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Update: Facebook Has A Mobile Card Up Its Sleeve In Addition To Advertising

2012-02-03T15:20:07Z

Much has been made of the mobile risks that Facebook laid out in its S-1 IPO filing earlier this week. Essentially, it’s seeing/pushing massive growth in mobile, but it still hasn’t tried out advertising, its most effective route to revenues, on this platform. That’s not to say it won’t. But meanwhile, there is another area where Facebook is already making money through mobile.

For as long as Facebook has been running its Facebook Credits program—the virtual currency that users can redeem on games and other content peddled through Facebook’s network—it has been letting users top up those Credits using their mobile phones. It does this in partnership with companies like (reportedly) Boku and (definitely) Zong, the payments company bought by eBay’s PayPal last year. Users can also top up their Credits via PayPal and credit cards.

It’s not known how much, exactly, is purchased via the mobile channel today, but it is an example of how mobile is actually already driving significant revenue for Facebook. “Facebook Credits make a lot of money through mobile phones,” enough that Zong was “growing very fast last year” because of Facebook purchases, according to Frederic Court, a partner with Advent Venture Parnters, one of the VCs that backed Zong before the eBay (NSDQ: EBAY) buy.

This is because while sometimes the mobile payments were actually more expensive than a PayPal or credit card transaction, they are often a lot quicker to do, especially if you are in the middle of a game. And, as with other mobile-based payment options, they appeal to those who don’t have or want to enter card details.

Commissions on those Credits netted Facebook $557 million in revenues in 2011. (Facebook writes in the S-1 that the “other fees” that it designates on the same line as Payments was “immaterial.”)

At this point, Facebook doesn’t take any commission on Credits that are purchased via mobile: that service—which uses the premium SMS channel to send a code to a user to redeem Credits on the main site, and then charges the amount directly to the user’s mobile bill—already has some other parties taking a cut, including the provider (eg Zong or Boku), the mobile carrier and even another processing middleman. Rather, Facebook’s cut comes in the form of a commission on the payments, similar to what Apple (NSDQ: AAPL) takes for transactions on its App Store. That fee is 30 percent.

Could Facebook eventually take more control of its payments, and potentially cut out some of those middle people? Probably not soon, in Court’s opinion. “Zong brought something to Facebook that it didn’t know how to do, and it became very deeply integrated,” he said. “I don’t see them starting to do what Zong does, which is connecting hundreds of operators.” Then again, he added, “When they have a worth of $100 billion with $10 billion on the balance sheet they can do pretty much anything they want.”

What’s interesting is that as Facebook starts to expand some of the other functionality on its mobile platform, that will also open up a lot more opportunities in terms of mobile transactions as well.

As Facebook enables and opens APIs to get publishers to build apps for its mobile platforms (via the web and apps), “Facebook will make sure those are monetized,” he said. “I have no doubt Facebook will be making money on mobile games and other content given the engagement and scale on mobile. There is an amazing opening there.” Paying for Credits that will actually get used on the device itself, he said, will be “even more natural.”

Facebook in the S-1 said it had 425 million monthly active users accessing the social network via mobile devices, with that number outpacing the growth of overall subscribers.

“Credits is a wallet that you can top up in all kinds of ways,” he said. “Facebook has created its own currency and has imposed that on anyone offering digital goods on Facebook.” If anything, that currency might have a life outside the platform, to to buy things outside of Facebook.

But even with the opportunity for Credits, Court doesn’t see this eventually overtaking revenues from whatever advertising Facebook plans to put on its mobile services “for a very simple reason,” which is down to how those games are played today. “If you look at Zynga, only between two and three percent of people who play actually pay. The rest play for free. Tt will be the same for Facebook on mobile, with only a fraction spending money,” he predicted. “With advertising, 100 percent of the population is exposed.”

Even though Facebook has listed “no mobile ads” as one of its risks on the S-1, it could be playing its cards very close to its chest: the last few days has been a lot of speculation already about how soon Facebook will launch those mobile ads.

Razorfish (via Digiday) says that it is already working on a pilot for rich-media ads for the social network.

The blog Inside Facebook, meanwhile, has put its money down on sponsored stories to be the “most likely” first stab at mobile advertising on the site, with running a mobile ad network the second-most likely option. (That’s one that we explored a bit yesterday as well.)

Update: Razorfish’s VP of mobile, Paul Gelb, has made a correction on how his comments were portrayed in the Digiday story (via Twitter): his agency is not working on any mobile ad buying with Facebook. “In the interview I was referring to rich media featured stories, not paid ads,” he said.

A Facebook spokesperson, via email, added the following: “We want to clarify that we are not working with any agency to create paid ads on our mobile platform.”

