4 ms·

Comparing Facebook's IPO to Google's

25 points by tristan_louis 15y ago

marcamillion 15y ago
This is some awesome analysis. I have always thought that it would be good to compare both IPOs, but never took the time to actually do it. Thanks!
- tristan_louis 15y ago
  I had heard a few people compare Google and Facebook but no one had gone over the numbers so I just decided to take it upon myself to do so. You're welcome :)
namdnay 15y ago
I don't get the figures. He says "all dollar figures in thousands", but then puts "US$" before them. Surely in this case you should say "all figures in thousands of dollars" and not put any units in the cells?
- tristan_louis 15y ago
  The reason is that some figures were not dollar denominated. Those are not in thousands.
chalst 15y ago
From the article: Of course, this does not mean that it is a business that is guaranteed success in the future. Some questions still remain around the cost of its revenue and the company’s ability to continue on the same growth curve as it has in recent years. And the article is too lazy to compare the plans for what the two companies want(ed) to do with the cash. Google's prospectus wanted the cash to finance new operations. Facebook's IPO prospectus says it wants to invest the proceeds in bonds. In other words, it has no business rationale for the IPO. ----- Source: 'as it admitted in its filing on Wednesday, its cash flow and credit “will be sufficient to meet our operational needs for the foreseeable future”. ... So what are its plans for the additional $5bn it may raise from an IPO? It intends to put the cash into US government bonds and savings accounts, and perhaps use some to pay the tax due on converting into shares the “restricted stock units” it has given to its 3,200 staff.' http://www.ft.com/intl/cms/s/0/cd03c402-4dba-11e1-a66e-00144feabdc0.html http://www.ft.com/intl/cms/s/0/cd03c402-4dba-11e1-a66e-00144... (registration walled)
- tristan_louis 15y ago
  it's not a question of laziness but comparing plans gets into hazy areas (how do you evaluate one plan vs. the other) whereas hard numbers are easier to compare and really non-negotiable. In either case, the companies went public because it made no more sense for them to stay private (due to legal requirements, they would have to do the same type of filings as private or public companies) so rationale for doing the IPO is just that. How they put it in their filing is just after the fact rationalization to justify giving the investors a financial exit.
- jwblackwell 15y ago
  Very good point. I would have trouble investing in a business that is simply going to reinvest my money in bonds.
Uchikoma 15y ago
As others have pointed out elsewhere, Facebook is in it's 8th year, Google was in it's 5th year. Google has a much faster growth attributable to larger revenues in the beginning than Facebook, percentage growth seems to be the same. (Update) I found the growth graph interesting: http://techcrunch.com/2012/02/05/facebook-pre-ipo-google/ http://techcrunch.com/2012/02/05/facebook-pre-ipo-google/
- tristan_louis 15y ago
  That second graph is really interesting. Thanks for sharing it.
Maro 15y ago
I used to be the guy who'd always ask how Facebook will make money and say it's overvalued. Today, given the hard revenue and profit numbers I no longer argue that Facebook is a real business and deserves a largish valuation. I also became a regular Facebook user. But I still have a funny feeling about it. It doesn't provide a userful service to me. It's just a centralized hub for wasting time. I do it with my social network, but somehow it's not a real social network, in so far as I don't make new friends or even add value to existing friendships. Of course, you could argue that Facebook defines the term social network. If Facebook disappeared off the face of the Earth, I wouldn't really care. I think the reason why this is not a problem for Facebook is that I'm the product, not the customer.
- jonnathanson 15y ago
  "It's just a centralized hub for wasting time." Sure, but let's take a step back and think about that statement in broader historical context. For a great many users, the internet itself is nothing more than a way of wasting time (well, wasting time and shopping -- though the latter often falls under the auspices of the former). The only functional difference is that Facebook is a "centralized hub"[1] for such time wasting. If Facebook never happened, if social networking in general never happened, people would still be wasting time online. And companies would still be making money off of that activity. [1] I would argue that the "centralized hub" description is apt, but there's an important distinction in the way users traverse that hub. Facebook isn't a portal or a walled garden in the way that, say, AOL was -- and this point is often lost on pundits and casual observers. Instead, Facebook is increasingly becoming a hub around which the rest of the web orbits. It lives with the distributed content web -- something portals often had trouble doing -- but it's the center of gravity within that web. People find things on Facebook, sure, but people also scour the web and share things back on Facebook. It's sort of like a beehive or an ant colony, actually. This is the real genius of social networking. There's no need for Facebook to have to aggregate and curate content; its users do that heavy lifting for it. There's no need for Facebook to have to develop games and other diversions; its developers do that for it. All Facebook needs to do is not piss off its users, while also monetizing them. That's a delicate balance in the long run, but for the time being, Facebook is sitting pretty in a wide-open field without apparent challengers.
sek 15y ago
Ctrl-F "Inflation" -> nothing found Close Tab
ashokn225 15y ago
The real difference is that Google's IPO was a Dutch auction. This was particularly accurate because of how much information asymmetry there was with Google. Not everyone knew where the value in Google was. Everyone knows about Facebook. That complicates things. I wrote about this recently if you guys wanna take a look. http://ashoknayar.wordpress.com/2012/02/04/ipos-the-social-web-and-an-auction-from-holland/ http://ashoknayar.wordpress.com/2012/02/04/ipos-the-social-w...

