010, and 2011 and the first quarter of 2011 and 2012, advertising accounted for 98%, 95%, 85%, 87%, and 82%, respectively."
Worldwide advertising revenue at Facebook should reach $5.06 billion this year -- up from $3.15 billion, according to eMarketer. The research firm said Facebook's share of overall U.S. display ad market revenue grew to 14% in 2011, up from 11.5% in 2010.
Facebook's share of the U.S. display market ad revenue should grow to 16.8%. By comparison, Google's share of U.S. display ad revenue should reach 16.5% in 2012, up from 13.8% last year.
While Facebook generates the majority of its revenue from ads, it lacks the ability to retarget ads on desktops and mobile devices, which would improve return on investments for brands. The open social network also does not provide integration to target ads across the Internet.
Kim believes Facebook has a lot of work to do before it can sustain revenue growth from online advertising. He highlights that work in the following infographic by WordStream.
It remains to be seen, based on Zuckerberg's comments to shareholders about not initially designing the social network as a company, if they even want to become an advertising company at all, he said.
COMMENTARY: From the above infographic comparing Facebook vs Google, you can clearly see why Facebook is a failure as an advertising platform. Facebook's CTR's are scary. Google's aren't that much better.
If you are not familiar with how Facebook's advertising works you should read About Facebook Advertising for general information, including what personal information (if any) Facebook provides advertisers about you, the difference between regular ads and sponsored stories, and Facebooks online ad creation tool.
Perhaps the biggest change to Facebook ads is the announcement at the end of February 2012, that classic premium ads (including premium like. premium event, video comment and premium poll) would no longer be available, but replaced by new upgraded premium ads.
The new upgraded premium ads will originate from Facebook Pages. In other words, advertising on Facebook will take place in the newsfeed and the line between paid, owned, and earned become virtually unrecognizable.
Why is this a big deal? At least two reasons… As a user, ads will be unavoidable because they will be in the news feed as opposed to exclusively in the sidebar (right margin). As an advertiser, the new Facebook ads work better… Facebook reports better reach, engagement, etc.
New upgraded premium ads The ad is created by the content that you post Page post. Anything that you post on your Page, you can turn into an ad.
New upgraded premium ads will allow advertisers to choose from six kinds of page posts:
Status updates or text
Photos
Videos
Links
Questions
Events
Facebook makes the following claims to advertisers using the new upgraded premium ads:
Target Anyone - Upgraded premium ads can be targeted to anyone you want. All available targeting options can be used.
More Social For Friends of Fans - When the person seeing your had has friends who are fans of your Page, Facebook will automatically expand the ad with enhanced social context about those friends, at no extra cost to you.
More Engagement Points for Fans - When fans see your ad, they'll see an expanded interface below the ad that lets them like or comment on the post directly from the ad.
New upgraded premium ads come in the following sizes depending on your news feed content:
Photos - Up to 90 characters of text, 168 x 128 pixel thumbnail, 43 aspect ratio.
Videos - Up to 90 characters of text, 185 x 104 pixel thumbnail, 16:9 aspect ratio.
Questions (Polls) - Will show exactly 4 answers, or 3 plus a "see more" link.
Status - Up to 150 characters of text, No additional media.
Event - Up to 90 characters of text, 75 x 75 pixel thumbnail.
Link - Up to 90 characters of text, 75 x 75 pixel thumbnail.
New upgraded premium ads come with certain pluses, minuses and limitations:
Reporting & Metrics - You receive the same Facebook reporting options as you do now with Classic Premium Ads (Ads and Sponsored Stories). You can see the same metrics for these ads as before.
Third Party Tracking - Facebook only allows impression tags for premium. Facebook does not allow click tags for Premium Page Post Ads at this time.
Creative Delivery - The Facebook ad team will provide advertisers with specific instructions based on your needs for each campaign.
Reaching Non-Fans - New premium upgrade ads will allow you to reach non-fans. Ads and featured stories from Page posts allow you to reach anyone, just like with any ad. This means you can target any segment of the Facebook user base, including fans, non-fans and any other targeting clusters desired. Facebook also provides the option to omit your ads from being viewed by your fans within your news feed, but can be viewed only by non-fans in their news feeds.
Additional information on how to create an ad or sponsored story on Facebook can be found by clicking HERE, but don't bitch if the ads don't produce results.
Facebook has also received recent criticismfor failing to produce a social commerce environ-ment. In a blog post dated February 27, 2012, I reported that The Gap, Nordstroms and Penneys had abruptly closed their F-commerce sites after only just a few months due to lack of interest or a quantifiable ROI. In the commentary section of that blog post, I provide a huge body of evidence (links) that concluded that Facebook stores don’t work. Furthermore, Facebook’s ad platform is expensive and doesn’t convert.
Courtesy of an article dated May 15, 2012 appearing in MediaPost Publications Online Media Daily
As your business gets more social-savvy, strengthen your metrics strategy. Here's how.
As businesses get more sophisticated in their use of social networking, so too are the metrics by which they measure social business ROI.
Back in the dawn of the social networking age, organizations relied almost solely on simple, standard metrics, such as the number of Facebook fans and likes or the number of Twitter followers and tweets/retweets, to determine their success. Those metrics are still important, but organizations today are developing more sophisticated metrics to measure their progress in meeting increasingly granular social objectives.
That makes it difficult to prescribe the social metrics that matter most, because what matters will differ depending on your organization's size, industry, products, current goals for social, and so on. But some increasingly important social media metrics can be applied widely. Here are five that you should consider now.
1. Quality of fans/followers. You may have hundreds, thousands, or even hundreds of thousands of fans on Facebook or followers on Twitter. These numbers still matter, of course, but it's critical to look beyond the numbers to the quality of those fans and followers. Tassoula E. Kokkoris, who manages a team of social ambassadors for Guidant Financial says.
"More important than the quantity of followers on the major social media channels is the quality of followers. There are companies out there now that will allow you to purchase followers, but I don’t allow my team to do so because it will not be an effective return on investment. Sure, it may look impressive to see thousands of followers on a company profile, but other than the wow factor for visitors, what purpose does that large number serve?"
It's important to look at what your audience is doing and saying and to what they respond negatively and positively to, and to cultivate that engaged core. Kokkoris added.
"Maintaining a smaller core audience of interested, engaged followers will ultimately lead to more meaningful conversations and stronger sales. By knowing your business audience and organically targeting connections that will truly be interested in your services, you’ll earn an authentic online reputation and position your company as an industry thought leader."
2. Social demographics.Related to the quality of fans and followers is knowing exactly who those fans and followers are. This will help to ensure that any social initiatives are hitting your core audience and achieving current business goals, but it will also help to uncover potential new customers and guide future marketing, advertising, customer service, product development, and other goals. Jennifer E. Dunphy, VP of sales and marketing, Vayu Media said.
"Fan demographics--countries, language, age, etc.--is a great way to see if there are market segments that your current marketing efforts, not just social, could tap into. If you see that you have a high concentration of Spanish speakers, for example, you may want to think about Spanish language-targeted campaigns for social media and all other forms of marketing. This can help to open up an entirely new revenue opportunity that you may be missing out on."
3. Most popular pages, posts and tweets. By now, most organizations realize that to succeed at social they need to maintain a consistent presence and dedicate resources to updating content and engaging with the audience. It's easy to measure in pure numbers which pages, posts and tweets are most popular, but organizations need to go beyond the numbers to determine why they were popular. Was it a question that prompted a barrage of comments? Was it a link to a how-to video on Twitter that resulted in a high number of retweets? Was it a how-to whitepaper that accompanied the announcement of a new product launch?
Cindy Balon Harder, principal of Visual Data Group, which is releasing a new social media evaluation tool this spring said.
"The most valuable metrics are those indicating the most popular pages, posts, or tweets, because they serve as templates to help you broaden your prospecting net and deepen customer relationships."
4. Page views and click-throughs.Content marketing is making everyone a publisher these days. Companies are developing white papers, how-to videos, podcasts, infographics, and other forms of content to engage existing and new customers, as well as to generate leads or sales (see No. 5). It's important to know what content gets seen and, more importantly, shared.
5. Conversion. Conversion is a long-vaunted goal, but as companies become more savvy about their use of social media, it's increasingly critical to measure what the social audience is doing as a result of the time they spend on your Facebook, Twitter, Pinterest, and other social sites. Did they buy something, sign up for something, or consume something as a result of a Facebook update, Twitter post, or Pinterest pin? If so--and this is the harder question to answer--why? These are just a few in a growing list of emerging social media metrics. What are the most important social metrics for your organization? Please respond by commenting below or sending me an email at debra.donstonmiller@gmail.com.
COMMENTARY: It should be noted that the list of the social media measurement metrics varies widely among social media brands. As noted above, the social metrics that matter most will differ depending on your organization's size, industry, products, current goals for social, and so on. Here are some additional blog posts dealing with the subject social media measurement metrics:
Blog post of October 13, 2010 which is simply titled, "How To Measure Social Media ROI", which is based on research by Mashable that found that 84% of social media campaigns don't measure ROI.
Google+ is succeeding in small bursts, feature by feature. As a social network competing with Facebook it’s a flop, but its video-chat tool Hangouts is a winner. Now photo sharing is poised to be the service’s next breakout hit, thanks to an enthusiastic community of photographers who like the focus on attractive full-size images, Google+’s new photo-centric iPhone app, and a uniquely Google passion for metadata.
In fact, Google+ is pushing hard on the photography front and is in a great position to dominate the floundering Flickr.
Bradley Horowitz V.P of Product for Google+talked about the future of photography and how Hangout in Real Life (HIRL) can help professional photographers (Click Image To Enlarge)
The Google+ team teamed up with Kelby Training for a two-day Google+ Photographers Conference in San Francisco, or as it was adorably called, a HIRL — Hangout in Real Life. Vice president of product for Google+ Bradley Horowitz (pictured above), who led Yahoo’s purchase of Flickr in 2005, kicked off the event Tuesday by talking about the future of photography, how Flickr changed his outlook, and whether ads will ever make an appearance in Google+.
A camera that records your blood pressure
Horowitz said.
“I feel photos are the lifeblood of our service. They are the way we can most immediately and viscerally connect as human beings.”
For the past four-plus years, Horowitz has pushed his passion for “social computing” at Google: combining photos, algorithms, and human interaction. While some of us may see the rising flood of images and data — from camera settings to GPS location — as overwhelming, Horowitz sees it as an opportunity. He thinks the future lies in capturing even more data, sharing more information, having more sensors, and recording more dimensions.
