The market awarded Facebook a 25 percent share price spike today, following a strong earnings report that showed off the company’s ability to retain mind share among youths, build its total global usership, and monetize mobile traffic better than nearly any other company. Period.
The firm pop in its shares has pushed Facebook’s valuation past the $80 billion mark, where it currently rests at $80.21 billion. Not a bad day’s work, but that number is somewhat shadowed by the fact that, as a company, Facebook has torched tens of billions of dollars of shareholder equity since it first went public.
We draw two conclusions from that fact: Given that Facebook is now a tremendously stronger company than it was a year ago, and yet it is valued under its former price, a pox on our own house for overpaying for the company’s shares; and, naturally, that Facebook is more than another strong quarter away from being simply flat.
Here’s TechCrunch’s Josh Constine and Kim-Mai Cutler the day before the fateful, and botched, IPO:
Facebook shares will start trading at $38 tomorrow, the company confirmed in a release, giving it a valuation of $104.12 billion. Facebook and its early shareholders will raise just over $16 billion in tomorrow’s much anticipated IPO.
At a $104 billion valuation, Facebook is worth more than any other tech IPO candidate at the time of its offering. It also perfectly matches what Facebook shares have been trading at in secondary markets over the last several months. Google was worth $23 billion at the time of its very unusual Dutch auction IPO back in 2004. As of tomorrow Facebook will be worth about half of what Google is worth now.
The implicit point in the second paragraph is that if Google managed to so greatly grow its valuation compared to its IPO price, to what heights might Facebook race? Despite general market furor, Facebook popped but a nibble to $42 a share on its first day, and then declined rapidly enough that its banking partners held the line at its initially offered price.
To illustrate just how off the market was concerning the pricing and sale of Facebook stock, here’s the same set of TechCrunch writers during its first day as a public company:
While the price is going to fluctuate a lot today, there’s a crowdsourced bet from Twitter users on FacebookIPOClosingPrice.com that the company will close at a $54 price and a $135.7 billion valuation.
Nope, Twitter users, that wasn’t the case. In fact, those shorting Facebook made out the best.
The gap between $104 billion and roughly $80 billion is $24 billion. But that’s not even the least-kind way we could describe Facebook’s total decline from former heights. Facebook opened on its first day at $42.05, meaning that it was worth more than $104 billion; those who bought in at that price would have enjoyed a far heavier decline in the value of their stock if they held onto it.
But, in effect, this is our fault. The Facebook IPO price, as noted in the first blocked quote above, matched secondary market interest. The market bore Facebook at a $38-per-share price; the IPO went off, hitches aside.
Christopher Hitchens once said that the ironies of history occur most pungently to those that don’t believe in them, and that applies greatly to us in the technology industry. We have undergone a number of periods in which valuations of technology companies have gotten far ahead of their earnings. Again and again we have bought into our own hype only to watch the money of the average Joe evaporate as founders and investors pocket cash at IPO prices. That’s fine. It’s simple market capitalism. But you’d think we would have learned a bit by now.
Facebook as a financial entity is much stronger than it was during the quarter it went public. Let’s do a little comparison for fun [Facebook Q2 2012 financial data versus Q2 2013 financial data]:
- Revenue, Q2 2012: $1.18 billion
- Revenue, Q2 2013: $1.81 billion
- Net income, Q2 2012: -$157 million
- Net income, Q2 2013: $333 million
Aside from higher expenses and a lower operating margin, it’s hard to find a metric by which Facebook is worse off than it was a year ago. And yet we the market public value the firm at $24 billion less than on its first day.
We were out of our skulls in 2012, and we are still paying for it. That said, Facebook is damn killing it recently, and is slowly growing into the valuation that its bankers and investors found palatable four quarters ago.
New question: Is Facebook overvalued at its current $80 billion price? The comments are yours.
Top Image Credit: Steve Snodgrass
Facebook stunned yesterday with its report that mobile advertising represented 41 percent of its total ad revenue in the second quarter of 2013. In the first quarter of 2013, it totaled a then-hailed 30 percent, bumping that key ratio by more than a third in just a fourth of a year. On a dollar basis, Facebook’s mobile advertising grew more than four times as much as its desktop-sourced advertising incomes in the most recent quarter.