25 points by tristan_louis 15y ago

This is some awesome analysis. I have always thought that it would be good to compare both IPOs, but never took the time to actually do it. Thanks!

tristan_louis 15y ago
I had heard a few people compare Google and Facebook but no one had gone over the numbers so I just decided to take it upon myself to do so. You're welcome :)

namdnay 15y ago

I don't get the figures. He says "all dollar figures in thousands", but then puts "US$" before them. Surely in this case you should say "all figures in thousands of dollars" and not put any units in the cells?

tristan_louis 15y ago
The reason is that some figures were not dollar denominated. Those are not in thousands.

chalst 15y ago

From the article: Of course, this does not mean that it is a business that is guaranteed success in the future. Some questions still remain around the cost of its revenue and the company’s ability to continue on the same growth curve as it has in recent years. And the article is too lazy to compare the plans for what the two companies want(ed) to do with the cash. Google's prospectus wanted the cash to finance new operations. Facebook's IPO prospectus says it wants to invest the proceeds in bonds. In other words, it has no business rationale for the IPO. ----- Source: 'as it admitted in its filing on Wednesday, its cash flow and credit “will be sufficient to meet our operational needs for the foreseeable future”. ... So what are its plans for the additional $5bn it may raise from an IPO? It intends to put the cash into US government bonds and savings accounts, and perhaps use some to pay the tax due on converting into shares the “restricted stock units” it has given to its 3,200 staff.' http://www.ft.com/intl/cms/s/0/cd03c402-4dba-11e1-a66e-00144feabdc0.html http://www.ft.com/intl/cms/s/0/cd03c402-4dba-11e1-a66e-00144... (registration walled)

tristan_louis 15y ago
it's not a question of laziness but comparing plans gets into hazy areas (how do you evaluate one plan vs. the other) whereas hard numbers are easier to compare and really non-negotiable. In either case, the companies went public because it made no more sense for them to stay private (due to legal requirements, they would have to do the same type of filings as private or public companies) so rationale for doing the IPO is just that. How they put it in their filing is just after the fact rationalization to justify giving the investors a financial exit.
jwblackwell 15y ago
Very good point. I would have trouble investing in a business that is simply going to reinvest my money in bonds.

Uchikoma 15y ago

As others have pointed out elsewhere, Facebook is in it's 8th year, Google was in it's 5th year. Google has a much faster growth attributable to larger revenues in the beginning than Facebook, percentage growth seems to be the same. (Update) I found the growth graph interesting: http://techcrunch.com/2012/02/05/facebook-pre-ipo-google/ http://techcrunch.com/2012/02/05/facebook-pre-ipo-google/

tristan_louis 15y ago
That second graph is really interesting. Thanks for sharing it.

Maro 15y ago

I used to be the guy who'd always ask how Facebook will make money and say it's overvalued. Today, given the hard revenue and profit numbers I no longer argue that Facebook is a real business and deserves a largish valuation. I also became a regular Facebook user. But I still have a funny feeling about it. It doesn't provide a userful service to me. It's just a centralized hub for wasting time. I do it with my social network, but somehow it's not a real social network, in so far as I don't make new friends or even add value to existing friendships. Of course, you could argue that Facebook defines the term social network. If Facebook disappeared off the face of the Earth, I wouldn't really care. I think the reason why this is not a problem for Facebook is that I'm the product, not the customer.

jonnathanson 15y ago
"It's just a centralized hub for wasting time." Sure, but let's take a step back and think about that statement in broader historical context. For a great many users, the internet itself is nothing more than a way of wasting time (well, wasting time and shopping -- though the latter often falls under the auspices of the former). The only functional difference is that Facebook is a "centralized hub"[1] for such time wasting. If Facebook never happened, if social networking in general never happened, people would still be wasting time online. And companies would still be making money off of that activity. [1] I would argue that the "centralized hub" description is apt, but there's an important distinction in the way users traverse that hub. Facebook isn't a portal or a walled garden in the way that, say, AOL was -- and this point is often lost on pundits and casual observers. Instead, Facebook is increasingly becoming a hub around which the rest of the web orbits. It lives with the distributed content web -- something portals often had trouble doing -- but it's the center of gravity within that web. People find things on Facebook, sure, but people also scour the web and share things back on Facebook. It's sort of like a beehive or an ant colony, actually. This is the real genius of social networking. There's no need for Facebook to have to aggregate and curate content; its users do that heavy lifting for it. There's no need for Facebook to have to develop games and other diversions; its developers do that for it. All Facebook needs to do is not piss off its users, while also monetizing them. That's a delicate balance in the long run, but for the time being, Facebook is sitting pretty in a wide-open field without apparent challengers.

sek 15y ago

Ctrl-F "Inflation" -> nothing found Close Tab

ashokn225 15y ago

The real difference is that Google's IPO was a Dutch auction. This was particularly accurate because of how much information asymmetry there was with Google. Not everyone knew where the value in Google was. Everyone knows about Facebook. That complicates things. I wrote about this recently if you guys wanna take a look. http://ashoknayar.wordpress.com/2012/02/04/ipos-the-social-web-and-an-auction-from-holland/ http://ashoknayar.wordpress.com/2012/02/04/ipos-the-social-w...