For example, we generate so much information that going through it to find gems is becoming more and more difficult. Ironically, even more data can be used to bring order to overload.
Horowitz said.
“I want to know everything I can about the environment. I would like to know more detailed information about the roll, pitch, yaw of the camera. About the lens optics, about even the blood pressure of person whose hand is on the camera, even the galvanic skin response.”
These biological markers can be used to identify the special and meaningful moments in your life worth remembering, such as the happiness you felt seeing your kid take her first steps.
Tools like Google’s own Google Glass could be a great start for capturing all of this information, but of course there are a few kinks to be worked out first.
Horowitz said of Google’s Vic Gundotra, who sometimes sports the augmented reality glasses during meetings.
“I never know whether Vic is listening to me or not.”
We are capable of so much more than Instagram
Capturing pixels is just the beginning of a photo. How it’s processed and used after it’s on a computer is becoming even more important. Google has multiple properties that dabble in photos, including Picasa, Google+, Drive, and even email. The next step is to combine those tools together, something Horowitz admits is still an issue.
Horowitz in response to a question about the difference between Picasa and Google+ said.
“Ultimately the brand distinction between those needs to go away… we’re working hard to erase the seams between these experiences. The fact that you have to ask it is a failing on our part.”
Eventually Google aims to blur the line between the device and the cloud, so all the data you generate is automatically backed up, archived, and secured in a nice non-obtrusive manner. Automating this synthesizing stage would free up time for photographers to focus on the more enjoyable process of manipulating the data.
Horowitz wants to increase the power its own post-processing tools, making image editors scalable so that an amateur can use them as easily as a professional photographer. Replacing the very segmented image editing market and creating a tool that is equal parts Instagram, Lightroom, and Photoshop is an especially ambitious (perhaps naive) idea.
Google wants you to think of ads as little presents
The absence of ads in Google+’s lightbox, the tool that shows your images, is part of what appeals to the many photographers who use the service. But certainly it’s only a beta perk, right? After all, a whopping 96 percent of Google’s revenue comes from advertising. Google’s philosophy when it comes to ads is that they can be a very useful part of the user experience (as they are in search results). However, it doesn’t want to serve them where or when they don’t belong and won’t be the most effective.
Horowitz said.
“We don’t think of ads as punishments the users must endure, we think of ads done well as something that users would cry over if we took them away.”
The company has not yet found a way to make ads useful in the lightbox. Horowitz says.
"If a Google+ user is looking at photos of their family, the last thing you want to do is stick an ad between that intimate moment and intimate interaction.”
Instead, Google leans more towards collecting data and delivering it when the context and time are right.
For example, say you review a restaurant. Google will tuck that information away and deliver it when it is relevant, perhaps six months later when one of your friends looks for a restaurant recommendation in the same area. Horowitz says.
“That’s a gift from me to that person facilitated by Google.”
And it all started with Flickr
Horowitz has a background in photography, like many others on the Google+ team. Horowitz says.
“We are geeks, and photographer geeks are a sub-flavor of geeks.”
As a grad student, Horowitz worked on some of the earliest image-processing programs and algorithms that analyzed images.
Eventually he landed at Yahoo as the head of multimedia search, which is where he met the founders of Flickr, a “fascinating, tiny little company in Canada.” They asked why, instead of writing complex algorithms to analyze images, he didn’t just ask people to volunteer their knowledge, à la Flickr’s tagging? People can just look at an image and say if it’s a dog, a person, or even if its funny or snarky.
Horowitz said.
“I realized my algorithms were so far from having a snarky detector that this was a better approach. A little bit of social engineering was better than all the algorithmic approach… it introduced the concept of bringing people and community into the equation.”
Horowitz went on to oversee Yahoo’s acquisition of Flickr, and eventually moved on from the company. But now, many years later, the idea of social computing that Flickr planted in his head is being used to turn Google+ into real Flickr competitor.
COMMENTARY: the new Google+ for iPhone app sports a crip look, and a dramatic image- and video-centric design rich with color. The design offers a content consumption experience ripe with personality. Status updates look more like art and flow on to the screen in a smooth and soothing fashion.
Google+ App for iPhone images taken using the iPhone are bigger, crisper with more readible type (Click Image To Enlarge)
And Android owners fear not, a similar Android version with a “few extra surprises” is said to be coming in a few weeks. I am happy as hell to here that!!
The application looks and feels like a whole new Google+ — just not a whole new social network. In fact, it seems to encapsulate much of the elements of today’s contemporary mobile social applications. It especially echoes the photo-centric qualities of private social network Path and social news app Flipboard, and we’d be remiss in our duties if we didn’t mention the overlap between this app and the storytelling, visual, and emotional aspects of Facebook’s Timeline.
POTUS looks sharp on the Apple iPhone using the Google+ App for iPhone
Google senior vice president Vic Gundotra said this about the new Google+ app .
“We’re embracing the sensor-rich smartphone (with its touchable screen and high-density display), and transforming Google+ into something more intimate, and more expressive. Content so immersive it remakes your mobile device into a rich carousel of beloved memories and breaking news.”
What’s new? A smattering of updates including larger profile pictures, crisper fonts, +1 image overlays, and other user interface and visual elements that should make the experience feel more fluid and more enjoyable.
I have always felt that Google+'s large audience of tech geeks, especially photographers, offers Google+ a great opportunity to capitalize on that audience. I can clearly see where Google+ can become a Digital Hub, similar to what Apple has down with iCloud with iPhone and iPad users. This is the sort of thing that I have been juiced up over since Google+ came upon the seen. This is the time for it to bring the rest of its apps into that Digital Hub. I had previously called Google+ a "Social Hub," but not it is juiced with with a powerful and very useful Digital Hub capability that brings real value to photographers using Google+.
Courtesy of an article dated May 22, 2012 appearing in VentureBeat
Hey, America. Don’t you just love the train wreck that has ensued following Facebook's humongous IPO?
You can’t get enough of it, the hand-wringing, the squirming the whole public spectacle of embarrassment.
Of course, you love it.
And here’s why: We all know that you — the heartland, the people we fly over, Main Street — got it right and Wall Street got it wrong.
Wall Street, Silicon Valley and the media all look bad. Each one contributed to the hype.
These days, social-media tools represent a pretty good cross-section of America and allow ordinary people to have an opportunity to express their opinions.
The Pew Research Center’s Project for Excellence in Journalism pointed out on Monday that the social-media behemoth’s May 18 IPO, which placed the worth of Facebook (NASDAQ:FB) at $105 billion, “sparked significant discussion on Twitter, blogs and Facebook itself, with more expressions of skepticism than confidence about the stock’s value.”
Twitter users were the most skeptical of all, as nearly four times as many users said that Facebook was overhyped as said it was worth buying, Pew noted, adding tellingly:
“Even on Facebook, the gap was nearly two-to-one.”
There is a lot of pain to go around on this debacle of an IPO. But for once, Main Street is having the last laugh.
I asked veteran Silicon Valley observer Paul Carroll — a former Wall Street Journal tech reporter, a consultant and the co-author of “Billion-Dollar Lessons: What You Can Learn from the Most Inexcusable Business Failures of the Last 25 years” — what he thought of the Facebook flop. (The Wall Street Journal, like MarketWatch, is owned by News Corp.) Carroll said, speaking as if he echoed the view of the heartland.
“I think it’s a good thing, the only way to kill the hype that goes into some of these goofy IPOs is to make the people pay for getting sucked in. It’s a hard lesson, but next time people might pay more attention.”
The Facebook flop — the “Gigli” of IPOs — was drenched in arrogance from the start. For one thing, it was priced way too high, considering that there were so many questions about its bottom line, growth prospects and long-term strategy.
The Nasdaq, where the shares are being traded, couldn’t get out of its own way long enough on May 18 to smoothly execute the trades. At the very start of trading, NASDAQ's system could not handle the huge volume, and sputtered to a halt. Brokers did not know if their sell or buy orders had gone through. When Facebook's stock plummeted they had no way of knowing if their clients were still in the marketing or out of it. Chaos ensued.
From the start on the debut day of trading, there was chaos in the air. There had already such build-up to the start of trading that the last thing Facebook needed to see were any technical glitches in what should have been the mundane act of executing trades.
Wall Street wasn’t alone in taking a hit on the Facebook IPO. Silicon Valley deserves some blame, too for pushing these crummy investments onto the market. Facebook’s road show merely reaffirmed what a lot of us thought: it is a haven of 25-year-old billionaires, who invent time-suck gadgets.
One more faction should come in for grief as well: the media.
Well, where to begin? America despises my brethren for a good reason: We are the dopes who hyped the Facebook IPO, with our misplaced priorities and panting coverage of such nonsense as whether CEO Mark Zuckerberg’s was out of line to wear his trademark hoodie during the pitch sessions on Wall Street.
Maybe the journalists should have been more concerned about the state of Facebook’s financial data than the fashion whims of a 28-year-old CEO.
As it turned out, Main Street got it right, trumping the professional investors on Wall Street.
COMMENTARY: Facebook was a failure as an IPO. The bottom line is that the underwriters floated too many shares and offered the stock at too high of a price. These factors caused big money to stay on the sidelines rather than jumping into the stock.
You knew there would be lawsuits after this IPO:
Class Action Lawsuit by Facebook Investers vs Morgan Stanley and Goldman Sachs Group - On May 22, 2012, A lawsuit has been filed by three Facebook investors who say that analysts at Morgan Stanley (NYSE:MS) and Goldman Sachs Group, Inc. (NYSE:GS) reduced theire forecasts on Facebook's revenues and earnings during the company's road show to promote the IPO. Late Tuesday night, the Attorney General for the State of Massachusetts sent a subpoena to Morgan Stanley after the news broke. In addition, more investors filed suit after feeling cheated by the underwriters about the true valuation of Facebook. The lawsuit that came out this morning is seeking class-action status as the underwriters’ mislead investors allegedly on the valuation of the stock. The lawsuit alledges that these underwriters’ did not properly disclose any changes to forecasts and expectations of Facebook. A Morgan Stanley spokesman said in response to the lawsuit that the bank followed the same procedure as it has done with all its IPOs. Furthermore, the spokesman said that the standard procedure follows all laws and regulations.