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Now Facebook Must Prove To Wall Street Its Ads Really Work

2012-02-02T10:58:02Z

Facebook has made a $3.1 billion business from a social advertising sector many, even it, concede is experimental and unproven. Now it must find that proof. But experimenting on Wall Street, as well as Madison Avenue, could prove challenging.

“Our advertisers typically do not have long-term advertising commitments with us,” Facebook’s S-1 warned. “Many of our advertisers spend only a relatively small portion of their overall advertising budget with us.

“In addition, advertisers may view some of our products, such as sponsored stories and ads with social context, as experimental and unproven.

“Advertising on the social web is a significant market opportunity that is still emerging and evolving. We believe that most advertisers are still learning and experimenting with the best ways to leverage reach, relevance, social context, and engagement offered by Facebook.”

Facebook manages to target standard display advertising very well because it knows so much about users, but the biggest opportunity may yet lay in getting users to participate in and distribute to their friends ad campaigns that are part of their social experience may yet hold greater promise. It is a long way from there, however.

Forrester analyst Nate Elliott cautions (via Reuters): “I worry that the billions of dollars of revenue that they generated last year aren’t as solid as they need to be because the advertisers who spent the money aren’t as thrilled with the results they got for it.”

Amongst advertising’s biggest skeptics is advertising’s biggest beast. WPP CEO Sir Martin Sorrell thinks advertisers will be challenged to reach social network users without offending them, making Facebook a better PR and word-of-mouth medium than a straight advertising one.

Indeed, Facebook has been trying to strike that very balance. But, with its quest to roll out the perfect formats still ongoing, Facebook has made frequent missteps along the way, such as its Beacon system, which proposed sharing users’ web purchases to friends before it was aborted.

Today, less than half a percent of people who Like big brands’ Facebook Pages actually bother to engage with them, according to new research from the Ehrenberg-Bass Institute.

Social is not Facebook’s only advertising play. Its offering today is focused mainly around display ads that run alongside users’ feeds. Here, Facebook is so big that, in some key markets like the U.S. and UK, it’s actually the biggest player of all in display advertising - social or otherwise - leaving those that effectively created the display field—Yahoo (NSDQ: YHOO), AOL (NYSE: AOL) and others—in the dust.

But it’s social advertising where perhaps the greatest potential lays. And frankly Facebook, like its advertisers, has not yet cracked the nut; that mission goes on.

If, previously, upgrades like Beacon, Timeline and its perpetual redesigns have prompted user outcry, expect future responses to manifest as share price fluctuation when such revisions take place in the public glare of Wall Street.

Still, users’ redesign shock often subsides, stock price can rebound accordingly. And, if Facebook can execute fully on the social advertising holy grail, it can become spectacularly successful.

None of this looks very problematic today. In 2011, Facebook advertising revenue rose 69 percent because it showed 42 percent more advertising thanks to a growing user base; it scored an 18 percent higher price per ad.

But Facebook concedes these growth rates may not be sustainable. “Our user growth has been a primary driver of growth in our revenue,” its S-1 says. “But “our rates of user and revenue growth will decline over time”, especially in the west.

One Facebook ad buying agency thinks that slowdown could be a good thing…

“The market has now entered a phase where there is no longer any super-growth in user numbers to dilute the increases in cost caused by demand increases,” Alchemy Social managing director Will Ashton writes in a new white paper. “As such, we expect costs to increase at rates substantially higher than those we have seen previously.”

In other words, advertisers rushing to Facebook are driving up demand, but the slowdown in Facebook user growth suggests finite supply, driving up the rates it can charge.

Outside the west, Facebook has a huge opportunity in mobile, having gathered 425 million users. But it’s not monetising a single one because it is not selling any ads through mobile. Worse - until then, mobile success could actually hurt the company from within…

“Growth in use of Facebook through our mobile products, where we do not currently display ads, as a substitute for use on personal computers may negatively affect our revenue and financial results,” the company warns. “Our ability to (generate mobile revenue) successfully is unproven.”

$3.1 billion in 2011 ad revenue suggests Facebook is well on its way. What an amazing number for such a young paradigm. But some investors may question whether much of that was short-term experimentation by advertisers, meaning Facebook must work hard to prove its value to them as much as they have to itself.

