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Would you have bought Facebook at the IPO?

Consultant's Mind

Did you read the 170 page Facebook prospectus? Me neither.

The consultant’s short-cut is to watch the FB IPO video. It was created for retail investors.  Unsurprisingly, it is quite bullish and does not really mention risks. You can find those details in the prospectus on page 11, not in the video.Some highlights from the video. Note: the numbers from the video are higher than the prospectus which was filed on February 1, 2012.

1. Facebook has scale

  • 900 million people use FB monthly
  • 500 million use it daily
  • 125 billion friendships
  • 300 million new photos are uploaded a day
  • 2 billion “likes” a day
  • 1 billion comments a day
  • 488 million mobile users
  • It is the most commonly download app in the US

2. Facebook is the platform

  • FB builds the core platform and lets other build apps
  • FB sees themselves as the bridge between publishers (who want distribution and eyeballs) and users (who want content that has been curated by their friends)
  • The global ad market is $600 billion.  Online and mobile ads are only 12% of total.
  • FB says it targets at 90% accuracy (e.g., women 25-34) vs. industry average of 30%

3. FB is growing quickly and profitably

  • Advertising revenue in 2008: $   272 million
  • Advertising revenue in 2011: $3,154 million
  • Payments revenue (usually from games) in 2011: $557 million
  • Operating margin range from last 3 years: 34% – 52%

4. FB has room to grow, but it takes money

  • There are 2 billion global internet users. FB plans to get them all
  • Penetration rates vary:  Chile and Turkey (85%), Brazil and Germany (20%)
  • The United States is 20% of users, but 50% of ad revenue
  • Capital investment (PPE and leases) in 2011: $1,079 million
  • Facebook headcount: 3,200

Several fascinating articles on FB and the IPO

 

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