Class Action Lawsuit by Facebook Investors vs Facebook Inc, Individual Defendents and Lead Underwriters - On May 23, 2012, Law Offices Bernard M. Gross, P.C. filed a class action lawsuit in the United States District Court, Southern District of New York, 12cv4081, on behalf of all persons who purchased the common stock of Facebook, Inc.pursuant and/or traceable to the Company's May 18, 2012 initial public offering (the "IPO" or the "Offering"), against the Company and certain individual defendants and the lead underwriters of the IPO for violations of the Securities Act of 1933. The Complaint alleges that the Registration Statement and Prospectus contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading and were not prepared in accordance with the rules and regulations governing their preparation. Specifically, defendants failed to disclose that Facebook was experiencing a severe reduction in revenue growth due to an increase of users of its Facebook app or website through mobile devices rather than a traditional PC such that the Company told the Underwriters to materially lower their revenue forecasts for 2012. And, defendants failed to disclose that during the roadshow conducted in connection with the IPO, certain of the Underwriter reduced their second quarter and full year 2012 performance estimates for Facebook, which revisions were material information which was not shared with all Facebook investors, but rather, selectively disclosed by defendants to certain preferred investors and omitted from the Registration Statement and/or Prospectus.
These lawsuits are probably just the beginning of the legal iceberg. You can bet that there will be more including investigations.
On May 18, 2012, shortly after the stock markets closed, the Securities and Exchange Commission (SEC) indicated after the market close of trading on Friday, May 23, 2012, that it would review trading issues on the Nasdaq related to Facebook’s initial public offering. There were reports that some confirmations about order execution were late in coming from the exchange when Facebook shares began to trade earlier in the day. An SEC spokesman told CNBC when asked about the complaints.
“As is our practice, staff will review the incident with Nasdaq to determine its cause, and steps that will be taken to address it."
There were 2.58 billion shares traded at the Nasdaq Friday — the highest level since Dec. 16. Of that, about 573 million shares were Facebook trades, accounting for over 22 percent of the volume.
NASDAQ has set aside money to compensate customers, but some on Wall Street are warning its ability to snag future big IPOs is at risk. Meanwhile, a suit filed late Tuesday in Manhattan federal court seeks class-action status for anyone who lost money due to a mishandled order.
Former SEC Chairman Arthur Levitt said of the IPO and its handling by banks and Nasdaq.
"It's dreadful for the markets. It's an event with long-lasting negative implications for an industry that can ill afford this kind of blemish, and the last chapter hasn't been written. Nobody looks good here."
NASDAQ had its annual shareholders' meeting on Tuesday, May 22, 2012, but the shareholders gave the stock exchange a pass on the Facebook technical gliche, discussing it only for a few minutes, top executives did not get any questions at all on what went wrong with Facebook or what they were doing to correct it.
Nasdaq Chief Executive Bob Greifeld said at the shareholder meeting.
"While clearly we had mistakes in the Facebook listing, we still want to highlight the fact that it was the largest IPO ever and on Friday of last week, we processed over 570 million shares."
I have yet to see a report on the SEC's investigation of the NASDAQ technical gliche that created so much havoc for the traders during the huge Facebook IPO. For the sake of stock investors, brokers and traders we must determine the exact nature of that problem, what caused it, what is being fixed or changed, and the present status of the problem..
It's my opinion that the SEC needs to come down very hard on both Morgan Stanley and Goldman Sachs Group, if as claimed in the above class action lawsuit, they selectively provided revised Facebook forecasts to some of their key institutional investors without providing this information to the general public. If the charges are true, both firms are in direct violation of SEC regulatinos, and should be severely fined, their CEO's should be asked to step down, and both firms should be prevented from underwriting future IPO's for a period of one year or longer.
As far as I am concerned, Facebook's huge pre- and post-IPO market valuations needs to be fully evaluated and brought into question. If you have been following my blog posts, I have attacked the ad-supported revenue model of social networks, in particular Facebook. In a blog post dated May 20, 2011, I told my readers that I thought that the ad-supported revenue model was deeply flawed and had already reached a "critical inflection point," where both future user growth and advertising revenues will plateau and eventually reach a peak. I don't know if the two analysts for Morgan Stanley and Goldman Sachs read that blog post, but they obviously felt that Facebook's future revenues and earnings needed to be revised.
Courtesy of an article dated May 23, 2012 appearing in The Wall Street Journal's MarketWatch and an article dated May 23, 2012 appearing in ValueWalk and an article dated May 23, 2012 appearing in The Wall Street Journal's MarketWatch and an article dated May 23, 2012 appearing in Yahoo! Finance
Mark Zuckerberg married long-time girlfriend Priscilla Chan on Saturday, May 19, 2012 in a secret wedding in the backyard of their Palo Alto, California home. (Click Image To Enlarge)
The Facebook billionaire, 28, topped off a remarkable week with a surprise wedding Saturday to college sweetheart Priscilla Chan, 27. A hoodie was good enough for his pre-IPO meeting with Wall Street investors, but Zuckerberg — either by his own choice or at the insistence of his fiancee — donned a big-boy suit, white shirt and tie to mark the occasion. Yes, some things are sacred.
Mark Zuckerberg and Priscilla Chan wedding picture (Click Image To Enlarge)
The wedding announcement was classic Facebook: Zuckerberg simply updated his profile to: “Married Priscilla Chan.” The news had almost 850,000 “likes” Sunday evening.
Mark Zuckerberg announces marriage to Priscilla Chan on his Facebook page (Click Image To Enlarge)
The couple pulled off the stealth nuptials by inviting 100 guests to what they thought was a surprise party for Chan, who graduated from medical school at the University of California at San Francisco last Monday — which also happened to be Zuckerberg’s birthday. He posted during the commencement ceremony.
“I’m so proud of you, Dr. Chan :).”
But the surprise was on their friends: The wedding had been in the works for months, a friend of the couple told the Associated Press; the fact that it came one day after Facebook debuted on the stock market was entirely coincidental.
Details quickly leaked out, although none of the guests were willing to be quoted on the record.
The ceremony took place in the backyard of the newlyweds’ Palo Alto, Calif., home.
The bride wore a white dress with a lace overlay and received a simple ruby wedding ring designed by Zuckerberg.
Green Day’s Billie Joe Armstrong sang, according to the Mercury News.
Dinner came from the couple’s two favorite restaurants, Palo Alto Sol and Fuki Sushi. For dessert, there were Burdick Chocolate “mice” (tiny chocolate truffles in the shape of mice), which they ate during their first date. (Awww.)
What’s most impressive (aside from Zuck’s suit) was that they managed to keep it under wraps. Celebrity weddings usually leak out from a guest or vendor, which makes a secret A-list ceremony like John F. Kennedy Jr. and Carolyn Bessette’s so rare. Chan and Zuckerberg used the classic bait-and-switch tactic employed by Julia Roberts for her Fourth of July marriage to Danny Moder in 2004: Invite all your friends for a party, then spring the wedding on them. All your loved ones in attendance, but no advance gossip.
The Chinese-American bride grew up in the Boston suburbs and began dating Zuckerberg when they were students at Harvard. Zuckerberg, scheduled to graduate in 2006, dropped out to run his company; Chan received her undergraduate degree in 2007. She spent a couple years teaching science before entering medical school, where she specialized in pediatrics — and inspired Zuckerberg to promote organ donation on Facebook. (Read more aboutPriscilla Chan, tech’s newest first lady.)
Mark Zuckerberg poses with Priscilla Chan after her Harvard graduation ceremony (Click Image To Enlarge)
Although the two have been dating for nine years, Chan was famously not depicted in the 2010 film “The Social Network,”(click to see my blog post) the cinematic account of Facebook’s creation. The movie opens with Zuckerberg’s getting dumped by a girlfriend, which allegedly sparked what would become his social media explosion. The movie included a few random groupies, but no serious love interest — a better dramatic narrative than the real story: Zuckerberg and Chan have been in a serious relationship throughout his spectacular rise to worldwide fame and fortune. (Another reason, ladies, to give those college geeks a shot.)
Mark Zuckerberg and Priscilla Chan pose in the kitchen of their home in Palo Alto after preparing Thanksgiving Day dinner for a small group of friends (Click Image To Enlarge)
Public reaction to the marriage ranged from hilariously obvious to genuinely funny and even kind of mean.
Steve Case tweeted.
“Facebook’s Mark Zuckerberg weds on day after IPO #aweektoremember.”
Daily Show head writer Tim Carvel tweeted:
“Congratulations, Mark Zuckerberg! As a gift, I got you the names of all my friends, a list of my favorite movies, and some photos of me!”
And there were plenty of folks who wondered whether the newlyweds had a prenuptial agreement. Reps for Zuckerberg didn’t respond to requests for comment, but anyone worth $19 billion who gets married in a community property state would be an idiot not to have a prenup. Zuckerberg, love him or hate him, is no idiot.
Donald Trump, unaware of the impending wedding, speculated about Zuckerberg’s future on CNBC on Tuesday:
“They get married, and then for some reason over the next couple of years they get divorced and then she sues him for $10 billion and she hits the jackpot.”
Trump thinks the new Mrs. Zuckerberg should get much less:
“I’m notoriously cheap with these things, I think if she made $1 million, that would be very good.”
But it was old-fashioned love, not money, that Zuckerberg’s sisters cared about: Arielle wrote,
“Now I’m the only unmarried Zuckerberg. . .”;
Randi posted,
“This week = :) :) :) :)”
COMMENTARY: I have been poking fun at Mark Zuckerberg and his girlfriend Priscilla Chan since I found out that he had a girlfriend. I won't poke fun on this very special occasion. Congratulations to Mark and Priscilla, and may you have a very happy marriage that lasts foreverrrr.
Courtesy of an article dated May 26, 2012 appearing in the Washington Post
The world's largest technology IPO is providing not just fees for bankers but fodder for comics. "It's great — now you can lose all your money in the same place you lost all your time," quipped late night comic Jimmy Fallon on the NBC network this week. With Facebook's share price expected by many to crash back down to earth within weeks or even days, the only people guaranteed not to rue their investment are those who bought in while the company was privately held.
We list Facebook's early backers are a potent mix of Silicon Valley insiders, Russian oligarchs, Wall Street financiers – and a pop star called Bono.
Investors
Accel Partners - Based in Palo Alto, California, this global venture and growth equity firm funds companies from inception through the growth stage. Led by managing partner Jim Breyer, Accel Partners made a $12.7 million investment in early 2005 that gave the firm a 15% stake, and also included million dollar bonuses for Zuckerberg, Parker and Moskovitz (unusual in a VC round). Accel's stake (less Breyer's personal one) represented 190 million classB shares.