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The Facebook IPO Lowdown 2-1-12

2012-02-02T04:59:05Z

» Facebook’s biggest risks explained (ReadWriteWeb)

» Is Facebook’s IPO the start of something, or the end? (GigaOm)

» Zuckerberg claims “We don’t build services to make money” (Forbes)

» IPO filing says that Zynga accounted for 12% of Facebook’s revenue in 2011 (TNW)

» From founders to decorators, Facebook riches (NYT)

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2.7 Billion Daily Likes And Other Key Numbers From Facebook's S-1

2012-02-01T23:28:26Z

Facebook‘s nearly 200-page S-1 filing appears to have crippled the Securities and Exchange Commission’s Edgar website with the mass of people going there to take a peek at the social network’s numbers. That traffic may well be matched by the weight of numbers in the filing itself. Here’s a look at some of them:

845 million active users, 100 billion “friendships”, 250 million photos uploaded daily

That works out to an average of 118.3 friends per user, and an average of ~~3.4~~ 0.3 pictures uploaded each day by those active users. Among those 845 million active users, more than half—483 million—are actually daily active users (taking the photo average up to 0.5 uploads per day, or around 15 per month). They’ve gone up by 48 percent since December 2010, when they stood at 327 million DAUs. Those numbers sound big on one hand, but not so big on another: doing some very basic math, this works out to average revenues per user of only $4.39. As a point of comparison, Google (NSDQ: GOOG) currently makes about $36 per user; Yahoo (NSDQ: YHOO) $16 per user (via CBS).

$1 billion in net income on revenues of $3.711 billion

That works out to net income at about 30 percent of revenues in 2011, up slightly from the previous two years when net income was at about 29 percent of revenues. A sign of improving efficiencies?

$3.2 billion in ad revenue

That’s the ad revenue figure for 2011, out of total revenues of $3.7 billion. The rest of its revenue is made up by Facebook Credits and other payments. The growth in ad revenues at the moment appears to be slowing down: Facebook says between 2009 and 2010, ad revenues grew by 145 percent, but then between 2010 and 2011 it grew by only 69 percent. There’s a clear sign that Facebook will need to further diversify how it makes its money if that trend continues. Credits and other fees are still very much on the rise and becoming a more prominent part of the overall revenue pie. In 2011 they amounted to 15 percent of revenues ($557 million); in 2010 they accounted for only five percent ($106 million).

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$0 in mobile advertising

Facebook currently makes nothing from advertising on mobile devices because it has yet to extend ads to its mobile platforms. The S-1 didn’t specify whether it planned to introduce this and in fact cast its mobile prospects in the most sober light possible: Facebook thinks that growth in mobile monthly active users will exceed the growth of overall MAUs “for the foreseeable future” as Facebook continues to encourage more mobile use of its platform. There must be a business agenda in that but Facebook doesn’t spell it out here. In fact, it cautions that as more people could just start using the mobile platforms more than the desktop version, where ads do appear, “if we are unable to successfully implement monetization strategies for our mobile users, our revenue and financial results may be negatively affected.”

Zuck’s salary is going down to $1 from next year. At the moment Facebook has 3,200 employees in total. That works out to an average revenue per employee of $1,159,687.50.

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Facebook's Status Update: $5 Billion IPO Filed

2012-02-01T21:51:07Z

It took the whole day, but Facebook finally—as many expected—filed its S-1 with the Securities Exchange Commission for its long-awaited IPO. While guesstimates for how much Facebook would try to raise ranged from $5 billion to $10 billion, in the end, it looks like it is the lower of that range: $5 billion.

There’s no firm idea yet on what that $5 billion might mean for a valuation of the company. But here are some quick early numbers: Facebook made $3.71 billion in revenue in 2011, almost twice what it did in 2010. Of that $3.71 billion, $1 billion was net income.

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It has 845 million active registered users with 483 million of them termed “daily active users”.

Advertising accounted for 85 percent of its revenue last year. Zynga accounted for 12 percent of its revenues overall and over 80 percent of its payment revenues.

And to confirm the rumors we heard about which banks are involved: Morgan Stanley is leading the IPO filing with J.P. Morgan, Goldman Sachs, BofA Merrill Lynch, Barclays Capital, and Allen & Co also participating.

Several folks are in line for a big gain on their investments. Facebook listed Accel Partners, DST Global Limited, Goldman Sachs, and T. Rowe Price as its major institutional shareholders. Dustin Moskovitz, a Facebook co-founder and CEO of startup Asana, is also a major stockholder listed in Facebook’s statement. Notable among the individual investors is Peter Thiel, who co-founded PayPal and will serve on Facebook’s board of directors.

It’s not just the IPO price, bankers and valuation that had people busy guessing. People have been speculating about other aspects of this IPO, including how much of a fee the banks will get on the deal (the range we’ve seen: between one percent and seven percent).

Now, with the IPO finally out, people will begin to pore over the numbers to figure out all sorts of things about Facebook that have not been completely clear while it was still in startup mode: What are its margins? What does it expect its growth rate to be? What are the comparative sizes of different business areas like advertising versus Facebook credits? What’s the geographical spread of its business?

