I suspect history will show their three biggest mistakes to be:
1. Allowing an IPO that was vastly overpriced.
2. Keeping Zuckerberg in the CEO role for too long.
3. Taking their users for granted.
Obviously the first has seriously damaged their credibility, and with it their ability to hire and retain people who could solve their problems and grow the business.
I believe the second has a similar effect. Aside from the catastrophe of the IPO, Facebook don't appear to be going anywhere strategically. The cat is out of the bag in terms of cost effectiveness (or lack thereof) of Facebook ads compared to alternatives like Google. And generating ad revenue on small-screen mobile is bound to be harder, whether you're using HTML5 or anything else, because the physical screen size only provides so much space.
The third will probably be what finally kills them. As long as they can maintain the critical mass of users, the "everyone's on Facebook because everyone's on Facebook" effect, they can get away with a lot. But no-one using Facebook goes there for the ads, and no-one really likes all the privacy invasion. These things are merely tolerated, and only up to a point, because people like being sociable and right now Facebook lets them keep in touch with their friends and family more conveniently than anyone else.
So when Zuckerberg says "Over the next three to five years, the biggest question on everyone's mind is really going to be how well Facebook does with mobile"[1], I think perhaps he's getting ahead of himself. The biggest question I would ask, if I were a potential investor, is whether Facebook will still have that critical mass of users in three to five years, or whether, like every popular social forum on the Web before them, they will have been disrupted by the new shiny.
The post-IPO share price decline is bad but I have not seen much, if any, evidence that it has hindered the ability to hire and retain employees. In fact, an easy case can be made that the smaller valuation creates much more upside for the RSUs that Facebook issues.
Mark is one of the premier CEOs of his generation. Removing him would be completely insane. He is, by far, the single most responsible for having created a $60 billion company, something few can ever even hope to do.
Facebook is extremely customer-focused and I don't think the privacy dust-ups suggest strongly otherwise. It's fashionable but trite to think Facebook will got "the same route" as properties before it. Pretty much the same thing gets said about any lasting company. It doesn't take much intelligenc or curiosity to consider that's not always the case.
> Mark is one of the premier CEOs of his generation. Removing him would be completely insane. He is, by far, the single most responsible for having created a $60 billion company, something few can ever even hope to do.
There aren't many CEOs in his generation (of large companies) so that's not a great comparison. Facebook is also a $40B company, it has dropped like a rock since the shares became liquid. How much lower before his leadership is questioned? With the lack of growth and low profits I could easily see another $10-15B dropping off in short order.
The post-IPO share price decline is bad but I have not seen much, if any, evidence that it has hindered the ability to hire and retain employees.
Please note that those three points were my projections for how history will look back on the company. I'm not claiming there is some mountain of robust scientific evidence to support my position right now.
Having said that, anecdotes predict the real data surprisingly often, and there doesn't seem to be any shortage of Facebook people who aren't impressed at half of the money they thought they had to fund their big house purchases disappearing before they could do anything about it. And of course, it's still relatively soon after the IPO, and a lot of the funds are only starting to become available around now. You wouldn't expect a mass exodus when a lot of money was still locked up.
As for recruiting new people, again I don't suppose Facebook are about to disclose hard data that makes them look bad, but where has the buzz gone? Pre-IPO, everyone and his brother seemed to want in, presumably in part because of the potential for a huge pay-off that everyone expected Real Soon Now. Without that incentive, and with plenty of other new businesses competing in the market that don't have Facebook's baggage, I find it hard to believe that they are still attracting the same quantity and quality of applicants as they did say 2-3 years ago.
Mark is one of the premier CEOs of his generation. He is, by far, the single most responsible for having created a $60 billion company, something few can ever even hope to do.
Is he, really? Or was he just in the right place at the right time, and if it hadn't been him and Facebook, it would have been someone else and their start-up instead?
As for being a $60B company, I think you're a little out-of-date. They're down to just over $40B already. In any case, I'm more inclined to judge big tech companies by how much money they actually make and not some random number the markets generate and label "market cap". And as of the first earnings call since going public, Facebook were actually making a loss.
Obviously that wasn't a typical earnings period because of the various stock-related factors, but they're taking roughly $1B per quarter in revenues, and making around $300M per quarter of profit after adjusting for the one-offs[1]. At that rate, to justify their current $40B valuation, they would need to sustain that level of profitability for over 30 years, or increase profitability through growth.
But where will this growth come from? By Zuckerberg's own admission, the market is increasingly moving to mobile for their social networking; that limits the opportunities to show as many ads. Their growth in user numbers has slowed to a crawl, because there are only so many people in the world to sign up and some of the ones who did sign up are going to get bored and do something else. And the return on investment for on-line advertising is falling over time, a pattern which has been evident for quite a while now, which is a third threat to a business model like Facebook's.