No of Shares held pre-IPO: 201.378 million
Value of Shares held pre-IPO @ $38.00: $7.652 billion
No of Shares sold during IPO: 49.031 million
Cash from IPO: $ 1.863 billion
No of Shares held post-IPO: 152.347 million
Value of Shares held post-IPO @ 38.23: $5.824 billion
DST Global Limited - Yuri Milner's DST Global has been the main conduit for Russian investments. His own backers include steel tycoon Alisher Usmanov. DST made two separate Facebook investments: $200 million in May 2009 for a 1.96% stake and $50 million in January 2011 for a 0.10% stake.
No of Shares held pre-IPO: 131.280 million
Value of Shares held pre-IPO @ $38.00: $4.989 billion
No of Shares sold during IPO: 45.662 million
Cash from IPO: $1.735 billion
No of Shares held post-IPO: 85.617 million
Value of Shares held post-IPO @ $38.23: $3.273 billion
Goldman Sachs - In Janury 2011, Goldman Sachs CEO Lloyd Blankfein finalized an investment of $450 million, $50 million from DST (see above), and $1 billion from unnamed foreign investors. The deal valued Facebook at $50 billion. The financing created controversy as it appeared to be a way for Facebook to sidestep U.S. securities laws forcing privately-held companies to make SEC filings once they reach a 500 shareholder threshold.
No of Shares held pre-IPO: 65.947 million
Value of Shares held pre-IPO @ $38.00: $2.506 billion
No of Shares sold during IPO: 28.673 million
Cash from IPO: $1.090 billion
No of Shares held post-IPO: 37.274 million
Value of Shares held post-IPO @$38.23: $1.425 billion
Elevation Partners - U2 rocker Bono, is a lead investor in Elevation and has been keen to stress any IPO winnings will be widely distributed. In April 2010, Elevation Partners announced a $90 million investment in Facebook for a 1% stake. This was the first of three investments in Facebook. By 2011, the firm invested a total of $270 million into the social media giant, and, was sitting pretty in anticipation of the company's public offering.
No of Shares held pre-IPO: 40.110 million
Value of Shares held pre-IPO @ $38.00: $1.524 billion
No of Shares sold during IPO: 4.622 million
Cash from IPO: $176.699 million
No of Shares held post-IPO: 35.487 million
Value of Shares held post-IPO @ $38.23: $1.357 billion
Mail.ru Group - In 2009, Mail.ru (now DST) a leading Russian internet company used as a second investment vehicle by Yuri Milner and his Russian oligarch contacts, made an undisclosed investment in Facebook.
No of Shares held pre-IPO: 56.352 million
Value of Shares held pre-IPO @ $38.00: $2.141 billion
No of Shares sold during IPO: 19.601 million
Cash from IPO: $744.838 million
No of Shares held post-IPO: 36.751 million
Value of Shares held post-IPO @ $38.23: $1.405 billion
Mark Pincus - Mark Pincus is the co-founder of online games group Zynga, whose Farmville and Mafia Wars games are played mostly on Facebook. In late 2004, Mark Pincus and Reid Hoffman both made $40,000 investments each alongside Peter Thiel's $500,000 loan (later converted to equity) to become Facebook's first angel investors.
No of Shares held pre-IPO: 5.314 million
Value of Shares held pre-IPO @ $38.00: $201.932 million
No of Shares sold during IPO: 1.009 million
Cash from IPO: $38.342 million No of Shares held post-IPO: 4.304 million
Value of Shares held post-IPO @ 38.23: $164.542 million
Tiger Global Management - Sensing a killing, the New York hedge fund run by 36 year old Chase Coleman increased the number of shares it was planning to sell from 3m to 23m on Wednesday.
No of Shares held pre-IPO: 53.837 million
Value of Shares held pre-IPO @ $38.00: $2.046 billion
No of Shares sold during IPO: 23.408 million
Cash from IPO: $889.504 million
No of Shares held post-IPO: 30.430 million
Value of Shares held post-IPO @ 38.23: $1.163 billion
Li Ka-Shing - Hong Kong ports, telecoms and property tycoon invested $120 million in two separate investments of $60 million in November 2007 and March 2008. Li Ka-Shing's first investment helped push Facebook's valuation up to $15 billion.
No of Shares held pre-IPO: Unknown (After his second investment in Facebook in March 2008 paidContent.org reported that Li Ka-Shing's stake was 0.08%)
Value of Shares held pre-IPO @ $38.00: Unknown
No of Shares sold during IPO: Unknown
Cash from IPO: Unknown
No of Shares held post-IPO: 20.403 million
Value of Shares held post-IPO @$38.23: $780.000 million
Valiant Capital Opportunities - Since July 10, 2010, Valiant Capital Management, a San Francisco-based sidestep hedge fund account organisation launched by Christopher R. Hansen, has been quietly acquiring blocks of Facebook shares for its investors through the secondary markets. He reportedly paid an estimated $500 million for those shares.
No of Shares held pre-IPO: 36.335 million
Value of Shares held pre-IPO @ $38.00: $1.381 billion
No of Shares sold during IPO: None
Cash from IPO: None
No of Shares held post-IPO: 36.335 million
Value of Shares held post-IPO @$38.23: $1.389 million
Meritech Capital Partners - Gained its Facebook shares by participating in the company's $27.5 million Series C round. Joining Meritech in the transaction were Greylock, Accel and Angel investor Peter Thiel, with the round valuing Facebook at over $500 million. Meritech Capital Partners was founded in 1999 in partnership with Accel Partners, Oak Investment Partners, Redpoint Ventures and Worldview Technology Partners, and currently manages more than $2.2 billion in capital.
No of Shares held pre-IPO: 40.355 million
Value of Shares held pre-IPO @ $38.00: $1.533 billion
No of Shares sold during IPO: 6.999 million
Cash from IPO: $266 million
No of Shares held post-IPO: 25.798 million
Value of Shares held post-IPO @$38.23: $986.257 million
Greylock Partners - Greylock, its roots going back to 1965, got its piece of the world's hottest tech company by getting in on Facebook's $27.5 million Series C round. Meritech Capital Partners also participated in the financing along with existing investors Peter Thiel and Accel, who chipped in additional funds. With this financing Facebook was valued at over $500 million, five times the amount when Accel first invested.
No of Shares held pre-IPO: 36.656 million
Value of Shares held pre-IPO @ $38.00: $1.393 billion
No of Shares sold during IPO: 7.607 million
Cash from IPO: $289.066 million
No of Shares held post-IPO: 29.049 million
Value of Shares held post-IPO @$38.23: $1.110 billion
Peter A. Thiel - In late 2004, Thiel became Facebook's first significant outside investor when he put up $500,000. "Just don't fuck it up," is what Peter Thiel told Mark Zuckerberg when the two finalized Thiel's investment in the cash-strapped startup, according to Facebook chronicler David Kirkpatrick. Initially structured as a loan, the financing later converted to a 10.2% equity stake in the company. Thiel maintains a seat on Facebook's board of directors and, in addition, serves as president of Clarium Capital, a hedge fund, and is a Managing Partner of VC firm, The Founders Fund. Thiel is known for being a package of contradictions due to the fact that he is a gay, Christian, entrepreneur, venture capitalist, libertarian, lawyer who, in 2010, launched the Thiel Fellowship, offering $100,000 in cash to aspiring entrepreneurs under the age of 20 to drop out of school and pursue their business endeavors. Due to selloffs and dilutions, Thiel's original stake in Facebook has been reduced to 3%.
No of Shares held pre-IPO: 44.724 million
Value of Shares held pre-IPO @ $38.00: $1.699 billion
No of Shares sold during IPO: 16.844 million
Cash from IPO: $640.072 million
No of Shares held post-IPO: 27.880 million
Value of Shares held post-IPO @$38.23: $1.066 billion
Microsoft Corp - In October 2007, Microsoft CEO Steve Ballmer negotiated a deal to acquire a 1.6% stake in Facebook for $240 million at a nosebleed $15 billion valuation, and seal the Seattle software goliath's foray into Web 2.0. Though interested in acquiring Facebook outright, an idea Zuckerberg nixed, Microsoft opted for a complicated arrangement that included an advertising partnership and a small stake in the social network.
No of Shares held pre-IPO: 32.785 million
Value of Shares held pre-IPO @ $38.00: $1.246 billion
No of Shares sold during IPO: 6.557 million
Cash from IPO: $24.917 million
No of Shares held post-IPO: 26.228 million
Value of Shares held post-IPO @$38.23: $1.003 billion
T. Rowe Price - T. Rowe Price, the mutual fund company with nearly $500 billion in assets under management, invested a total of $190.5 million in Facebook in April of 2011. Shares were acquired from Faceboo employees and private investors. The very expensive Facebook shares were then distributed across nearly 20 separate mutual funds, including the Science & Technology Fund, New America Growth Fund, and Media & Telecommunications Fund.
No of Shares held pre-IPO: 18.200 million
Value of Shares held pre-IPO @ $38.00: $6.916 million
No of Shares sold during IPO: None
Cash from IPO: None
No of Shares held post-IPO: 18.200 million
Value of Shares held post-IPO @$38.23: $695.786 million
Marc Andreessen - Marc Andreessen is an American entrepreneur, co-founder of Netscape and the software engineer behind Mosaic the first widely-used web browser, co-founder of Andreessen Horowitz (see below), a high-flying venture capital firm. Andreessen is currently one of the web 2.0's most sought after prognosticators and VC investors, and serves on the Facebook board.
No of Shares held pre-IPO: 6.607 million
Value of Shares held pre-IPO @ $38.00: $251.066 million
No of Shares sold during IPO: None
Cash from IPO: None
No of Shares held post-IPO: 6.607 million
Value of Shares held post-IPO @$38.23: $252.586 million
Andreessen Horowitz - Andreessen Horowitz is a venture capital firm founded by Marc Andreessen and Ben Horowitz. Andressen (Netscape co-founder) who sits on the board of Facebook and Horowitz (high technology entrepreneur), launched the firm in June of 2009 with a $300 million dollar fund. Apparently their limited partners have enjoyed the results, as the duo recently closed a $1.5 billion fund. In February 2011, Andreessen Horowitz invested $80 million in Twitter, making the outfit the first venture firm that holds stock in all four of the most coveted social-media companies: Facebook, Groupon, Twitter and Zynga. The fund holds approximately 3.5 million shares of Facebook stock putting its stake at around $150 million
No of Shares held pre-IPO: 3.500 million
Value of Shares held pre-IPO @ $38.00: $133.000 million
No of Shares sold during IPO: None
Cash from IPO: None
No of Shares held post-IPO: 3.500 million
Value of Shares held post-IPO @$38.23: $133.805 million
Fidelity Investments - Fidelity Investments is a Boston-based financial services corporation with a sizable stake in the social network. Similar to T. Rowe Price, Fidelity is another large mutual fund company with holdings in Facebook. According to the Boston Business Journal, there are five Fidelity Investments funds holding shares in Facebook, which in aggregate, represent an investment of $151 million. One of the largest mutual fund and brokerage groups in the world, Fidelity acquired its Facebook shares from former Facebook employees or private shareholders in March of 2011, at a price of $25 a share.