However you cut it, the company has been a ground-breaker in the online world. You can argue about whether or not Facebook introduced the concept of social networking, but it has certainly run away with it, and now has 845 million users. And counting.

The question today is whether it will be able to convert that into a sustainable financial juggernaut, too?

More S-1 detail and number crunching here.

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Report: Facebook's IPO To Start At $5 Billion, And It's Coming Wednesday AM

2012-01-31T21:52:03Z

Facebook’s much-anticipated IPO looks to be coming ever-closer, with a new report out with further details of what we will see come Wednesday morning.

According to the International Financing Review, Facebook will be filing to raise $5 billion in a preliminary initial public offering prospectus on Wednesday morning. IFR cites unnamed people close to the deal as its source for the news.

That sum is significantly less than the $10 billion IPO that people have been reporting—perhaps in response to some of the other IPOs hits and misses we saw last year among other internet heavy-hitters like Zynga and Groupon (NSDQ: GRPN). However, as IFR points out that number could go higher if investors demand it.

Also, because of this, no target valuation will be set tomorrow, writes IFR—contrary to the $80-billion valuations that we’ve seen floated around.

IFR says there will be five banks involved in the deal, Morgan Stanley in the lead, with Goldman Sachs, Bank of America Merrill Lynch, Barclays Capital and JP Morgan participating as well. That number could go up too, it noted.

The IPO is projected to be finalized by May 2012.

Between now and then people will be going over Facebook’s filing with a fine-toothed comb looking for the smallest overlooked detail about how the company plans to make money in the future, what might affect those plans, and what its margins are today as it serves its 800 million (and counting) users.

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Facebook's Birth Certificate

2012-01-31T20:34:00Z

Facebook is widely expected to go public in the very near future with a valuation north of $75 billion. It’s a moment that tech watchers have been anticipating for half a decade and will make millionaires out of many, many early Facebook employees.

But let’s go back to May of 2005, less than a year after Facebook was initially incorporated. TheFacebook, as it was then called, measured its users in the low millions. Only American college students could be on the network, and they were verified through their college e-mail addresses. TheFacebook had steamrolled first through Harvard, beginning in February of 2004. Here is Zuck’s first statement as the proprietor of The Facebook, which he gave to the Harvard Crimson’s Alan Tabak, now a lawyer at the high-powered firm, Davis Polk:

“Everyone’s been talking a lot about a universal face book within Harvard,” Zuckerberg said. “I think it’s kind of silly that it would take the University a couple of years to get around to it. I can
do it better than they can, and I can do it in a week.”

As of yesterday afternoon, Zuckerberg said over 650 students had registered use thefacebook.com. He said that he anticipated that 900 students would have joined the site by this morning.

After conquering the Crimson, Zuckerberg expanded the operation to a group of Ivy League schools, and then on to the rest of the country’s colleges. It was clear big things lay on the horizon for the company, but I’m not sure anyone could have seen quite how big.

It was that spring that ‘TheFacebook, Inc’ made its first filing with the Securities and Exchange Commission. The paperwork details a $6,840 investment from a time when only Mark Zuckerberg, Sean Parker, and Dustin Moskovitz had to be listed on the startup-friendly Rule 506 Form D. Zuckerberg appears to have used is personal phone number for the filing, a New York 914 number rather than the Palo Alto landline used after August of 2005. The legal fees associated with the filing were a mere $50. And it’s signed by the very hand of Zuckerberg.

In the next filing (dated a week later) things get really interesting. We see the $12.7 million investment that came in from Accel Partners. Peter Thiel’s name also shows up on the SEC filing as a director and beneficial owner of the company. Still, I find the first filing the most compelling. If Facebook is now the 800-pound gorilla of the social space, this is that monster’s birth certificate.

Facebook’s First SEC Filing

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Report: Facebook IPO Could Arrive Next Week With Hopes Of $10 Billion

2012-01-27T19:08:54Z

The long-awaited Facebook IPO might arrive as soon as next week, according to a new report. When the company does get around to filing the paperwork it will set Facebook on the path toward one of the richest IPOs in tech history.

Facebook could raise as much as $10 billion when shares of its stock are sold to the public, and the usual “people familiar with the matter” are telling the Wall Street Journal that the first step could come by next Wednesday. It is believed to be preparing an offer that values the company between $75 billion and $100 billion, according to the report.

That will also allow the public to get a peek at Facebook’s financial statements, a chance to see how effectively the social giant is making money on its 800 million users. Facebook is believed to be solidly profitable, unlike a few other tech IPOs from last year, and is increasingly making Google (NSDQ: GOOG) nervous with its ability to provide extremely targeted data to advertisers.

