Facebook held its initial public offering in February 2012, raising $16 billion, the largest IPO for a newly public company at the time. The document summarizes Facebook's business model, which relies heavily on advertising revenue that accounted for 85% of its 2011 sales. It also notes concerns about Facebook's ability to continue its rapid growth and increasing expenses as it expands globally and develops new mobile experiences.

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FACEBOOK IPO
Presented by:
NAYANA. N.P
KIRUTHIKA.N

2. 2Company Description
• The firm was launched in 2004 by Harvard student Mark Zuckerberg as an
online version of the Harvard Facebook.
• Facebook lets users share information, post photos and videos, play
games, and otherwise connect with one another through online profiles.
• Facebook has about 850 million total users and about 480 million daily users.
• the company had 3,200 full-time employees as of December 31, 2011.

3. 3Financial information

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• crossed the line into profitability in 2009,
• Facebook earned $229 million that year on sales of $777 million,
and has remained profitable ever since.
Financial information

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How Facebook makes money
1. Advertising :
• 85% of Facebook's 2011 revenue, almost $3.2
billion, comes from advertising.
• Facebook has grown by grabbing market share from
Google and Yahoo. Last year
2. Apps and games:
• Facebook allows outside developers to build apps
that integrate with Facebook.
• Revenue from Zynga, which makes FarmVille and
other games played on Facebook, represented 12%
of Facebook's total revenue in 2012.

7. 7Facebook IPO

8. 8Facebook IPO

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Face book's Strategy
• a) IPO Document Statement
• In the IPO document, Facebook describes its strategy as follows :
• “We are in the early days of pursuing our mission to make the world
more open and connected. We believe that we have a significant
opportunity to further enhance the value we deliver to
users, developers, and advertisers. Key elements of our strategy
are:
– Expand Our Global User Community.
– Build Great Social Products to Increase Engagement
– Provide Users with the Most Compelling Experience
– Build Engaging Mobile Experiences
– Enable Developers to Build Great Social Products Using the Face book
Platform.
– Improve Ad Products for Advertisers and Users

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The early start up and expansion of face book was funded in the years
from 2004 by:
– Zuckerberg and Savarin
– injections of cash by various venture capital funds such as Accel partners
– funding from various corporations and Microsoft who purchased 1.6% of Face
book’s stock for$240 million in 2007
– funding from private individuals such as Hong Kong billionaire Li Ka Shing who
invested $60 million in November 2007

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• Sale of MySpace to News corp. in July 2005
• Rumors about possible sale of face book to
Yahoo in Sept 2006
• Did not happen since Face book board valued it
to $8 billion

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• Initial Public Offering in 1st February 2012
• Seeking to raise $5 billion
• The company document announced
– 845 million active users
– 2.7 million daily likes and comments
• After IPO, Zuckerberg will retain 22% ownership share in
face book and will own 57% of the voting shares.

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• Underwriters values shares at $38 each, pricing the
company at $5 billion – largest valuation to a newly
public company
• 16th May-FB announced it would sell 25% more shares.
• IPO raised to $16 million
• 18th May trading began –NASDAQ started with some
technical delay, but stock struggled to stay above IPO
price most of the day
• 25th May- stock ended its full week of trading at $31.91
,16% decline

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• 22nd May – Wall streets Financial Regulatory
Authority –investigate-banks underwriting FB
had improperly shared info with selected clients
• Allegations sparked and law suits were filed
claiming $ 2.5 million losses due to IPO
• Bloomberg estimated- retail investors lost $
630 million

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Conclusion :
reasons to not 'like' Facebook's IPO
1- Slowing growth? Already?
• Facebook's sales increased suddenly for the past few years.
• Revenue rose by more than 150% in 2010. Sales were up nearly 90% last
year. But in the first quarter of 2012, revenue was up just 45% from the
same period a year ago
• Facebook's first quarter sales fell 6% from the fourth quarter of 2011

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2- Rising expenses
• Facebook says in its IPO filing:
– “Building great things means taking risks. This can be scary and prevents most
companies from doing the bold things they should. However, in a world that's
changing so quickly, you're guaranteed to fail if you don't take any risks.“
It can be seen :
– Net income fell 12% in the first quarter as costs and expenses doubled from a
year ago
IT means:
Facebook investors should be prepared for the company to make more big
purchases; Facebook admitted as much in its IPO filing
Conclusion :
reasons to not 'like' Facebook's IPO

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3- Facebook is a media company
Facebook generates most of its money from advertising
AND
That is a changeable and inconsistent business
- ARPU (average revenue per user ):
Facebook : $1.21 in the first quarter of 2012
EBay : $12 in the first quarter of 2011
Conclusion :
reasons to not 'like' Facebook's IPO

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4- Everybody is gunning for Facebook
- Facebook will not remain the undisputed leader in social forever.
Competitor and risks:
- Twitter
- Google+ (a company that has $49.3 billion in cash .That's almost 13
times the amount Facebook has.)
- if Facebook does decide to bulk up in China, it will face intense
competition (Tencent, Sina and Renren )
- LinkedIn (professionals are using that site, and not Facebook)
Conclusion :
reasons to not 'like' Facebook's IPO

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