No of Shares held pre-IPO: 3.500 million
Value of Shares held pre-IPO @ $38.00: $133.000 million
No of Shares sold during IPO: Unknown
Cash from IPO: Unknown
No of Shares held post-IPO: Unknown
Value of Shares held post-IPO @$38.23: Unknown
Reid Hoffman - Reid Hoffman is considered a member of the "PayPal Mafia," the founders or early employees of PayPal. The PayPal posse later founded a series of other technology companies such as YouTube, and Friendster. Hoffman has been credited with arranging the first meeting between Facebook CEO Mark Zuckerberg and investor Peter Thiel. Additionally, Hoffman invested $40,000 alongside Thiel in the social network's first financing round. Prior to the funding of Facebook, Hoffman was the Executive Vice President of PayPal and co-founder of LinkedIn, where he maintains a position as Executive Chairman. In May 2011, LinkedIn had very successful, albeit controversial IPO of its own. In 2010, Hoffman joined the Greylock Partners.
No of Shares held pre-IPO: 4.714 million
Value of Shares held pre-IPO @ $38.00: $179.132 million
No of Shares sold during IPO: 943 thousand
Cash from IPO: $35.834 million
No of Shares held post-IPO: 3.771 million
Value of Shares held post-IPO @$38.23: $144.165 million
General Atlantic - In March 2011, New York-based venture capital firm General Atlantic made a deal to purchase approximately 2.5 million shares of Facebook stock from former Facebook employees, giving Facebook a valuation of $65 billion.
No of Shares held pre-IPO: 2.500 million
Value of Shares held pre-IPO @ $38.00: $95 million
No of Shares sold during IPO: 2.500 million
Cash from IPO: $95 million
No of Shares held post-IPO: None
Value of Shares held post-IPO @$38.23: None
Kleiner Perkins Caufield & Buyers - Founded in 1972, KPCB is considered to be one of the most successful and influential venture capital firms in the world. In early 2011, KPCB purchased $38 million in Facebook stock from other shareholders at a $52 billion valuation according to the Wall Street Journal. Although KPCB made its mark during the dot-com era with investments in Amazon.com and Google, the firm diddled with un-realized cleantech investments for most of the last decade. KPCB is now sipping from the social web Kool-Aid, and has purchased stakes in Groupon, Twitter and Zynga, in addition to Facebook. The navigation towards social networking investments comes on the heels of KPCB's recently announced sFund, a $250 million initiative to invest in entrepreneurs inventing social applications and services.
No of Shares held pre-IPO: 1.743 million (est)
Value of Shares held pre-IPO @ $38.00: $66.234 million
No of Shares sold during IPO: Unknown (assumed holding on to shares)
Cash from IPO: Unknown
No of Shares held post-IPO: Unknown
Value of Shares held post-IPO @$38.23: Un
Facebook Key Current Employees
Mark Zuckerberg, CEO and co-founder - Selected TIME Magazine's "Person of the Year" in 2010, Mark Zuckerberg has been credited for connecting the world via Facebook. Raised in Dobbs Ferry, NY, Zuckerberg began writing software while in middle school and by the end of high school, he had co-written a music recommendation program called Synapse Media Player, which Microsoft and AOL reportedly offered Zuckerberg a million dollars to further develop. "Zuck" however turned them down and ran off to attend Harvard. While in his ivy covered Cambridge dorm, Zuckerberg created Facemash, a website that compared students' photos side-by-side in a fashion similar to HOT or NOT.com. After disciplinary action from the school's administration, Zuckerberg shut down Facemash and began "thefacebook," initially only available to Harvard students. Zuckerberg has since defended the site in intellectual property disputes and spurned buyout offers from Viacom, Yahoo!, Microsoft and other suitors. The 28 year old CEO owns 28.2% of Facebook's B shares.
No of Shares held pre-IPO: 533.802 million
Value of Shares held pre-IPO @ $38.00: $20.284 billion
No of Shares sold during IPO: 30.200 million
Cash from IPO: $1.148 billion
No of Shares held post-IPO: 503.602 million
Value of Shares held post-IPO @$38.23: $19.252 billion
Sheryl Sandberg, Chief Operating Officer - Sheryl has served as the chief operating officer of Facebook since March 2008. Formerly the Vice President of Global Online Sales and Operations at Google, Zuckerberg wooed her away from Google after a series of stealthy meetings and dinners at Sandberg's home. Though her base salary of $300K is modest, Sandberg didn't leave her Google position for nothing. She is currently sitting on nearly 1.9 million shares of Facebook stock valued at $722 million. But the real serious dinero will come down the road as nearly 40 million shares of restricted stock will vest. The one-time chief of staff for Larry Summers at the U.S. Treasury Dept. can then start her own Treasury with approximately $1.8 billion worth of Facebook shares.
No of Shares held pre-IPO: 1.900 million
Value of Shares held pre-IPO @ $38.00: $72.200 million
No of Shares sold during IPO: None
Cash from IPO: None
No of Shares held post-IPO: 1.900 million
Value of Shares held post-IPO @$38.23: $72.637 million
David Ebersman, Chief Financial Officer - David joined the social media concern in 2009 after a long stint at biotech firm, Genentech. Ebersman landed the job shorly after Facebook ousted Gideon Yu from the position, citing at the time its desire to find someone with "public company experience." Ebersman will be living quite well after the IPO, as he currently sits on 2.4 million shares, and holds another 7.5 million in restricted stock.
No of Shares held pre-IPO: 2.400 million
Value of Shares held pre-IPO @ $38.00: $91.200 million
No of Shares sold during IPO: None
Cash from IPO: None
No of Shares held post-IPO: 2.400 million
Value of Shares held post-IPO @$38.23: $91.752 million
Mike Schroepfer, V.P. of Engineering - Mike is an entrepreneur, technical architect and manager who has been the Vice President of Engineering at Facebook since 2008. He was recently listed as number 20 in the 25 Most Influential People in Mobile Technology by Laptopmag.com. In 2010 Fortune listed him, and two colleagues at Facebook's technical branch, as joint number 27 in their list of the 40 top entrepreneurs under forty. Similar to his brethren of C-Level execs at Facebook, Schroepfer holds 2.292 million shares of Facebook, and another 6.1 million shares of restricted stock.
No of Shares held pre-IPO: 2.292 million
Value of Shares held pre-IPO @ $38.00: $87.096 million
No of Shares sold during IPO: None
Cash from IPO: None
No of Shares held post-IPO: 2.292 million
Value of Shares held post-IPO @$38.23: $87.623 million
Theodore Ullyot, General Counsel - Theodore is an attorney and former government official, and is currently the general counsel for Facebook. Ullyot served in the George W. Bush Administration from January 2003 to October 2005, including stints as Chief of Staff at the Department of Justice, and as a Deputy Assistant to the President. Ullyot holds 2.025 million shares of Facebook as well as another 3.8 million shares of restricted stock.
No of Shares held pre-IPO: 2.025 million
Value of Shares held pre-IPO @ $38.00: $76.950 million
No of Shares sold during IPO: None
Cash from IPO: None
No of Shares held post-IPO: 2.025 million
Value of Shares held post-IPO @$38.23: $77.416 million
Jeff Rothschild, V.P. of Technology - Jeff Rothschild was in his fifties and retired when Facebook CEO Mark Zuckerberg recruited the co-founder of software company, Veritas. In 2005, Rothschild was brought in as a part-time consultant by Accel Partners colleague Kevin Efrusy, who had spearheaded the Facebook deal. However, Zuckerberg convinced the retiree to take a full-time position with the company. Concerned that Facebook would undergo a server crash similar to social networking pioneer Friendster, Zuckerberg sought to utilize Rothschild's deep knowledge of data centers to avoid such a problem. Since 1979, Rothschild has been active in the areas of storage management, system software, and networking. As the Vice President of Technology, Rothschild leads the engineering team and focusing on scalability and performance. He is concurrently a Consulting Partner at Accel Partners, the first venture capital firm to invest in Facebook.
No of Shares held pre-IPO: 22.368 million
Value of Shares held pre-IPO @ $38.00: $850 million
No of Shares sold during IPO: Unknown (assumed he sold a small part of his stake)
Cash from IPO: Unknown
No of Shares held post-IPO: Unknown
Value of Shares held post-IPO @$38.23: Unknown
Facebook Key Former Employees
Dustin Moskowitz, former V.P. of Engineering and CTO - Man, was this guy lucky to be Mark Zuckerberg's roommate? Currently the youngest U.S. billionaire, Dustin Moskovitz was one of the original founding Facebook cadre. Born in Washington D.C., Moskovitz met his fellow co-founders at Harvard University in 2004 where they developed the social networking site from their dorm room. Moskovitz was an economics major before dropping out of college to relocate to Palo Alto, CA to work on Facebook full-time. Credited as both Vice President of Engineering and Chief Technology Officer, Moskovitz led the technical staff, oversaw the major architecture of the site, and was responsible for the company's mobile strategy and development. He left Facebook in 2008 to start Asana, a company that builds project management software to help companies collaborate. Moskovitz was able to garner the title of "United States Youngest Billionaire" over Mark Zuckerberg because he is eight days younger than his fellow co-founder.
No of Shares held pre-IPO: 133.699 million
Value of Shares held pre-IPO @ $38.00: $5.080 billion
No of Shares sold during IPO: None
Cash from IPO: None
No of Shares held post-IPO: 133.699 million
Value of Shares held post-IPO @$38.23: $5.111 billion
Eduardo Saverin, former CFO and co-founder - One of the three original founders of Facebook, Eduardo Saverin was a Harvard classmate of Mark Zuckerberg. Acting as the business partner of "The Facebook," in 2004, Saverin concentrated on developing advertiser relationships while Zuckerberg focused on product development. When Facebook moved its operations to Palo Alto and Sean Parker gained more influence, Saverin ended up on the losing side of a power struggle. Initially granted a 30% stake in Facebook, Saverin's position was whittled down as institutional investment rounds diluted his shares. Saverin was born in São Paulo, Brazil to a wealthy Brazilian Jewish family and was raised in Miami, Florida, the state where he initially incorporated Facebook. In 2006, Saverin graduated magna cum laude from Harvard University with a B.A. in Economics. Saverin at one point owned 4.1% of Facebook stock, but has trimmed back his holdings substantially and now owns about half, but Forbes estimates his net worth at $2.7 billion. Currently living in Singapore. Saverin has been spreading his bucks around and is a major investor in a new social network called Qwiki, as well as Jumio, an online and mobile payment product. Saverin made headlines in recent days after it was revealed that he had renounced his U.S. citizenship last year. Many people, including two U.S. senators, accused the 30-year-old of dodging taxes. Saverin struck back, saying, “It is unfortunate that my personal choice has led to a public debate, based not on the facts, but entirely on speculation and misinformation.”
