

Ask HN: Why does Facebook need another $500 million? - emilepetrone

From the MSNBC article, "(FB) said the new money will give Facebook the financial firepower to hire new employees away from competitors, develop new products and perhaps gobble up other companies - all without being a publicly traded company."<p>Why can't they do all of that now?
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JSig
Here is ticker guy's take on it.

"Facebook: Looking For Bagholders: Don't let it be you."

<http://market-ticker.org/akcs-www?singlepost=2337946>

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jayzee
I think that they are circumventing SEC regs on 500 of shareholders for
privately held companies. GS could sell the stake to HNW but for the SEC it
would appear that only GS is a shareholder.

So basically they get away with all the reporting requirement, Sarbanes-Oxley
and what have you to tap public markets by going through GS.

Meanwhile GS passes off all the risk to HNW individuals and keeps some nice
change for itself.

Frankly as a libertarian I do not see any problem with this. As long as GS
does not come back looking for a bailout.

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jayzee
Latest update from John Cassidy (NewYorker)
[http://www.newyorker.com/online/blogs/johncassidy/2011/01/fa...](http://www.newyorker.com/online/blogs/johncassidy/2011/01/facebook-
goldman-where-is-the-sec.html)

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revorad
At a very modest average value of $70,000 per employee for 3000 employees,
that's about 2 years' worth of salaries. That's not a lot of money for FB to
spend.

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aspir
They probably can do all of these things, but not at the rate that they would
prefer. This funding round would allow them to speed up efforts by a
significant factor.

I also wouldn't be surprised if a lot of the capital is actually used for
construction. Every time Facebook signs a new lease, they outgrow it. This may
buy a huge plot of land to build their own megacomplex.

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azazo
I also believe they will use some of the new money to cash out early
investors.

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togasystems
Do you think that early investors would want out now with an (Not Confirmed)
IPO around the corner?

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gte910h
I think early investors always appreciate taking out a good chunk of their
original investment if they can leave it with no downside and all upside

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marketer
This seems more like a strategic investment. They're obviously partnering with
Goldman Sachs for an (eventual) IPO, and the terms were probably good. Why not
do it?

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Nikkki
Let´s see when the next Web 2.0 FB challenger will come out and then the over
$1.5 billion investors have plugged into FB will be gone with the wind :-)

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gallerytungsten
They need it to start sending dozens of "Facebook CDs" to everyone, because
that worked so well for AOL.

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ig1
The strategy took AOL from a mere 200k users to 25million. It worked very very
well for AOL. If they hadn't done it they'd likely be yet another long
forgotten online services company like Prodigy, CompuServe or Genie.

But instead they're a multi-billion dollar company which everyone here has
heard of.

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chailatte
They're not as profitable as they like us to think. I am guessing declining
game ad spend and increasing cost from new users in countries that cannot be
monetized.

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il
You got it. As an advertiser/agency, US traffic is worth significantly more to
me than international traffic, and I'm willing to pay a premium for it.
Facebook growth in the US is slowing, and international traffic is not doing
well.

In some ways, the Facebook ads ecosystem is a replay of the first .com bust.
Ad-supported games are buying ads on other games to get users to click on
their ads advertising more games. It's not sustainable at all.

~~~
jayzee
Besides I think that some marketers are discovering that facebook is not that
effective at converting users.

At least that is our experience. We are into enterprise software for
researchers and though we can target even grad students at universities these
grad students are not in the frame of mind to consider enterprise software
while checking out profiles on fb.

Google just turns out to be much cheaper to per conversion.

And I think that our experience is not uncommon. If you are doing something
cool/trendy/luxury/consumer facing business then may be facebook is for you.
For the rest of the market Google is way more effective

~~~
ig1
I'm building a job board for developers, and Facebook is giving me cheaper
conversions than anyone else. But you need to invest the time in building
high-performing ads, the current ads we run are performing 50x better than our
initial ads. Good ad copy and appropriate demographic choice is critical.

I suspect when a lot of people say they find Facebook ads not being effective,
they've just stuck an ad up seen a 0.0001 CTR and given up. Not that I'm
complaining, it makes the ads cheaper for me :-)

Facebook could do a lot more to make it easier for advertisers to build high-
performing ads, but I suspect they're afraid that it'd mean that the
advertisers would end up spending less money of Facebook.