In short, I don't think Facebook are anything like a $60B company. If you do, I assume you're investing heavily at this point, since you'll surely see a 50% ROI?
It's fashionable but trite to think Facebook will got "the same route" as properties before it. Pretty much the same thing gets said about any lasting company. It doesn't take much intelligenc or curiosity to consider that's not always the case.
Perhaps not. But usually it is, particularly in entertainment industries, and particularly in fast-moving tech industries. Ten years ago, Microsoft were riding high after the release of Windows XP, Apple were a has-been, a couple of guys had started a little company called Google that was attracting a bit of attention as an alternative search engine, and Facebook wouldn't even exist for several years.
I don't think it matters. By the argument I gave in my last post, they probably aren't worth anything like $40B. If the market cap figures everyone's quoting don't take some of the shares into account and the real number would be $57B, that just makes the valuation even more implausible.
Your incorrect corrections were rather matter-of-fact. And we are discussing the notion of Mark continuing as the CEO, not the plausibility of the company's current market value.
To be fair, I still can't find a single source to back up your higher figure, while I can find dozens with a quick Google search that quote a market cap of around the $40B that I and at least one other poster who replied to you were using. If you want the $60B you stated to mean something other than the most common valuation (market cap), you could clarify what exactly you're talking about instead, or the figure doesn't really further the discussion.
In any case, it still doesn't matter. Your argument for Zuckerberg's effectiveness is that he has built a very valuable company. Part of my argument is that it's funny money and the company isn't really that valuable at all. Whether we're thinking of the same kind of "funny money" doesn't make any difference to this argument.
[i]He is, by far, the single most responsible for having created a $60 billion company, something few can ever even hope to do.[/i]
Two things:
Q) Wasn't this $100 billion not so long ago?
A) Yes, and if things progress, it'll be $2 billion in six months.[1]
Q) Who provided MZ with the finance, the clout and the film, not to mention a whole lot of other perks?
A) The people who really made Facebook what it is.
Anyone who thinks that the Facebook saga is one lone libertarian hero proving Capitalism need to... re-evaluate their maturity levels.
[1] Please note the # of total shares about to hit the market.
I was (snarkily) suggesting something through hyperbole, but of course you're correct. However:
August 15th, 2012: 268 million shares, 10% of shares outstanding.
October 14th: 249 million shares, 9% of shares outstanding.
<b>November 13th: 1.332 billion shares, 49% of shares outstanding.</b>
December 13th: 124 million shares, 5% of shares outstanding.
May 17th, 2013: 47 million shares, 2% of shares outstanding.
60%ish of shares haven't been released yet, with Nov. 13th being 'the big one'. Given the speed / size of the price collapse, and impending tax bills and so forth, there's a good bet to be made that they'll tap at least some of that $10bil reserve.
In short, I can't logically see how the extra 50% swimming free will raise their share price. But then again, that's why I'm not paid the big bucks to work at JP & the Street, there's no doubt some plan afoot.
As others have pointed out, that's a feature not a bug. They raised a ton of money for not much equity, which is the best case result for an IPO from the company standpoint. Not so much for the suckers who bought.
> 2. Keeping Zuckerberg in the CEO role for too long.
As a consequence of #1, Zuck did not give up control. He can stay there until the equity is worth $0.00/share.
The only consequence of #1 and #2 is that he pissed in the pool for all those that follow, because the suckers have been bled dry. And when you think about it, that means IPO is not as much of a possibility for all the future acquisition targets for FB. Total win for the company.
1. Allowing an IPO that was vastly overpriced.
2. Keeping Zuckerberg in the CEO role for too long.
3. Taking their users for granted.
Obviously the first has seriously damaged their credibility, and with it their ability to hire and retain people who could solve their problems and grow the business.
I believe the second has a similar effect. Aside from the catastrophe of the IPO, Facebook don't appear to be going anywhere strategically. The cat is out of the bag in terms of cost effectiveness (or lack thereof) of Facebook ads compared to alternatives like Google. And generating ad revenue on small-screen mobile is bound to be harder, whether you're using HTML5 or anything else, because the physical screen size only provides so much space.
The third will probably be what finally kills them. As long as they can maintain the critical mass of users, the "everyone's on Facebook because everyone's on Facebook" effect, they can get away with a lot. But no-one using Facebook goes there for the ads, and no-one really likes all the privacy invasion. These things are merely tolerated, and only up to a point, because people like being sociable and right now Facebook lets them keep in touch with their friends and family more conveniently than anyone else.
So when Zuckerberg says "Over the next three to five years, the biggest question on everyone's mind is really going to be how well Facebook does with mobile"[1], I think perhaps he's getting ahead of himself. The biggest question I would ask, if I were a potential investor, is whether Facebook will still have that critical mass of users in three to five years, or whether, like every popular social forum on the Web before them, they will have been disrupted by the new shiny.
[1] http://www.bbc.co.uk/news/business-19565937