No of Shares held pre-IPO: 53.133 million
Value of Shares held pre-IPO @ $38.00: $2.019 billion
No of Shares sold during IPO: Unknown (assumed none)
Cash from IPO: Unknown
No of Shares held post-IPO: 53.133 million
Value of Shares held post-IPO @$38.23: $2.031 billion
Sean Parker, former first President of Facebook - Part tech genius, part bad-boy, Sean Parker has displayed uncanny foresight and comprehension of Internet business strategy. However, his fondness for hard partying and run-ins with the law have also left him as the odd-man out in business ventures. At the age of 16, Parker's Virginia home was raided by the FBI when he was caught hacking systems of Fortune 500 companies. In 1999, at the age of 19, he co-founded the online music sharing service, Napster. At a trendy Chinese restaurant in New York in 2004, Parker met Facebook co-founder Mark Zuckerberg and became a mentor and advisor to the rising entrepreneur. Much like Napster, Parker was able to foresee Facebook's success and societal contributions only months into its inception. Acting as the company's first President, Parker negotiated a deal with Facebook's first investors Peter Thiel and Accel Partners, giving Zuckerberg absolute control of the board of directors. Ousted from Facebook in 2005 for a drug-related arrest, Parker went on to become Managing Partner of Founders Fund, a San Francisco-based venture capital firm. Parker still acts as an informal advisor to Zuckerberg.
No of Shares held pre-IPO: 69.654 million
Value of Shares held pre-IPO @ $38.00: $2.647 billion
No of Shares sold during IPO: None
Cash from IPO: None
No of Shares held post-IPO: 69.654 million
Value of Shares held post-IPO @$38.23: $2.663 billion
Chris Hughes, former Public Relations and Customer Service Manager - Known amongst Facebook insiders as "The Empath" for his ability to understand people, co-founder Chris Hughes was the spokesman for the social networking site. Unlike his fellow co-founders, Hughes did not write code or generate advertising sales. Instead, his focus was on the user, making him part customer service representative, part public relations specialist. Hughes was born in Hickory, North Carolina, and attended Harvard University where he met his roommates and Facebook co-founders Mark Zuckerberg and Dustin Moskovitz. In 2007, Hughes left Facebook to serve as the coordinator of online organizing for Barack Obama's 2008 presidential campaign utilizing My.BarackObama.com. Hughes was the subject of an April 2009 cover story in Fast Company magazine under the headline, "The Kid Who Made Obama President." The openly-gay entrepreneur graduated magna cum laude from Harvard University with a B.A. in Literature and History, and in January 2011, announced his engagement to partner Sean Eldridge. Hughes currently resides in New York, NY and is now Co-Founder & Executive Director of Jumo, a startup that aims to use the social web to foster long-term relationships of responsibility between individuals and organizations working to change the world. In March, 2009 Hughes was named Entrepreneur in Residence at General Catalyst Partners, a Cambridge, Massachusetts venture-capital firm.
No of Shares held pre-IPO: 22.368 million
Value of Shares held pre-IPO @ $38.00: $850 million
No of Shares sold during IPO: Unknown (assume he sold part of his stake)
Cash from IPO: Unknown
No of Shares held post-IPO: Unknown
Value of Shares held post-IPO @$38.23: Unknown
Matt Cohler, former Vice President of Product Management - Matt was the first external executive hire at Facebook and also one of the first five employees to be hired by the company's founders. Cohler joined Facebook in 2005 during the company's critical growth period and helped drive Facebook's strategy, organizational growth and product direction. Prior to Facebook, Cohler was a founding member, Vice President, and General Manager at LinkedIn. In 2008, Cohler left Facebook to become General Partner at the Silicon Valley venture firm Benchmark Capital. Cohler's decision to leave Facebook came shortly after the departure of co-founder and Chief Technology Officer Adam D'Angelo, and according to some reports, has left speculation about the changing dynamic and culture of the company. However, Cohler continues to act as a special advisor to CEO Mark Zuckerberg.
No of Shares held pre-IPO: 2.737 million (est)
Value of Shares held pre-IPO @ $38.00: $850 million
No of Shares sold during IPO: Unknown (assume he sold all or part of his stake before IPO in the secondary market)
Cash from IPO: Unknown
No of Shares held post-IPO: Unknown
Value of Shares held post-IPO @$38.23: Unknown
Adam D'Angelo, former Chief Technology Officer - Seriously-- does this guy look old enough to even drive? Adam D'Angelo met Facebook co-founder Mark Zuckerberg while the two were still teenagers attending "uber" preppy prep school, Phillips Exeter Academy. Initially, D'Angelo worked on the first "app" for Facebook called Wirehog, a peer-to-peer file sharing program. He later went on to become Chief Technology Officer where he led the Platform Development and Data teams, and oversaw new product design and architecture. D'Angelo maintained the CTO position for two years before leaving in June 2009 to co-found Quora, an online database of information organized by questions and answers created by users.
No of Shares held pre-IPO: 17.895 million (est)
Value of Shares held pre-IPO @ $38.00: $680 million
No of Shares sold during IPO: Unknown (assume he sold all or part of his stake before IPO in the secondary market)
Cash from IPO: Unknown
No of Shares held post-IPO: Unknown
Value of Shares held post-IPO @$38.23: Unknown
Owen Van Natta, former Chief Operating Officer - Owen joined the Facebook team in 2005 as Chief Operating Officer where he focused on revenue operations, business development, and strategic partnerships. Van Natta played a key role in Facebook's early lucrative ad deal with Microsoft, which resulted in the software company paying $240 million for a 1.6% stake in the social network, giving Facebook a $15 billion valuation. He left Facebook in 2008 to serve as Chief Executive Officer of Project Playlist and in 2009, became Chief Executive Officer of Myspace. In 2010, Van Natta stepped down from his Myspace position to join Zynga as Executive Vice President of Business. According to Business Insider.com, Van Natta had aspirations of becoming Facebook's CEO, but left the company when it became clear to him that Mark Zuckerberg would not likely be replaced.
No of Shares held pre-IPO: 17.895 million (est)
Value of Shares held pre-IPO @ $38.00: $680 million
No of Shares sold during IPO: Unknown (assume he sold all or part of his stake before IPO in the secondary market)
Cash from IPO: Unknown
No of Shares held post-IPO: Unknown
Value of Shares held post-IPO @$38.23: Unknown
Justin Rosenstein, former Facebook engineer - Justin Rosenstein may in fact be the most mysterious of all of Facebook's big stock holders, having received little publicity relative to players like Sean Parker or the Winkelvii twins. Even David Choe, the graffiti artist, has gotten a New York Times piece. A software whiz poached from Google, Rosenstein played a pivotal role as an engineer with Facebook, leading the technical team that created the now ubiquitous "Like" button. Currently co-founder of software company, Asana, Rosenstein's sizable holdings show up only in the fine print of Facebook's S-1 filing. Rosenstein possesses a stash of 4.8 million shares of Facebook stock. Interestingly, Dustin Moskovitz, who owns 7.6% of Facebook (and is the co-founder with Rosentsein of Asana), lists Rosenstein as trustee of one of his massive trusts (containing Facebook stock). Apparently the "trust" runs deep between these colleagues, as Rosenstein lists Moskovitz as the trustee for his block of FB stock.
No of Shares held pre-IPO: 4.800 million (est)
Value of Shares held pre-IPO @ $38.00: $182.400 million
No of Shares sold during IPO: Unknown (assume he sold all or part of his stake before IPO in the secondary market)
Cash from IPO: Unknown
No of Shares held post-IPO: Unknown
Value of Shares held post-IPO @$38.23: Unknown
Other Notorious Facebook Stakeholders
David Cho - David Choe is an American painter, muralist, graffiti artist and graphic novelist . According to Wikipedia, Choe achieved art world success with his "dirty style" figure paintings-raw, frenetic works which "combine themes of desire, degradation, and exaltation." On his way to joining the ranks of Facebook centi-millionaires, Choe previously has seen darker, tougher times. In his documentary, "Dirty Hands," he admits to being a shoplifter, and he also claims to have been a looter in the L.A. riots of 1992. He did jail time in Japan for punching a security guard at his own show in 2005. Invited to create murals in the new Silicon Valley offices of Facebook, Choes opted to get paid in stock, despite believing that Facebook was "ridiculous." According to the New York Times, the amount of stock Choe received will vault him out of the starving artist ranks into the mega-rich.
No of Shares held pre-IPO: 4.800 million (est)
Value of Shares held pre-IPO @ $38.00: $182.400 million
No of Shares sold during IPO: Unknown (assume he sold all or part of his stake before IPO in the secondary market)
Cash from IPO: Unknown
No of Shares held post-IPO: Unknown
Value of Shares held post-IPO @$38.23: Unknown
Cameron and Tyler Winklevoss a.k.a. "The Winklevoss Twins" - The Winklevoss Twins is widely known for their lengthy legal battle with Facebook founder and CEO Mark Zuckerberg. While a senior at Harvard University, the Winklevoss Twins, along with classmate Divya Narendra (see below), conceived the idea for a social networking site for Harvard students called HarvardConnection, later renamed ConnectU. They enlisted the help of the freshman classmate Zuckerberg to write code, and after Zuckerberg verbally agreed to finish the HarvardConnection site, the brothers claimed that he delayed his work, and then developed competitor, "thefacebook.com." The Winklevoss Twins and Narendra sued Zuckerberg for $140 million in 2004, alleging that he had broken a verbal contract and copied their idea, in addition to illegally using source code. In 2008, after competing in the Beijing Olympics, the jocks reached a settlement with "Zuck," which was reportedly valued at $65 million. However, in 2010, the Twins claimed they were misled about the value of Facebook stock. A federal appeals judge recently affirmed a lower court ruling which said that the twins cannot undo the 2008 settlement. The good looking, buffed and litigious former preppies are the sons of Howard E. Winklevoss, Ph.D., a professor of actuarial science at the Wharton School of the University of Pennsylvania. Dad also operates a couple of businesses and is reportedly worth $100 million.
