Facebook Case IPO
“Facebook, Inc: The Initial Public Offering”
Introduction
Facebook, which was founded by Mark Zuckerberg in February 2004, is an online social networking platform with the mission of making the world more open and connected. Within a few years, Facebook attracted millions of new users, from 1 million Monthly Active Users to 845 millions Monthly Active Users. Though competing with global and regional corporations in the industry, Facebook kept growing rapidly. With the high expectation of investors, Facebook finally decided to go public. The “Red Herring” of Facebook stated that its goal was to connect all two billion global Internet users. Basing on our analysis of Facebook’s IPO, we would like to give several recommendations on the investment of Facebook.
Analysis
Facebook generated its revenues mainly through advertising. Advertising accounted for 98% of Facebook’s revenue in 2009, 95% in 2010 and 85% in 2011. As a real identity networking website, Facebook can match the proper products based on users’ preferences. Facebook provides advertisers the opportunity to target the users based on the users’ demographic information. It owns any information uploaded by users. Facebook records all these information in database, which can be used by advertisers to target specific segments of users (social context). Moreover, Facebook generates money by its payments business from selling virtual goods through online gaming companies. Revenues generated from selling goods in online games increased from $13 million in 2009 to $557 million in 2011 and still has upward trend. It seems that the huge customer database with tremendous information about these users and the penetration of smartphone are the most significant value drivers of Facebook. As we know, Facebook appealed to people who are looking to reconnect with family and old friends or to find new friends. That is what made Facebook an outstanding company comparing to LinkedIn, Google plus and Twitter etc. In other
Introduction
Facebook, which was founded by Mark Zuckerberg in February 2004, is an online social networking platform with the mission of making the world more open and connected. Within a few years, Facebook attracted millions of new users, from 1 million Monthly Active Users to 845 millions Monthly Active Users. Though competing with global and regional corporations in the industry, Facebook kept growing rapidly. With the high expectation of investors, Facebook finally decided to go public. The “Red Herring” of Facebook stated that its goal was to connect all two billion global Internet users. Basing on our analysis of Facebook’s IPO, we would like to give several recommendations on the investment of Facebook.
Analysis
Facebook generated its revenues mainly through advertising. Advertising accounted for 98% of Facebook’s revenue in 2009, 95% in 2010 and 85% in 2011. As a real identity networking website, Facebook can match the proper products based on users’ preferences. Facebook provides advertisers the opportunity to target the users based on the users’ demographic information. It owns any information uploaded by users. Facebook records all these information in database, which can be used by advertisers to target specific segments of users (social context). Moreover, Facebook generates money by its payments business from selling virtual goods through online gaming companies. Revenues generated from selling goods in online games increased from $13 million in 2009 to $557 million in 2011 and still has upward trend. It seems that the huge customer database with tremendous information about these users and the penetration of smartphone are the most significant value drivers of Facebook. As we know, Facebook appealed to people who are looking to reconnect with family and old friends or to find new friends. That is what made Facebook an outstanding company comparing to LinkedIn, Google plus and Twitter etc. In other