This week, Facebook’s plans to raise $5 Billion from its initial public offering (IPO) has been front page news. Just to put it into perspective, Facebook has $3.9 Billion in cash - but that’s not enough. You would think from all the hype that Facebook was the world’s wealthiest company \ but next to Google’s estimated $45 Billion, you begin to see why they might feel the need to grow.
Facebook needs to improve and compete with the other Internet giant with its mobile sites, making acquisitions and introducing new features. Recently, a letter from Facebook’s Founder, Mark Zuckerberg detailing previously unreleased information, with some interesting facts emerging as Facebook looks to sell shares in the company.
You may or may not have heard the story of how Harvard student Mark Zuckerberg created Facebook and with the help of some friends created the company now worth all the money. You may have seen the hit film “The Social Network”, and how it showed us that Mark Zuckerberg is the brains behind Facebook and even after going public, Mark will retain charge of the empire that he has created.
Shares in the company are split into two types, shares ‘A’ and ‘B’, with the ‘B’ shares being worth 10 votes per share and ‘A’ shares worth a single vote. Mark owns 28% of the company’s ‘A’ shares which equates to Mark having a 56.9% say in how the company is ran. Not only that but in the case of Zuckerberg’s death, he has the right to name an heir to the company to make sure Facebook continues to be ran by someone that shares his vision .. NICE! Control from the grave.
Facebook earnings have been revealed as $1billion in profit with 2009 being the turn around year for finance. Income almost tripled from $272m to $777m and costs only doubled which of course means .. you guessed it .. profit. So what happened in 2009? Well that was the year that Mark introduced the ‘Like’ button to the Facebook world. One thing the aspect of ‘liking’ has done has been to enable the site to target advertising, which of course is something Facebook depends on for revenue. The other aspect of revenue for the site is through in-app purchases. Znyga , the company behind popular social games such as Farmville, Mafia Wars and Poker received a special mention in the IPO report with approximately 12% of the companies earnings.
One aspect of all of this that has been focused on by the media is how a lot of people are due to become very rich or become even richer. Even the enemies of Facebook, the Winklevoss twins, are going to capitalise on this with their shares from their lawsuit against Facebook being potentially worth $300million. Employees that have been with the company for a number of years are also looking to benefit from any shareholdings they have with a number of them looking to become millionaires.
What will become of Facebook in the year’s ahead? Will the new demands for profit cause the end of Facebook as we know it? Will they take their new capital and grow to the size of Google? Anything is possible, but comparing the 2 companies is like comparing apples to Volkswagens. Google has a mission to “to organize the world’s information and make it universally accessible and useful.” Facebook is 100% focused on profit above all else and is banking on the fact they have pioneered social data mining and are first in position to profit from it. After all, we all saw what could happen if not done correctly .. cough Myspace cough ..