No of Shares held pre-IPO: 1.069 million (est)
Value of Shares held pre-IPO @ $38.00: $40.622 million
No of Shares sold during IPO: Unknown (assumed they have sold all or part of his stake either through the secondary market or the IPO)
Cash from IPO: Unknown
No of Shares held post-IPO: Unknown
Value of Shares held post-IPO @$38.23: Unknown
Divya Narendra - ConnectU co-founder Divya Narendra was born to two immigrant doctors from India and attended Harvard University in 2000, where he would later meet fellow co-founders Cameron Winklevoss and Tyler Winklevoss. In 2002, Narendra and the Winklevoss twins conceived the ConnectU predecessor HarvardConnection, a social network for Harvard students that would later expand to other universities. After utilizing the programming capabilities of two different Harvard classmates, Narendra approached Mark Zuckerberg for assistance. When Zuckerberg allegedly did not follow through on his agreement and later established his own social networking site, the founders of ConnectU filed lawsuit, which resulted in a $65 million settlement. Although Narendra continued to be embroiled in lawsuits surrounding Facebook, he moved on to co-found the professional investor networking site SumZero and attends law school at Northwestern University. In a 2010 interview with a Northwestern University publication, Narendra claims that his involvement with the Facebook lawsuits is what led him to pursue a career in jurisprudence.
No of Shares held pre-IPO: .534 million (est)
Value of Shares held pre-IPO @ $38.00: $20.311 million
No of Shares sold during IPO: Unknown (assumed they have sold all or part of his stake either through the secondary market or the IPO)
Cash from IPO: Unknown
No of Shares held post-IPO: Unknown
Value of Shares held post-IPO @$38.23: Unknown
COMMENTARY: I hope you have enjoyed reading this blog post. It took me a while to put it together. I am not absolutely 100% sure about the number of shares owned by some of the above investors, current and former Facebook employees and other lucky individuals who made out during the IPO. Several of them probably cashed-out some or all all of their stakes in the secondary market or sold them to angel investors, hedge funds, mutual fun firms, VC firms or wealthy individuals prior to the IPO, so I hope you will forgive me if I made a few mistakes. All of the above re now multi-millionaires or billionaires. Isn't capitalism great?!!
Facebook CEO and co-founder Mark Zuckerberg rings the bell for the start of trading of Facebook shares on NASDAQ from Facebook's HQ in Menlo Park, California (Click Image To Enlarge)
Facebook Inc. NASDAQ:FB took eight years to stage one of the most anticipated initial public offerings ever. The anticlimax came today, Friday, May 18, 2012, as Wall Street bankers struggled to prevent the newly minted stock from ending its first day with a loss.
The stock had been widely predicted to soar on its first day. Instead, up until the closing moments of the trading session, Facebook's underwriters battled to keep the stock from slipping below its offering price of $38 a share. Such a stumble would have been a significant embarrassment, particularly for a prominent new issue like Facebook, the most heavily traded IPO of all time.
Facebook's public debut had plenty of buzz but not much pop. The shares opened 11% higher, but soon struggled to stay above their offering price. David Benoit and Shayndi Raice have details on The News Hub. Photo: Reuters.
In the end, the bankers succeeded. When trading on Nasdaq ended at 4 p.m., the social network's stock was up just a hair, 0.6%, at $38.23.
The roller-coaster day—Facebook's shares started out jumping roughly 11%, before cooling off—was also beset by trading glitches and a 30-minute delay in the opening of trading. Nasdaq OMX Group Inc. NDAQ didn't respond to requests for comment.
Click Image To Enlarge
Facebook was also hurt by investors' high expectations of a healthy first-day pop in the price, according to people familiar with the matter. When that pop didn't happen, it prompted a selloff, these people said.
That's when Facebook's underwriters had to step in to support the company's share price, people familiar with the matter said. In particular, lead underwriter Morgan Stanley was assigned to be the deal's "stabilization agent"—meaning it was the firm's job to keep the shares above the offering price, these people said. In that role, Morgan Stanley was forced to buy Facebook shares as the price slid toward $38 in order to prevent the price from crossing into negative territory, according to these people.
Morgan Stanley, which led the platoon of 11 Wall Street banks that arranged the listing, had to dip into an emergency reserve of around 63 million Facebook shares—worth more than $2.3 billion at the offer price—to boost the price and create a floor around $38 a share, according to people close to the situation. In successful IPOs, the reserve, known as the "over-allotment" or "green shoe," is used by underwriters to meet soaring demand but in this case, it was used to prop up Facebook's ailing share price.
The process is common in IPOs and works like this: The underwriters have the extra shares available to either sell or buy for a period after the IPO. If demand is strong, they sell them like all the other shares. But if the stock price falls, they can buy them back, effectively creating a floor for the price.
Facebook's price began falling almost immediately after shares began trading. It is unclear exactly when Morgan Stanley stepped in, but traders said that the price movements throughout the day, with the shares occasionally touching the IPO price but never crossing below it, suggested the firm was active throughout much of the session.
Facebook's opening-day travails suggested how tough it can be to live up to high expectations in the market. Peter Falvey, managing director of the Boston-based investment bank Falvey Partners LLC said.
"There's been way, way too much hype, so it may be impossible not to have it be anticlimactic."
The stock's 0.6% rise was far below the first-day performance of other companies that raised $5 billion or more in their IPOs, such as United Parcel ServiceInc., which experienced a 36% first-day pop in 1999, according to Dealogic. Some Web-company IPOs over the past year, such as the social network LinkedIn Corp., more than doubled on their first days, though game maker Zynga Inc. closed down 5% on its December debut and slid a resounding 13.42% today
Still, at a market capitalization of nearly $105 billion by day's end, Facebook took its place among the nation's corporate giants. Its stock market capitalization makes Facebook bigger than computer firm Hewlett-Packard Co., and puts it in the same league as PepsiCo Inc.
At Facebook's headquarters in Menlo Park, Calif., the mood was celebratory, according to people on the company's campus. Chief Executive Mark Zuckerberg, who founded the company from his Harvard dorm room in 2004 and who is now worth $19.25 billion, rang the Nasdaq opening bell from there early Friday morning amid a gathering of around 2,000 employees.
Flanked by Chief Operating Officer Sheryl Sandberg, Mr. Zuckerberg told the crowd to remember the IPO was just one day. The 28 year old Zuckerberg, sporting his trademark hoodie said.
"Going public is an important milestone. But here's the thing. Our mission isn't to be a public company. Our mission is to make the world more open and connected."
He closed with.
"Stay focused and keep shipping."
Facebook has some recent bad news which may have concerned investors and negatively impacted the IPO:
Q1 2012 Revenues and Earnings Slump - The social network last month reported that its first-quarter sales declined from the prior quarter, and that profit also slumped, though revenue was up from a year earlier.
Effectiveness of Facebook Ads Questioned - On Thursday, May 17, 2012, Generl Motors cancelled $10 million in Facebook ads because of poor account service, and publicly questioned the utility of Facebook ads and lack of a measureable ROI.
Privacy Issues - Facebook must grapple with privacy issues as well as concerns over its strategy in mobile devices and the complex China market, among other things. In January, 2012, Facebook was placed on 20-year probation with annual privacy audits by the Federal Trade Commission (FTC) for numerous privacy violations.
Deepak Kamra, a general partner at venture-capital firm Canaan Partners said.
"Facebook's got a great run ahead of it, but things keep moving. Platforms come and go."
For the day, however, the offering drew in investors large and small. Theophilus Hodges, a 36-year-old property manager, stopped into an E*Trade branch in downtown Chicago Friday morning specifically to open an account to buy Facebook shares. Mr. Hodges said he plans to invest $10,000 in Facebook shares, using $4,500 of his own money and $5,500 from his mother. He said.
"If it wasn't for Facebook, I wouldn't be here."
Some investors who had bought Facebook shares in private transactions in the so-called secondary market before the IPO said they were disappointed the social network didn't have a strong first-day pop. Kevin Landis of the $85 million technology fund Firsthand Capital in San Jose, Calif., which bought Facebook at about $31 a share on the secondary market said.
"If the stock were trading in the $50s right now, I might be fighting off some momentary giddiness, but I can't take giddiness to the bank."
Yet even if some institutional investors felt let down, Facebook's early venture-capital investors were jazzed. David Sze, a venture capitalist at Greylock Partners, which invested about $12 million in Facebook in 2006 at a $525 million valuation, faced criticism at the time for what was viewed as an expensive deal. Greylock now owns a stake in Facebook valued at as much as $1.15 billion. Mr. Sze said.
"No one ever believes at the beginning."
He added that his partners are "feeling very happy."
The hours leading up the IPO on Friday morning were busy at Facebook. Late into Thursday night, hundreds of employees huddled around their computer screens and goofed off, playing hockey or giving impromptu concerts.
At around 6:30 a.m. Pacific Time on Friday, hundreds more employees returned to the campus to watch Mr. Zuckerberg ring in Nasdaq's opening bell. Facebook engineers had rigged the button to automatically post the message, "Mark Zuckerberg has listed a company on NASDAQ - FB," on his own Facebook profile as he rang the bell.
But on the other side of the country, on Wall Street, traders were exasperated by a 30-minute delay in the opening of the stock, which didn't begin trading till around 11:30 a.m. Eastern. Nasdaq officials told members in a notice at noon that its staff was "investigating an issue in delivering trade execution messages" from trades made in Facebook's IPO. Around 1 p.m., Nasdaq indicated it would provide a "manual report" to brokers with information on Facebook trades.
Once the stock opened, trading was robust. More than 200 million shares changed hands in the first hour, as investors rushed in to buy, and some who had received stock from the IPO cashed out. By day's end, 571 million shares traded hands.
The glitches that beset Nasdaq on Friday helped contribute to the lackluster price for Facebook shares, according to people familiar with the snafus. One of the biggest problems, these people said, was that buyers and sellers of Facebook shares weren't provided confirmation of their trades until 2 p.m. That's akin to people not knowing how much money is in their bank account, and therefore not knowing whether to go out and spend more money or save.
COMMENTARY: Judging from the reaction of the stock market to Facebook (NASDAQ:FB) stock today, Facebook shares at the offering price of $38.00 per share were over-valued from the beginning. On Friday, FB stock never received a "pop" that could be sustained, and the price began to plummet to 38.00. If the stock underwriters had not provided the support to propup FB shares so that they would not go below $38.00, the stock certainly would've dropped well below $38.00.