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China's State Media Plan IPOs For Their Online Operations

2012-01-11T11:37:43Z

Communism and capitalism are now apparently the same thing in Chinese online media. The People’s Daily newspaper, an organ of the country’s ruling Communist Party, has filed to float its People’s Daily Online website in Shanghai to raise 527 million yuan ($83.4 million).

The idea is “to maintain and enhance the company’s competitive position in the industry, thus further improving the company’s profitability and social impact”, according to the prospectus.

It wants to invest most of the funds raised in mobile internet services, with the remainder toward upgrading its technology and editing platforms.

The China Securities Regulatory Commission (CSRC) is due to consider the application on Friday.

ABC: “Up to 10 state-owned media websites, including those of the People’s Daily, state broadcaster China Central Television and the Xinhua news agency - are planning domestic stock listings, state media said last year.”

In China, commercial online brands like Sina (NSDQ: SINA) with its market-leading Weibo microblog service, Tencent and Youku are becoming dominant. People’s Daily Online, with 19 million monthly uniques, lags rivals significantly - Sina’s portal had 247 million uniques, the prospectus concedes.

Though companies already required an Internet Content License in order to operate, the government is also now exerting pressure on the companies’ social media services to stamp out radical messages. The government could regain influence by beefing up its own media apparatus in the same commercial sphere led by the upstarts.

FT: “The planned IPO will mark the first time a Chinese state media website goes public, and the first time a Chinese state media company’s listing includes not just commercial but also editorial assets.

“The authorities have pondered for several years how to enable the state media to act as commercial enterprises and produce content that audiences find more attractive and credible without losing the power to use them as propaganda tools.”

In the first half of 2011, People’s Daily Online made a 30 million yuan profit on 211 million yuan revenue.

The People’s Daily newspaper currently holds 79.54 percent of shares in the web operation. Other shareholders include the mobile networks China Mobile, China Unicom and China Telecom.

Mobile Ads Join The IPO Boom As Millennial Looks For Public Investment

2012-01-06T00:13:40Z

Mobile ad company Millennial Media is going to try its hand in the public markets, filing papers Thursday for a $75 million initial public offering in hopes of raising cash to compete at a higher level. Registration documents show the company isn’t profitable but it posted a huge revenue increase over the last year as mobile app downloads soared.

It’s still very early days for mobile advertising, but the money tends to follow the eyeballs, and consumers are still snapping up smartphones and downloading mobile apps with aplomb. Millennial Media is second only to Google’s AdMob when it comes to putting ads on mobile screens, a business that earned it $69.1 million in revenue during the first nine months of 2011, according to the financial statements included with the registration papers.

The company is essentially breaking even, losing about $400,000 over that nine-month period but making money if you ignore pesky things like taxes and depreciation. Ads served through its technology reached 200 million unique users worldwide in December, and 100 million in the U.S.

As it does with several forms of digital advertising, Google (NSDQ: GOOG) dominates the mobile field with its AdMob holding. But mobile advertising is a game that is changing quite rapidly, eyed hungrily by those envious of how much time we spend engaged with our mobile devices.

And Millennial holds a bit of a trump card for those worried about the influence of Apple (NSDQ: AAPL) and Google over their mobile strategies: “We are the only one of the three principal mobile advertising platform companies that is not affiliated with a particular mobile operating system or set of devices,” Millennial said in its filing.

According to a source speaking to BusinessWeek, Millennial’s IPO could value it at between $750 million and $1 billion.

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Game On Or Game Over? Zynga Opens Above IPO Price But Then Drops

2011-12-16T16:35:43Z

The long-awaited IPO of social games giant Zynga has finally arrived, but those hoping for quick, early flips of the stock may end up having their bubble burst today: its shares opened above its initial offer price range, before quickly dipping down again.

The early volatility, and the fact that the price has not been consistently high, could be signs that investors have some skepticism about the longer-term prospects for the company, which has made a killing mainly through its social games available via Facebook. Although it has also more recently moved significantly into offering its games as standalone offerings, such as through mobile phone apps, some 95 percent of its revenue comes from Facebook.

The company is already working on a “plan B” to Facebook which it calls “Project Z”, independent of any third-party platform.

In its favor, Zynga is already profitable, and Reuters points out that investors saw being so reliant on distribution on one platform was a positive rather than a negative, given how huge and growing Facebook is.

The conservative trading could be an indication that as far as public offerings go, the tech bubble may be over. Groupon (NSDQ: GRPN) and LinkedIn (NYSE: LNKD) are two other recent IPOs that failed to live up to their initial offer prices.