However, looking backwards, last quarter’s mobile ad growth is less astounding when placed into context. From the third to fourth quarter of 2012, Facebook juiced its ad revenue as a percentage of total ad income by 9 percent. From the last quarter of 2012 to the first quarter of 2013, growth was 7 percent. Taking into account the 11 percent gain reported yesterday, Facebook has averaged 9 percent growth in its mobile ad revenue as a component of its larger ad top line for the past few quarters.
This allows us the ability to make basic predictions. Facebook yesterday noted on its earnings call that mobile advertising revenues will eventually outstrip desktop ad income. But when? Well, we can predict. If mobile advertising revenues continue at their average rate of the past few quarters, Facebook should earn precisely as much from desktop and mobile advertising platforms in the current quarter.
The math is simple: Facebook ended the most recent quarter with a 41/59 split between mobile and desktop ad income. If mobile revenues are growing by 9 percent quarterly – again, on average – 41 and 9 make 50, leaving the remaining 50 percent for desktop ad revenues.
Adding another 9 percent to Facebook’s mobile ad revenue as a percentage of its total ad income, and we could wrap the year where the second quarter finished, but in reverse, with mobile revenues comprising 59 percent of total ad income, and desktop just 41 percent.
This feels, prima facie, optimistic. Are we being too generous?
There is always a risk in any form of prediction, as future market dynamics are outside of our vision, and will always remain so. That said, we can take mild refuge in the fact that our average rate of mobile ad growth, again as a percentage of Facebook’s total advertising top line, is under the most recent quarter’s rise; this means that we are anticipating Facebook to under-perform its most recent quarter moving forward.
This gives us some breathing room in our predictions. Here’s the chart:
If mobile revenue is so strong, where does that leave desktop advertising incomes? Well, as it turns out, Facebook’s desktop advertising business is all but not growing. We can deduce this by subtracting the percentage of Facebook’s mobile ad revenue from its total advertising income, leaving us with its desktop-sourced figure. Let’s have some fun:
- Facebook’s total advertising revenue was $1.25 billion in the first quarter of 2013. Of that, 30 percent came from mobile. That means 70 percent came from desktop sources. Seventy percent of $1.25 billion is $875 million.
- Facebook’s total advertising revenue was $1.60 billion in the second quarter of 2013. Of that, 41 percent came from mobile. That means 59 percent came from desktop sources. Fifty-nine of $1.60 billion is $944 million.
- $944 million – $875 million = $69 million. That, assuming that Facebook has its numbers in place, is the delta between Q1 and Q2 for Facebook’s desktop advertising business.
That’s not much. Not only is Facebook sourcing a growing percentage of its revenue from mobile platforms, but its revenue growth is increasingly coming from a smartphone near you.
Let’s get to the bottom of the final number: In dollar figures, how much did Facebook’s mobile ad revenue grow from the first to second quarter? I’m glad you asked. Let’s find out:
- Facebook’s total advertising revenue was $1.25 billion in the first quarter of 2013. Of that, 30 percent came from mobile. Thirty percent of $1.25 billion is $375 million.
- Facebook’s total advertising revenue was $1.60 billion in the second quarter of 2013. Of that, 41 percent came from mobile. Forty-one percent of $1.60 billion is $656 million.
- $656 million – $375 million = $282 million.
So, Facebook’s mobile revenue grew by a quarter billion dollars in the second quarter. Not bad, given that as a percentage gain it works out to around 75 percent. And, perhaps more importantly, the $282 million figure is more than four times our previous $69 million sum. Therefore, mobile ad revenues on a dollar basis grew four times as fast as desktop advertising incomes in the most recent quarter.
Top Image Credit: Randy Lemoine
While you kind of feel badly for them, James Earl Jones and Malcolm McDowell manage to still look classy in the new Sprint commercials, in which they emote on a phone call and, in another, on Facebook updates for someone named Jenna.
“I think I see you. Nope, wasn’t you,” booms Jones, who has most memorably been the voice of Darth Vader in the “Star Wars” films, among other big roles.
“Now, I’m by the tools … now, I’m by the linens,” responds McDowell, who once starred as Alex in the movie classic, “A Clockwork Orange.”
Facebook is taking its standalone app strategy to an extreme new level on Wednesday. It’s starting to notify users they’ll no longer be able to send and receive messages in Facebook for iOS and Android, and will instead have to download Facebook Messenger to chat on mobile. In an on stage talk I did with Mark Zuckerberg in November, the EO revealed an explanation for today’s change that Facebook’s PR team referred me to: “the other thing that we’re doing with Messenger is making it so once you have the standalone Messenger app, we are actually taking messaging out of the main Facebook app. And the reason why we’re doing that is we found that having it as a second-class thing inside the Facebook app makes it so there’s more friction to replying to messages, so we would rather have people be using a more focused experience for that.”
