Presented by: Kirill Gourov, Benjamin Eng, Michael Ortiz, and Derek Ku
▪ Presented a case with regards to the Facebook IPO for Second Place in Alpha Kappa Psi's Annual Case Competition
▪ Proposed corporate restructuring to an Employee Stock Ownership Plan, decreasing shareholder count and allowing investor exits with a Section 1042 Rollover
39. $162 Billion
from US Online Travel Industry Revenue
87%
of travelers use the internet to plan trips
70%
of travelers update their Facebook status
46%
of travelers check-in to a location via
Facebook & Foursquare
travel
40. 86%
of viewers use their tablets simultaneously
88%
of viewers use their phones simultaneously
62%
of viewers use social networks while
watching television
51%
of viewers use social networks feel more
connected to other viewers.
media
41. 38%
Of viewers who use social media are talking
about sports
88%
of viewers use their phones simultaneously
62%
of viewers use social networks while watching
television
51%
of viewers use social networks feel more
connected to other viewers.
sports
Hello Judges, My name is Mark Zuckerberg and today I’ll be discussing why I should not have taken facebook public
What is Facebook. Facebook is the hacker way. I don’t mean hack as in breaking into computers but building something quickly and testing the limit of our abilitiesThe Hacker Way is a way of continuous development. A corporate company often becomes a bureaucracy. Our company believes in a meritocracy: People don’t win arguments. Code wins argument.
As you all know Facebook is a household name. In 2004, I created it in my own room. Today, you use it in your own rooms. And your car. And the train and even In the privacy of your own bathroom. We know it as the largest social network in the world.
Our mission is to make the world more open and connected.
Not only that, it’s also the largest photo sharing website in the world with over 100 billion photos. There’s 2 billion photos added every day.
We’ve been cash flow positive as of 2011.90% of our revenue came from advertising. The Remaining 10% is from social goods, sold via Zynga.
Of the $2.3 billion in private venture capital & investments, I multiplied 20 fold.
That’s great and all but, here are my problems when I was contemplating IPO
Social advertising isn’t working · Users clicked on 5 ads on every 10,000 displayed. · This worried our advertisers · Our competitors - google+ and twitter has been gaining traction · Today, we’re tackling the ever pressing issue, our user’s privacy.
`Facebookraised 16 Billion through their initial public offering on May 17th, 2012.
Because social media trends demonstrate that social networks are growing and people are ever reliant on social networks. It makes sense to stay private to further that growth and as a public company, our growth would be hindered by a board of director, shareholders, and regulations. More agile companies would be able to compete with facebook and ride the social media trends.
Because social media trends demonstrate that social networks are growing and people are ever reliant on social networks. It makes sense to stay private to further that growth and as a public company, our growth would be hindered by a board of director, shareholders, and regulations. More agile companies would be able to compete with facebook and ride the social media trends.
Looking back, we shouldn’t have IPO’d. Being a public company hinders us technologically and culturally.
Facebook is a team. It’s not just a company. It’s a community of hackers whose goal is to “make the world more open and connected.” While Facebook is a lucrative company, our objective is to launch innovative products rather than monetizing every molecule of their company. Hacker Way“As part of building a strong company, we work hard at making Facebook the best place for great people to have a big impact on the world and learn from other great people. We have cultivated a unique culture and management approach that we call the Hacker Way.”---The Hacker Way is a way of continuous development and iteration. A corporate company often becomes a bureaucracy. Our company believes in a meritocracy: Code wins argument.Numberof patents go down as number of purchases go up and the company IPOsRed-tape and board of directors will slow down the amount of products get pushed out. According to a study conducted by Stanford university, as number of acquisitions increase, patents go down which means the company is not making products from scratch. From a cultural standpoint, this means a company will acquire not just the product but the employees as well, who may not align with Facebook’s culture. Facebook has a rigorous training program called Bootcamp which instill the values of Facebook to its employees.
Investment Funds & Hedge Funds
ESOPRestructure Facebook with an Employee Stock Ownership PlanTax-qualified retirement planSPV buys and owns at least 30% of Facebook sharesOffers employees retirement benefits and ownership stake in companyEmployees retain voting rightsESOP BENEFITSEarly investors avoid capital gainsInterest and principal payments on ESOP loans are tax-deductableContributions into ESOP are tax deductableESOP Companies shown to be 2-3% more profitable and employees more motivated(1)
However we have already IPO’d, here are two issues that we have to tackle. We have a huge security problem and a challenge reaching expected revenue growth rates.
Here’s how facebook users manage their privacy settings now.
They go into the settings
And dig through a set a tools.
Timeline + Tagging
Here’s what will happen: All new users will have a default setting where all information is kept private. From that point on, they can select which content they wish to make available to the intended audience.For current users, they can revert back to the default private setting and share the information they choose. Proposed Solutions:More vocal about privacy settingsMake more comprehensible/easier to understandWhen making a new account, user setting set at the maximum capacityRegulate third-party applications and restrict the amount of information accessible to them
I already discussed how these products will generate revenue for facebook. Brands utilize our endorsements to influence our friends purchasing decision via our newsfeed and timeline. Graph Search will further allow people to connect over similar interests and discover new brands.
Pandora, Zynga, and Groupon are all tech companies that have IPO’d and rely heavily on ad revenue. People do not like ads because companies push these products and services. Zynga (ZNGA) - $10 – $3.40 (-66%)Pandora (P) $16 – $11.32 (-29%)Groupon (GRPN) $20 – $5.47 (-72%)
Companies like Zillow, Linkedin, and Yelp have search engines where users seek out these services and find other helpful, paid content in the process. Their business models do not rely heavily on paid placement or SEO albeit still lucrative for them. Instead, they have other streams of B2B revenue. Talk about their successes post-IPOLinkedin LNKD– $45 - 150.76 (235%)Zillow (Z) $20 - $36.05 (80%)Yelp (YELP) $15 - $22.33 (33%)
A new stream of revenue will come from 30% percent of all in-app purchases in the facebook app store This will tightly integrate Facebook with other businesses and further user engagement while increasing their business transactions and exposure to the company’s media/advertising/sales/products.
Travelers make much of their purchasing decisions online with companies like Kayak, Priceline, Hipmunk, Airbnb, Travelocity, and Expedia. It’s grown to a 162 billion dollar industry. Travellers are document more of their trips on social media with 70% of travelers who update their Facebook status.
Technology has evolved the way we consume our media. Many viewers watch television shows while using their tablets and phones to communicate with their friends and other fans. 62% of users share updates on their social networks while watching television. Facebook appears to be a complement for many of these shows. If media companies invested in creating native Facebook application that would further engage the audience from television show to social media.
If we did not have public shareholders, we could have released products such as graph search, and app center at a faster rate. With the graph search and app center, we could’ve generated more revenue
If Facebook hadn’t become a public company, we could have innovated and expanded our culture. Our App stores generating 30% of all in-app sales, Facebook’s new graph search integrating between social relationships and brands. This way Facebook can do what we were meant to do. Make the world more open and connected.
Businesses can sell their products to… (PEOPLE) (click)
PEOPLE who connect with their network of family, friends and (Make the world)
The world of 7 billion people. That much closer.Thank you judges