Zynga this morning initially opened at $11—above its expected range of $8.50-$10, before trading down as low as $9.48. The latter price is still within the initial offer range, but Zynga at this rate does not look like it will be the next “Google” in terms of the first, post-IPO valuation, which saw the search giant raise $1.7 billion in its IPO. Zynga will still likely raise $1 billion.

At the time of this writing, the stock was trading at $9.53 per share.

Updated: Zynga closed down 5 percent on the day, at $9.50.

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Rovio Still Talking Up A Mickey Mouse IPO, Now In Hong Kong

2011-12-16T12:49:34Z

Is Rovio’s floatation ever going to happen? For some time now, we’ve been reading chatter about an imminent IPO.

The latest date is 2013, the latest market is Hong Kong. And, this time, the company itself is making bold on-the-record plans…

“Disney (NYSE: DIS) is worth around $60 billion. That is our goal and there is no reason why we could not build a company that size,” Rovio marketer Peter Vesterbacka tells business paper Tekniikka&Talous in Rovio’s native Finland.

Rovio’s parallels with Disney are clear. Each has a very popular franchise in Angry Birds and Mickey Mouse respectively; Rovio is creative the interactive-age version of pioneering cartoon entertainment. But the differences are obvious, too…

Disney got an early hit with Mickey Mouse’s Plane Crazy and Steamboat Willie but quickly expanded its portfolio with a broad lineup of other characters and franchises.
Rovio, however, had developed a whopping 51 under-the-radar mobile games and nearly fell bankrupt before finally finding its Angry Birds hit in December 2009.

Now the game-maker finds itself essentially a single-franchise company, churning out update upon update and new products like plush toys of the pigs and birds.

The amount of interest consumers have left in Angry Birds will be a critical factor in the timing of Rovio’s IPO ambition, which has now been pushed farther back and which the company had previously said would take place on Wall Street.

Vesterbacka tells Tekniikka&Talous Rovio is planning five or six new games based on Angry Birds characters in 2012. But Walt Disney might have seen fit to develop new animations with entirely new characters, at the same time as growing the core franchise.

It would be surprising at this point if the money Rovio is making can’t support new developments. But this may be why it is seeking a floatation fundraising.

Zynga IPO Could Challenge Google's High Score

2011-12-15T22:47:33Z

Zynga, the social gaming company behind Farmville, Words With Friends and other online games, is preparing to go public on Friday in what could be the biggest initial public offering of a tech firm since Google’s debut.

More than 60 million people a day play Zynga’s games. The firm is hoping to raise at least $1 billion (£650 million) and was expected to set a price for shares on Thursday night.

Zynga would be valued at $9 billion, less than half the $20 billion it anticipated in July before stock markets started to slide. Nevertheless the sale would make it the largest internet listing by a US company since the $1.9 billion IPO of Google (NSDQ: GOOG) in 2004, according to Dealogic. The flotation precedes an expected share sale by Facebook next year, in what is likely to be the largest ever social media IPO.

Zynga, based in San Francisco, is profitable. In the first nine months of the year, its revenue doubled to $829 million from a year earlier, but its net income declined 35 percent to $31 million.

It plans to sell 100 million shares for $8.50 to $10, equal to 10 percent of the company. The demand for social media shares, combined with their scarcity, has led other firms who have followed this path to enjoy spectacular first-day “pops” in their valuations.

Daily deal site Groupon (NSDQ: GRPN) surged 31 percent on its debut as a public company. LinkedIn (NYSE: LNKD) jumped 84 percent. Both are now trading well below those prices.

Zynga faces risks. Analyst Arvind Bhatia, of Sterne Agee Group, issued a report on the company this week predicting it would “underperform” and set a price target of $7. He said Zynga’s growth was slowing and its margins under pressure.

Whatever the outcome, the IPO is likely to catapult founder Mark Pincus into the league of the super-rich. Pincus owns more than 105m shares with another 7.2 million “issuable pursuant to stock options”. At $10 a share, his Zynga stake is worth $1.05 billion.

And this isn’t Pincus’s only shot at social media billions. The 45-year-old also has a stake in Facebook that he bought for $40,000 back in 2004. According to Forbes magazine, that is now worth about $140 million.

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Facebook Readying Mobile Ad Push For 2012, Right Around The Expected IPO

2011-12-13T21:21:36Z

Facebook’s Carolyn Everson was tight-lipped several months ago at paidContent Advertising when the subject of mobile advertising was discussed. Turns out Facebook has been working on its mobile ad approach the whole time, and now according to a report it’s gearing up to launch what could produce a big influx of cash just before it is expected to file for an initial public offering.

