Facebook IPO filing puts high value on social network
SAN FRANCISCO -- Facebook on Wednesday filed to go public and raise $5 billion in what could be the largest-ever Internet IPO.
The mammoth initial public stock offering values the social-networking giant at $75 billion to $100 billion and has been eagerly anticipated as a defining moment for the latest Web-investing boom.
Facebook has redefined the way millions of people worldwide interact and share information on the Internet.
In the proposed stock offering filing, which details the 8-year-old company's financials for the first time ever, Facebook said it rang up $3.7 billion in revenue and a $1 billion profit last year. That's nearly double the $1.97 billion in revenue it registered in 2010. The company boasts 845 million members, nearly half of them mobile users.
The stock offering, ticketed for May, will make CEO and founder Mark Zuckerberg a very rich man. With 28.4% of Facebook shares, his personal worth would be a staggering $24 billion. Zuckerberg, who had total 2011 compensation of $1.49 million, will opt for a $1 salary in 2013.
Facebook's offering, filed with the Securities and Exchange Commission, also laid out some of the risks to its business in the highly fickle and competitive social-networking arena. The company views Google, Twitter and Microsoft, which has a financial stake in Facebook, as its chief rivals. It warns potential investors that Google, for example, could integrate its Chrome Internet browser, its Android operating system or its search engine into its Google+ social site — a move that could put Facebook at a disadvantage.
There are other warnings. Facebook says advertisers may view some of its social ads as unproved. It also said increases in mobile viewership could adversely affect ad revenue because it doesn't currently generate "meaningful revenue" there.
Zuckerberg, as is the practice, also wrote a letter. The lengthy, somewhat-at-odds memo details Facebook's mission, including its transformative role in society. It highlights the company's spot in strengthening personal communication and the dual role that, for Facebook, means injecting businesses into the conversation.
"As people share more, they have access to more opinions from the people they trust about the products and services they use," he wrote.
Advertising uncertainty
Once Facebook stock starts trading under the symbol FB, which could happen as soon as May, the onus is on the company to ramp up revenue to maintain its lofty valuation. Facebook's fortunes hinge on advertising, which accounted for 85% of its revenue last year, or about $3.15 billion. Social-games-maker Zynga accounted for 12% of Facebook revenue. Google raked in $37.9 billion last year, 96% from ads.
The good news is Facebook commands a 28% chunk of the U.S. online-display ad market, up from 21% a year ago, says market researcher ComScore. Its closest competitor, Yahoo, had 11% of the display-ad market, up slightly from 10.9% in 2010.
The bad news is that Facebook ad sales worldwide are slackening. They grew 104% in 2011 but are expected to climb just 52% to $5.8 billion this year and only 21% to $7 billion next year, according to eMarketer.
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