

Comparing Facebook's IPO to Google's - tristan_louis
http://www.tnl.net/blog/2012/02/05/facebook-ipo-vs-google-ipo/

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chalst
From the article: _Of course, this does not mean that it is a busi­ness that
is guar­an­teed suc­cess in the future. Some ques­tions still remain around
the cost of its rev­enue and the company’s abil­ity to con­tinue on the same
growth curve as it has in recent years._

And the article is too lazy to compare the plans for what the two companies
want(ed) to do with the cash. Google's prospectus wanted the cash to finance
new operations. Facebook's IPO prospectus says it wants to invest the proceeds
in bonds. In other words, it has no business rationale for the IPO.

\-----

Source: 'as it admitted in its filing on Wednesday, its cash flow and credit
“will be sufficient to meet our operational needs for the foreseeable future”.
... So what are its plans for the additional $5bn it may raise from an IPO? It
intends to put the cash into US government bonds and savings accounts, and
perhaps use some to pay the tax due on converting into shares the “restricted
stock units” it has given to its 3,200 staff.'

[http://www.ft.com/intl/cms/s/0/cd03c402-4dba-11e1-a66e-00144...](http://www.ft.com/intl/cms/s/0/cd03c402-4dba-11e1-a66e-00144feabdc0.html)

(registration walled)

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jwblackwell
Very good point. I would have trouble investing in a business that is simply
going to reinvest my money in bonds.

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Maro
I used to be the guy who'd always ask how Facebook will make money and say
it's overvalued.

Today, given the hard revenue and profit numbers I no longer argue that
Facebook is a real business and deserves a largish valuation. I also became a
regular Facebook user.

But I still have a funny feeling about it. It doesn't provide a userful
service to me. It's just a centralized hub for wasting time. I do it with my
social network, but somehow it's not a real social network, in so far as I
don't make new friends or even add value to existing friendships. Of course,
you could argue that Facebook defines the term social network.

If Facebook disappeared off the face of the Earth, I wouldn't really care. I
think the reason why this is not a problem for Facebook is that I'm the
product, not the customer.

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jonnathanson
_"It's just a centralized hub for wasting time."_

Sure, but let's take a step back and think about that statement in broader
historical context. For a great many users, _the internet itself_ is nothing
more than a way of wasting time (well, wasting time and shopping -- though the
latter often falls under the auspices of the former). The only functional
difference is that Facebook is a "centralized hub"[1] for such time wasting.

If Facebook never happened, if social networking in general never happened,
people would still be wasting time online. And companies would still be making
money off of that activity.

[1] I would argue that the "centralized hub" description is apt, but there's
an important distinction in the way users traverse that hub. Facebook isn't a
portal or a walled garden in the way that, say, AOL was -- and this point is
often lost on pundits and casual observers. Instead, Facebook is increasingly
becoming a hub around which the rest of the web orbits. It lives with the
distributed content web -- something portals often had trouble doing -- but
it's the center of gravity within that web. People find things on Facebook,
sure, but people also scour the web and share things back on Facebook. It's
sort of like a beehive or an ant colony, actually.

This is the real genius of social networking. There's no need for Facebook to
have to aggregate and curate content; its users do that heavy lifting for it.
There's no need for Facebook to have to develop games and other diversions;
its developers do that for it. All Facebook needs to do is not piss off its
users, while also monetizing them. That's a delicate balance in the long run,
but for the time being, Facebook is sitting pretty in a wide-open field
without apparent challengers.

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Uchikoma
As others have pointed out elsewhere, Facebook is in it's 8th year, Google was
in it's 5th year. Google has a much faster growth attributable to larger
revenues in the beginning than Facebook, percentage growth seems to be the
same.

(Update) I found the growth graph interesting:

<http://techcrunch.com/2012/02/05/facebook-pre-ipo-google/>

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tristan_louis
That second graph is really interesting. Thanks for sharing it.

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ashokn225
The real difference is that Google's IPO was a Dutch auction. This was
particularly accurate because of how much information asymmetry there was with
Google. Not everyone knew where the value in Google was. Everyone knows about
Facebook. That complicates things. I wrote about this recently if you guys
wanna take a look. [http://ashoknayar.wordpress.com/2012/02/04/ipos-the-
social-w...](http://ashoknayar.wordpress.com/2012/02/04/ipos-the-social-web-
and-an-auction-from-holland/)

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namdnay
I don't get the figures. He says "all dol­lar fig­ures in thousands", but then
puts "US$" before them. Surely in this case you should say "all figures in
thousands of dollars" and not put any units in the cells?

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tristan_louis
The reason is that some figures were not dollar denominated. Those are not in
thousands.

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marcamillion
This is some awesome analysis. I have always thought that it would be good to
compare both IPOs, but never took the time to actually do it.

Thanks!

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tristan_louis
I had heard a few people compare Google and Facebook but no one had gone over
the numbers so I just decided to take it upon myself to do so. You're welcome
:)

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sek
Ctrl-F "Inflation" -> nothing found

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