So why did FB shares flop so badly? I blame the prices of FB shares on the secondary market (SharesPost and SecondMarket) for driving the price of FB shares to unsustainable levels. The secondary market deals in the sale of stocks of private companies, and shares are auctioned in large blocks of 100,000 to 250,000 shares at a time. The buyers tend to be institutional investors like hedge funds, mutual funds firms and very wealthy individual investors. The secondary market brokers hyped up FB shares to the high heavens, and were able to drive share prices to levels that could not be sustained in the public markets. Here is what I am talking about:
On SecondMarket, Facebook's pre-IPO shares traded at an average price of $42.72 in the first week of April. The last trade was April 5.
On SharesPost, the last transaction took place at $44.10 per share on March 30.
Although they were frequently badgered to reveal where Facebook shares were trading in the private market, neither SharesPost or SecondMarket disclosed the above pricing until Facebook shares began trading publicly on Friday.
Aishwarya Iyer, a spokeswoman for SecondMarket said.
"It's the way we wanted our market to be. We didn't want any external hype."
So these private-market prices were of no help to investors deciding if they wanted to buy into Facebook's IPO.
But they can help private companies raise capital by determining a market value for their shares, says Boyd Steinhoff, a vice president with SecondMarket.
But, as you can readily see, the public markets are just too smart, they knew that there is a huge difference between the private secondary markets and the public markets.
Facebook priced its shares at $38 Thursday night. They opened at $42 per share on Friday, traded as high as $45 and closed at $38.23 on the Nasdaq. FB's pop turned out to be mostly "poop," because it could not be sustained. Main Street investors said "it's too high," and the result was an inevitable plumming from $45 to $38.23.
FB shares as of Monday, May 21, 2012 at 12:34 p.m. were at about $34.00, which is closer to where the shares were trading in the secondary market prior to the FB roadshow. You cannot fool the public and Main Street investors felt from the onset that FB stock was over-priced and it is now plummeting to an equilibrium price level.
The public stock markets just closed at the Facebook stock ended at $34.03, a $4.20 or 10.99% drop from Friday's close. This is much close to the price of Facebook in the secondary markets before Facebook declared its IPO.
Facebook Inc (NASDAQ:FB) stock prices from the open of the NASDAQ stock market on Monday, May 21, 2012 to closing time. FB stock ended at $34.03, $4.20 down or 10.99% down from Friday's closing price of $38.23
Courtesy of an article dated May 18, 2012 appearing in Mashable and an article dated May 19, 2012 appearing in SFGate.com
Just as Facebook prepares for its highly anticipated initial public offering of stock, the effectiveness of advertising on the site is under scrutiny, thanks to General Motors' decision to pull its paid advertising.
GM said this week that while it will continue to use Facebook's free social-media services such as fan pages, it is, in its word, "reassessing" the use of paid advertising on the site.
GM spokesman Tom Henderson wouldn't disclose what factors led to that decision. The Wall Street Journal, citing unnamed sources, said GM executives thought Facebook ads had little effect on consumers' car purchases.
Facebook would not comment.
GM's decision not only put Facebook's ad effectiveness into the spotlight, it also raised questions about management's ability to service important blue-chip clients.
Technology analyst Rob Enderle of the Enderle Group says.
"They clearly mistreated their customer. Even Bill Gates had to learn how to kiss people's butts."
The public falling-out could have come from Facebook not producing a strong enough ad formula to meet GM's business goals.
Enderle says.
"At a lot of these conservative companies, these guys have to show (a return on investment). You can't just say that 'Facebook ads make us look trendy.' "
Yet proving that social-media advertising works is incredibly difficult to do, says Jed Williams, an analyst at media research firm BIA/Kelsey.
The big problem Facebook and many other social-media sites have, he says, is that they don't have consistent, clear-cut metrics that prove advertising on their sites works.
He says.
"They need to create a clear set of tools that show return on investment. They have to demonstrate that, yes, that (ad) performance can be consistent and reliable."
By traditional measures — such as how many people click on an ad — Facebook doesn't look very effective. Nearly 60% of Facebook users say they never click on ads or sponsored content, according to a new poll from the Associated Press and CNBC. Another quarter rarely do.
Debra Williamson of research firm eMarketer says that low click-through rate has to be considered alongside other measures, depending on what the marketer's goal was, such as whether a brand gained more Facebook fans or if a game developer got more people to install a game.
Overall, it is "difficult to know" how effective Facebook advertising is, she says.
Facebook and other social-media sites are trying to address some client concerns by introducing new advertising formats. For instance, Facebook's "social context" feature allows an advertiser to show users which of their friends have already interacted with the brand by "liking" it or posting about it.
As social-media marketing becomes more nuanced, with new features and ad formats, some client fallout is expected, says Clay McDaniel, CEO of social-media agency Spring Creek Group.
McDaniel says.
"Social-media marketing has gone from sheet cake to layer cake — it's multilayered. Because social-media marketing is maturing, it's natural that some brands are going to shift their marketing investment mix."
And while some companies are leaving Facebook, many are increasing their ad investment in the site.
In the first quarter of 2012, Facebook had $1.06 billion in revenue. Of that, $872 million was from advertising.
The rest comes from Facebook's share of revenue when people purchase virtual goods for games such as FarmVille. That ad revenue is up 37% from the first quarter of 2011.
Facebook is the largest publisher of online display ads — static or animated banners. It published 28% of all such online ads last year, according to research firm ComScore.
Going forward, the ad landscape looks healthy for social-media providers. BIA/Kelsey forecasts that social-media advertising revenue will swell from $3.8 billion in 2011 to $9.8 billion in 2016.
Ford is one company that has raised its expenditures.
The automaker increased its spending on digital display advertising at the beginning of 2012, says social media head Scott Monty. Those ads are now 25% of its advertising budget.
Facebook is in that mix, but Monty wouldn't break out spending on the site.
Monty says.
"We can't judge GM's decision. We're just focusing on what's right for us. When you have 900 million people on Facebook and 500 million log in every day, it's just too big to ignore."
COMMENTARY: I am not surprised to learn that a Blue Chip company like General Motors decided to pull all its ads from Facebook because the ads were ineffective in generating revenues or a measureable ROI. I think we will be seeing a lot more of this until Facebook can provide reliable ad measurement metrics and quantifiable ROIs on advertising campaigns.
What Wall Street and Investors Are Saying About Facebook
Institutional investors might be sold on the Facebook (FB) IPO, but most consumers think the social networking company's stock is doomed to fall after its debut.
A survey of 1,500 individual investors and traders conducted on Tuesday and Wednesday, and released Wednesday by WhisperNumber.com, raised some eyebrows with these findings:
49% think Facebook is a passing "fad."
32% rate Facebook a buy after its IPO.
68% said Facebook is not a buy.
35% said yes to whether Facebook is a long-term investment.
65% said no to whether Facebook is a long-term investment.
An AP-CNBC poll found that investors have mixed opinions on both investing in Facebook and its leader, Mark Zuckerberg, and strong opinions when it comes to trust, purchasing and advertising on the site. Key findings include:
About 8 in 10 Facebook users surveyed say they hardly ever (26%) or never (57%) click on online advertising or sponsored content when using the site.
Most (54%) say they would not feel safe purchasing goods and services on Facebook. Among the site's most frequent users, half say they would not feel safe making purchases through the site.
About half (51 percent) say Facebook stock would be a good investment to makewhile 31 percent say it would not be so good and 17 percent just aren't sure.
Among those who own stocks, bonds or mutual funds, 54 percent say Facebook would be a good investment, 34 percent say it would not. Active investors (38%) are more likely than other investors (30%) to say it wouldn't be a good investment.
Half of Americans (50 percent) say a Facebook valuation of nearly one hundred billion dollars - larger than Ford and Kraft but smaller than Google and Coca-Cola - would be too high. Among active investors, 62 percent say they think Facebook will be overvalued, 27 percent think it will be fairly priced and 5 percent believe it will be undervalued.
A majority (59%) of Facebook users do not trust the site with their personal information and have little or no faith in the company to protect their privacy. A slight minority (13%) trust the company completely or a lot.
General Motors is no patsy, they are the third largest advertiser in the U.S., and the $10 million that they expected to spend on Facebook is a serious blow to Facebook. The fact that Facebook refused to comment on the GM ad cancellation is probably a good strategy coming on the eve of their IPO scheduled on Friday, May 18, 2012, but the social giant cannot afford to lose major Blue Chip accounts like GM.
In spite of the bad news from the surveys and loss of the GM account, the Facebook IPO will probably be very successful. Investors can't get enough Facebook shares, which is why Zuck agreed to increase the number of shares to be floated in tomorrow's IPO from 337 million to 422 million.
Courtesty of an article dated May 16, 2012 appearing in USA Today
While GM may be disappointed with Facebook, plenty of other advertisers are still interested in social media, judging by the latest forecast from BIA/Kelsey, which predicts total social media advertising revenues will more than double over the next four years, jumping from $4.8 billion in 2012 to $9.8 billion this year. This includes both display advertising, which is predicted to grow from $4.6 billion to $9.2 billion, and non-display, on track to increase from $230 million to $630 million over the same period.
That represents a sizeable chunk of all online ad spending -- but not necessarily a big increase proportionally speaking. In a separate forecast, eMarketer sees total online ad spending growing from $32 billion this year to $62 billion in 2016. If both predictions turn out to be right, that means social media’s share will increase from 15% to 15.8% over the same period -- a marginal increase for what is supposed to be a hot new sector in a burgeoning medium (it’s worth noting that the eMarketer forecast is also lower than some others, with Forrester predicting $76.6 billion in overall ad spending by 2016).
Meanwhile, eMarketer predicts total U.S. ad spending will increase from $169.5 billion in 2012 to $196.7 billion in 2016. Thus online’s share of total ad spending will grow from 18.9% to 31.5% over this period, while social’s share of total ad spending will grow from 2.8% to 4.9%. In other words, despite its apparently impressive growth rate, according to these forecasts social media will not capture a larger share of online ad spending, and will be a fairly minor contributor to online’s proportional growth relative to other media; rather, it is just sort of “along for the ride.”
All this makes interesting reading following a fairly steep downward revision in growth projections for Facebook, which dominates social media ad spending: as noted in yesterday’s column, eMarketer recently revised its forecast for Facebook’s 2012 advertising revenues down from $6.1 billion to $5.06 billion -- a 17% reduction, suggesting advertisers may not be signing up for Facebook in quite the numbers you might expect based on all the buzz.
Courtesy of an article dated May 16, 2012 appearing in The Social Graf and an article January 19, 2012 appearing in Marketing Land
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