Monday, January 09, 2012

Facebook And Profitability: Interesting Video And Some Thoughts About Potential IPO

Facebook keeps growing at a fast pace, and has matured as a strong marketing media, used by a large number of companies throughout the world.

I recently watched this video on Youtube, and wanted to share it with you.Unfortunately I am not able to upload it on my blog...

It is a CNN show where analysts discuss about the move of Godman Sachs to buy for $450 million of Facebook shares, evaluating it at $50 billions. It was on January 2011, a year ago.

At this time, Facebook was counting 600 million members, $2 billions in revenues. The analysts are discussing about the actual profitability Facebook may get. Indeed, it is very difficult, and it remains difficult now, to know exactly what kind of profitability Facebook is right now achieving. Also the fact that Facebook is not public, it does not need to give specific financial data, which could help us see how it works.

Facebook and social media company in overall is a brand new business modell. And as all new groundbreaking business modell, it is difficult to analyse the company's result and profitability in ten years from nom (which is what really matters).

Facebook has great ambition in 2012 to launch an IPO, and to enter stock exchange market. It will allow the company to raise massive money, and therefore give a lift to their effort of developping a leading advertizing hub, to attract advertizing budgets from companies and communication agencies.
This video has been published a year from now, and since then, very few information on the financial and business end of Facebook have been released. If Facebook actually really wants to enter the stock exchange market, they will have to publish some information about its profitability, and this is based on these information that the company will actually be rated.

The context is pretty tough for Facebook for a potential IPO:
  • The world is experiencing a major economical downturn, and it impacts most of the Index, including Nasdaq
  • The competition is getting tougher as Google is reaching more and more users with Google Plus.
  • A lot of regulation complains have come up with Facebook, and new laws restricting Facebook's terms of condition may hurt its will to master users' data for commercial purposes.
2012 will be a crucial year for Facebook, because even though the IPO does not happen this year, Facebook will have to prepare for it, and we will probably have more information about Facebook's actual results.