According to a report from Bloomberg, Facebook is looking at launching a mobile-advertising product by the end of March but hasn’t totally settled on the approach it wants to take. One idea under consideration involves putting “Sponsored Stories,” or status updates that involve major brands, within the news feed of its mobile apps and sites, the report said.

Mobile advertising is tricky, even for companies that don’t have to endlessly worry about freaking out their users with personalized advertising. More and more time is being spent in front of mobile devices but ad dollars have not followed as the industry struggles to figure out the right balance between visibility and respect for the user.

Facebook’s mobile traffic is certainly a huge part of its overall usage, given how many people check their news feeds and update their statuses while on the go. Yet Facebook has taken a cautious approach to mobile this year, waiting months to release an iPad app while it is believed to be working on an HTML5-friendly version of its site that would allow it to bypass apps altogether.

The pressure associated with heading down the IPO path may be just the motivation to get its mobile-advertising strategy in place.

“We are holding ourselves to as high a standard as possible on mobile,” Everson, Facebook’s global vice president for marketing solutions, said back in September at paidContent Advertising. “I don’t rule mobile out, but we are working hard to figure out what the right model is. We haven’t figured that out yet.”

Here’s a video of her appearance:

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Zynga To Raise $1 Billion From IPO

2011-12-02T16:13:38Z

Facebook games maker Zynga plans to raise $1 billion (£630 million) in its initial public offering, valuing the fledgling internet firm at $7 billion.

The company behind popular Facebook games Farmville and Mafia Wars said in a regulatory filing on Friday that it intends to sell 115 million shares – 14 percent of its common stock – at up to $10 each.

The $7bn price tag will make Zynga the third-largest US gaming firm by market cap, behind World of Warcraft maker Activision (NSDQ: ATVI) Blizzard and Electronic Arts (NSDQ: ERTS). Activision Blizzard was valued at $14.19 billion and Electronic Arts was valued at $7.69 billion when the stock markets closed on Thursday.

Zynga said it has 54 million active users in 175 countries across the world, many of whom play its range of Facebook games including CastleVille, Empires and Allies and Zynga Poker.

Mark Pincus, the Zynga founder and chief executive, will control 36.2 percent of voting stock after the flotation.

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Report: Facebook IPO Coming By Next June

2011-11-28T23:41:38Z

Facebook expects to become a public company over the next six to eight months, according to a report Monday. And the first step down that path could become before the end of the year.

The Wall Street Journal reported Monday that Facebook has done all its homework internally before taking the leap into the world of publicly traded companies, but that CEO Mark Zuckerberg has yet to decide on the timing of such a move. With the world economy still a bit iffy Facebook seems to be waiting as long as it can before internal and external pressures to see a return on the billions invested in the company come to a head. The first papers could be filed this year, however, according to the report.

The timing isn’t that surprising, as 2012 has long been identified in several reports over the last few months as the year Facebook finally cashes in. The company has more than 500 shareholders at present, which means it will eventually have to disclose its financial statements to the Securities and Exchange Commission next year in accordance with the law.

But it’s interesting to imagine what Facebook could do with $10 billion in investment, which the report says is the company’s target. That would value Facebook at $100 billion, a market capitalization that’s more than tech heavyweights such as Amazon (NSDQ: AMZN), Cisco (NSDQ: CSCO), and HP (NYSE: HPQ). And it would make a mockery of the other tech IPOs of 2011, such as Groupon (NSDQ: GRPN) and LinkedIn.

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The Morning Lowdown 11-18-11

2011-11-18T13:14:33Z

Some of the stories people are talking about this morning:

» Yelp Files to Raise $100 Million in IPO of Consumer-Review Internet Site (Bloomberg)

» Has The Kindle Fire Already Fragmented Android Tablets? (paidContent)

» Major Newspaper Publishers Band Together On Social Shopping Portal (paidContent)

» Rehabilitated Netflix (NSDQ: NFLX) Could Rebound To $142 Stock Price (Forbes)

» TechCrunch CEO Heather Harde’s Quitting AOL (NYSE: AOL) (Business Insider)

» 5 questions about the Amazon (NSDQ: AMZN) smartphone (SplatF)

» SMG Moves Beyond Owned, Earned, Paid: Developing New Metric For ‘Shared’ (Mediapost)

» Glamour Gets 50,000 “Likes” From Social Media Campaign (Folio)

» Drone Journalism Arrives (NYT)

» BreakingNews Goes International with New UK Team (RWW)

Updated: The Deal Is On! Groupon Gets $700 Million IPO, Stock Up 31 Percent

2011-11-04T11:21:11Z

There may be hundreds of competitors out there, but Groupon (NSDQ: GRPN) this week has confirmed itself as the biggest daily deals site of them all, not just in terms of users but value, as it raised $700 million in its IPO—the biggest in tech since Google (NSDQ: GOOG)—valuing the company at around $12.8 billion as it started trading today on NASDAQ as GRPN. The result may have been a surprise to some, considering the bumpy road Groupon took to get there.