Read the full story at TechCrunch.
Continuing its trudge toward becoming a more media-centric service, Twitter on Tuesday announced a new version of its iOS and Android mobile applications, giving more prominence to photos and video in the stream.
Instead of needing to click through to see an attached photo in your Twitter timeline, now users will see previews of pictures and videos captured with Vine within the stream as they thumb through it.
It’s a simple yet logical move for the microblogging service, which until now has primarily been relied upon for text-based updates in real-time. With the rise of Instagram over the past few years, users have flocked to more visual platforms, preferring to thumb through images and videos.
The move comes as Twitter aims to broaden its appeal to users, only weeks before the company makes its public debut on the New York Stock Exchange. While practically ingrained into the mainstream media consciousness, Twitter’s user growth rate has slowed year over year; the company is home to around 230 million monthly active users, far short of Facebook’s billion-plus member network.
Not to mention the obvious appeal to advertisers, which will receive more prominent billing in the Twitter feed when including pictures and Vine videos within their tweets. (Digiday’s take on this is good.)
Facebook’s acquisition of Instagram did not help matters for Twitter. The microblogging network was in fierce competition with Facebook to acquire Instagram just a few years ago, but lost out to a last-minute billion-dollar offer directly from CEO Mark Zuckerberg.
As a result, Instagram later rescinded the ability to preview its photos from within the Twitter stream, requiring users to click an extra link in order to reach the Instagram shots. Not only was it annoying for users, it was a blow to Twitter, which lost a great deal of rich visual content.
Shortly after Twitter received the heads-up late last year that Instagram would cut off its integration, the company scrambled to figure out a solution to bringing filters into the Twitter app itself, according to sources familiar with the matter. To do that, Twitter contracted the services of Aviary, an outside company responsible for much of Twitter’s photo filter product.
Twitter certainly learned from the whole situation. What you won’t see are previews of photos uploaded from nonTwitter products; only photos uploaded via Twitter’s apps and services will show up in preview form. Same goes for Vine videos (but not for YouTube videos). No word on whether that will change in the future.
Expect the download to roll out for Android and iPhones on Tuesday.
Since its inception, it has been tough to tell just how well Google’s social network, Google+, is doing. Every time Google+ releases a new set of user number statistics, their accuracy and methods are almost immediately called into question.
According to information released on Thursday, it seems that skepticism was well warranted.
Take Amir Efrati’s Thursday morning story on Google+, which called into question the 300 million active, “in the stream” user visits Google+ recently claimed it received each month.
As Efrati wrote, citing anonymous sources, and Google confirmed to AllThingsD, the “stream” is more broadly defined than one would think. It also means clicking on the little red bell or share icons you see across all of Google’s properties.
Quoth Google, in a statement to AllThingsD:
“Yes, clicking on the notifications bell does count in our monthly actives metric for the Stream. If you click anywhere which leads to the Stream being loaded and displayed, we count you as viewing the Stream. The Stream is rendered on mobile (Android and iOS), on the Web at plus.google.com, and when you click and open a notification view of the Stream on desktop properties.”
To be fair to Google+, yes, you can still reach and use Google+ from all other Google sites. Click the bell when you’re in your Gmail account screen and you’ll indeed be presented with a small, stream-like view of Google+ content. It’s possible that people are sharing from there.
And what’s more, competitors like Facebook also define monthly active users fairly broadly. The numbers include people who use third-party website widgets to share – the “Like” or “tweet” buttons you’ll see on sites like ours, for instance.
The problem is, as Google presents it, we can’t tell if users actually intend to use and share on Google+, or if they’re just clicking on the notifications bell to get rid of it – glaring red and bright against the plain white and gray background of Google’s properties.
So this leaves us, the critics and skeptics, back at a bit of a loss. Perhaps there are a significant number of people actively using and sharing on Google+ from other Google-owned sites.
Or perhaps it’s as dead as lots of people like to joke it is.
We just don’t know. And until Google decides to break down specifically how and from where people are visiting “the stream,” I doubt we’ll ever really have a notion of the network’s health.