Facebook Bares It All
We've all had those sleepless nights when no matter what you do, insomnia just has your number. You meander to the boob tube, hoping to find something that will bore you to sleep, only to find an infomercial of overly inebriated young women baring it all. With as much of Facebook's private parts that were exposed yesterday, we might as well start a "Facebook Gone Wild!" campaign.
The social-networking kingpin filed its S-1 registration statement with the SEC yesterday, as expected, opening its books for the first time for all to see. What interesting tidbits were uncovered?
Facebook and Zynga sitting in a tree
Advertising comprises a larger portion of revenue than I had expected -- 85% in 2011, down from 98% in 2009. The rest of it comes from payment and other fee revenue. Another fact that we've known is that Zynga (NAS: ZNGA) has always relied heavily on Facebook for its own business, but it seems that relationship goes both ways.
Zynga chalked up 12% of Facebook's revenue last year, a figure that has been on the rise. The happy couple inked a deal in May 2010 where Facebook gets a 30% cut of user purchases made on Facebook's platform, and this agreement expires in May 2015.
Sweet black ink
Facebook turned a profit of $1 billion last year, up from $229 million in 2009. Over that same time, sales grew from $777 million to $3.7 billion. The company was even kind enough to break it down by quarter.
Source: Facebook S-1 SEC filing.
So far, so good. It looks like Facebook is able to translate its growing top line into black ink. The next real question will be valuation once the offer is priced, but it will sure be expensive any way you slice it.
Does Facebook hate mobile?
Facebook now has 845 million monthly active users (MAUs), of which 483 million are active on a daily basis. More than 425 million MAUs, a little over half, use the company's mobile products, which is actually a detriment to its results, since Facebook doesn't display ads on its mobile apps. Unsurprisingly, it expects the mobile user growth rate to outpace overall MAU growth, which might hurt revenue as users increasingly substitute PC-based Facebooking with non-monetized mobile apps. No wonder Facebook's iPhone app has always been horrendously buggy.
Apple of Zuckerberg's eye
CEO Mark Zuckerberg has always admired Apple (NAS: AAPL) co-founder Steve Jobs. He even bought a house in Palo Alto last year that's less than 2 miles away from Jobs' longtime home. Zuckerberg's been known for trying to mimic Jobs' renowned presentation style. The compensation portion of the S-1 shows that starting in 2013, Zuckerberg's salary will be reduced to a Jobs-esque $1 per year.
In 2011, he took home total compensation of $1,487,362, and didn't receive any additional equity awards, either. Zuckerberg currently owns a roughly 28% stake in Facebook, so if the offering values the company at $100 billion, he'll be sitting on a $28 billion position at age 27. He owns Class B shares, which carry 10 times as many votes as Class A shares.
Back in 2004 and 2005, when Facebook was but an infant, Zuckerberg's dad provided the company with initial working capital. As thanks, Facebook issued him options to purchase up to 2 million Class B shares, but those options expired unexercised after one year. Excluding Zuckerberg, Facebook's board subsequently decided to go ahead and give 2 million shares to an LLC owned by Zuckerberg's dad in 2009.
Good old Goldman
We knew Goldman Sachs (NYS: GS) had a stake in Facebook, and now we know how much. In December 2010 and January 2011, Goldman, who is one of the underwriters in this offering, bought 69.5 million shares for $1.45 billion, which values shares just under $21. It lost out on the coveted lead underwriter spot to Morgan Stanley (NYS: MS) , but I think Goldman will do just fine on the deal.
Like it. Like that?
Facebook measures user activity and engagement by tracking the number of likes and comments generated. It saw an average of 2.7 billion likes and comments per day during the last quarter of 2011. That's an interesting proxy for engagement, mostly because I never thought anyone cared about what I like.
The deal is initially set for $5 billion, but that could easily change in the months leading up to the offer, and Facebook may even raise as much as $10 billion. Either figure would top the biggest reigning Internet IPO ever: Google (NAS: GOOG) , whose 2004 offering raised $1.9 billion at a $23 billion valuation for the then-fledgling search giant.
These are just some of the intriguing details I was able to uncover while perusing the document, and many more are bound to be unearthed. Facebook had better get used to having keen observers scrutinizing its every detail, as par for the public course -- but most of them won't just be restless sleepwalkers.
Facebook may hate the mobile revolution as a hindrance to its revenue growth, but this is one wave that can't be stopped. Instead of trying to fight it, investors should go with the flow and look for the best way to capitalize on The Next Trillion-Dollar Revolution. In this new special free report, The Motley Fool names one company that is set to benefit from mobile adoption, instead of being hurt by it like Facebook. It also has exposure to the red-hot growth in China. Get your 100% free copy now.
At the time this article was published Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services have recommended buying shares of Google, Goldman Sachs, and Apple and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.