And the result may have even been something of a surprise to Groupon and its financial advisers: the company had originally planned to sell 30 million shares priced between $16 and $18, before increasing the number to 35 million priced at $20.

The price of those shares closed up 31 percent on the day, up $6.11. At various points during the day the stock flirted with the $30 barrier before settling down as the weekend arrived.

The $700 million raised sets a record for recent IPOs and could set the pace for what will be expected of other IPOs still to come, such as those from Facebook and Zynga. Still, Groupon’s public financing round is still less than half of what Google raised in its IPO in 2004, of $1.9 billion.

However, opinion seems divided over whether the company will be able to sustain the hype that is surrounding the company today. Over the past several weeks there have been plenty of questions raised about the company:

Perhaps most significantly, there is the number of companies mimicking its business model of offering daily discounts for goods and services, and whether the company will be able to grow as fast as it has as a result—not to mention whether longer term people will remain interested in the proposition of buying through sites like it.

Living Social, Amazon (NSDQ: AMZN), Google and Facebook are just four names to watch in this space, and that’s before you even get to the many local and more vertically focused daily deal offerings out there. (One of the sites I use most here in London is a one that only offers daily deals on food.)

The company has also been the subject of scrutiny over how it runs its accounting and at one point had to restate some figures along more traditional metrics.

When Groupon was in a quiet period leading up to the IPO, an internal memo leaked out from the CEO, Andrew Mason, in which he tried to rally the troops in the face of naysayers, which painted an unflattering picture of the company, however you looked at it.

Some of those issues are longer-term ones, but others appear more immediate. As Bloomberg notes, in September Groupon owed twice as much in payouts to its merchant partners as it had in cash. Marketing was up by 37 percent in the last quarter as well to cope with the rise in competition and as Groupon tried to ride the wave of its growth as a business.

Although the company has claimed it would be “wildly profitable” soon, in the first three quarters of this year it has had a net loss of $214.5 million.

In August, it was reported that Groupon had some 115 million subscribers worldwide.

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Bulls In Wall Street's China Shop: Baidu Soars, Another IPO Planned

2011-10-28T10:53:27Z

Beijing-based Chinese portal Baidu (NSDQ: BIDU) had the pleasure of telling the Nasdaq, where its stock is listed, how Q3 net income is up nearly 80 percent to RMB 1.882 billion ($295 million) thanks to 85 percent higher revenue of RMB 4.175 billion ($654.7 million).

CEO Robin Li credits “stellar growth” to “rapid growth in customer spending and user traffic” from Chinese advertisers. “Spending by large customers significantly outperformed our expectations as we continued to build strong relationships with high quality companies,” Li said.

“China’s search industry is still in its early stages, and as the clear industry leader we see enormous room for continuing growth as users and online marketing customers become increasingly sophisticated.”

Baidu stock closed nearly six percent up on Thursday. The company forecasts similar year-on-year growth for upcoming Q4. Release.

Meanwhile, after what has been a frantic two years of chinese tech companies listing on Wall Street, another, the downloads and entertainment portal YY.com, is reportedly looking to follow suit in 2012.

The company - which has more than 120 million registered users for its IM, e-commerce site, YY Music, social gaming and education services - has engaged Credit Suisse to float to raise between $100 and $200 million, reports Thomson Reuters (NYSE: TRI) (via Sohu and Penn Olson).

Since being founded in 2005, YY has taken at least $33 million from investors including Morningside, Disney’s Steamboat and GGV.

Groupon Prices IPO At $16 to $18 Per Share, Expects To Raise $478.8 Million

2011-10-21T13:00:06Z

Groupon will sell 30 million shares in its upcoming IPO, priced at $16 to $18 per share. The company estimates its net proceeds will be $478.8 million, down from the $750 million the company originally expected to pull in, on a valuation of $10.1 to $11.4 billion.

Groupon had delayed its IPO due to a poor economy and a series of company missteps, but financial data in its SEC filing this morning showed some good news. The company narrowed its losses for Q3 2011, to $10.6 million compared to $49 million in Q3 2010. Groupon’s revenue was $430.2 million in Q3 2011, up from $1.2 million Q2 2009. The company’s subscriber base is now 142.9 million, up from 152,203 as of June 30, 2009.

Groupon now operates in 175 North American countries and 45 countries, with 10,418 employees. A good chunk of its revenues are coming from its international operations—$161.5 million for Q3 2011, with $268.7 million from the North American side.

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