Oh Facebook, how you’ve changed since the beginning…The biggest internet-company IPO is coming up. For the last several weeks, Facebook has begun preparing for it’s inevitable initial public offering estimated to take place in early May. Facebook has begun to cease trading of private shares on private exchanges. They are also preparing a roadshow to attract institutional investors for pension plans, mutual funds & hedge funds.
The recent development here is the ‘Book’s acquisition of Instagram for $1 billion in cash and stock. Many wonder how on earth the social photo app can be worth so much, but beneath it all there are 2 reasons why. The obvious first is their upcoming IPO. The second is that Facebook wants to become more dominant in terms of photo sharing and mobile markets overall. Instagram has a massive userbase. In terms of investing, Forbes says:
…investors may have been wondering, Why are we buying into a massive IPO for an Internet company with no clear (or massively successful) mobile strategy? Even if Instagram is not ultimately successful within Facebook, for big buyers in the IPO, it now looks like Facebook has a legitimate property in the space with tons of growth. This doesn’t mean Facebook bought Instagram just to appease these institutional investors. But it was a factor.
Via LA Times & Forbes
The financial and tech news sites have been buzzing about the Facebook initial public offering (IPO) over the last few days. For a private company that’s sitting on almost $4 billion in cash, what do they plan on doing with the extra $5 billion they hope to generate from the IPO? In the filing, Facebook gave a standard explanation of what it will do with cash it raises: “working capital and other general corporate expenses”. The company plans to focus on 4 key areas of improvement:
Mobile Revenue Strategy – Facebook was designed for computer browser interfaces, not mobile. With that in mind, they have not come up with a way to generate cash from its mobile applications. With people accessing the web more and more from mobile devices than computers, this is an essential challenge that FB must overcome.
Package More Data – With numbers of users growing (845 million + as of Tuesday), Facebook collects more data than ever. As this is their product, they need to find more ways to bring in content from other sites (Youtube likes etc.) and find better ways to package this data to sell to advertisers.
Streamline Advertising Strategy – Facebook is at the end of their experimentation period in terms of an advertising strategy. What they do well now is serving tons of display ads (28% of all US display ad impressions actually…) but eventually advertisers will want to know how to get leads from data on Facebook. One way they have talked about doing this is using “sponsored stories” to feed ads right into a users’ feed.
Hire Top Talent – Facebook mentioned in their IPO filing that they plan on continuing their strategy of buying smaller startups, shutting down their products/services and deploying their technicians on their own initiatives. It would be advisable for Facebook to throw in some attractive salary perks such as company equity
Image Via TechiesHome