welcome to hip mojo show 26 I’m your
host Ashley and Carver solution and I’m
Rebecca Brayton all right so Rebecca how
much time you spent on Facebook be
honest as you’re my boss I don’t spend
that much time on Facebook especially a
word like it when you’re at home when
you’re doing your own you know I tried
wasting exercises really I I spend most
of my time on Twitter to be honest yeah
same year I’ve become quite the Twitter
addict and a lot of my friends are
pointing it out although I say it’s
really more my newsroom that’s my excuse
okay so I don’t spend much time on
Facebook either but it is a rather
popular site and this week they filed
for an IPO so we just want to cover that
a bit and I believe you have some
questions yes so this led to a lot of
questions from a lot of people so first
things first how does fake ships yeah
Facebook actually make money and how did
how much do they generate times have
changed even internet companies make
money so Facebook generates largely
money from advertising which is the
number one way that internet businesses
generate money but they also have been
building up their credits or payments
business they’re going to make a 1
billion dollars in net income basically
profit off 3.7 billion in revenue of
that 3.7 3.2 comes from advertising and
the payments just to explain the
payments credit side of things a few
years ago video game makers Zynga was
basically leveraging the facebook
platform and monetizing that experience
and facebook said timeout if you’re
going to be charging people you can’t
use your payment system you got to use
ours so large a large portion of that
growth has come from sorry of the
Facebook credit payments growth has come
from zynga and Zynga generates twelve
percent of Facebook’s revenues okay so
according to the IPO how much is
Facebook raising and what is it worth
and is it a deal is it a deal or no deal
well Facebook originally was rumored to
raise up to 10 billion dollars let’s
actually go back what happens in an IPO
or initial public offering is a company
that previously was private basically
says you know we might have some
investors venture capital firms and
private
and employees but we’re now going to
sell as a first offering to the public
and you basically say let’s say if
you’re worth a hundred billion dollars
you then say if we’re going to sell ten
percent to the public then we’re going
to get ten percent of a billion ten
billion dollars to go and hire more
staff expand by other companies so it
was rumored that Facebook was going to
raise ten billion dollars by selling ten
percent of its stock at a hundred
billion dollar valuation that’s not
actually what’s going to happen although
it’s surprisingly close Facebook is only
only going to raise five billion dollars
and it’s still a lot of money it’s the
biggest tech IPO in mark sacrifice yeah
poor mark zuckerberg we’ll talk about
Mark Zuckerberg in a bit but basically
Facebook analysts are giving it a
valuation of anywhere from 75 probably
low range 85 billion to as high as a
hundred billion and historically
investment bankers usually price and IPO
below its fair value so that the stock
pops because that’s great for marketing
so this being said Mark Zuckerberg who
is one of the few founder young founder
CEOs who stayed at his company as the
CEO almost ten years eight years and
he’ll be taking one of the biggest
internet brands public so that hats off
to mark and his team he holds twenty
eight percent of the stock so he’s worth
as little as 16 billion to as high as
like 30 billion making him you know
automatically overnight one of the
richest men on earth and he deserves a
lot of praise despite what the cynics
might say okay is it a deal well that’s
the big question is it a deal yes and no
Facebook is going to become the
bellwether the the bellwether of the
internet stock so if right now somebody
has been investing in Google because
they want to have exposure to the
internet well Google’s like an 11 year
old you know more like a 12 13 year old
company it’s been public for almost a
decade so Google is somewhat mature as a
stock so if somebody really wants to
pour money into Facebook even though
Facebook is expensive from a price to
revenue or price to earnings perspective
it will get a lot of demand for its
stock because people are willing to be
patient so even if it’s going to be a
very you know expensive stock relative
to earnings investors won’t care because
they’re like listen this company is
going to
a billion users this year so we’re
willing to wait for the earnings to
catch up to the price it’s a deal in
that sense that demand will far outstrip
supply of stock but it’s not a deal from
a purely financial perspective but who
cares about that it is Facebook really
worth all the hype when are they going
to keep up with the momentum um okay
well they’re going to keep up i think
with the momentum from a user
perspective because i do think though
that they were going to become the
natural monopoly in terms of like
profiles and all that is it worth the
hype put at you this way their revenues
grew from 2009 to 2010 by a hundred
fifty percent but then from 2010 2 2011
they only grew by fifty percent the
problem is as you get bigger and as your
revenues get bigger the growth is harder
to accomplish so even though at face
value the relative percentage seems like
it’s slowing down the absolute numbers
are staggering 3.7 billion dollars in
revenue for a billion dollars of profit
is a profit machine and it’s true that
today Facebook as it goes IPO is
generating more income it’s generally
more profit than Google was generating
revenue top line when Google and private
public there is a difference the overall
size of the advertising market online is
so much bigger today that you are
comparing apples to oranges my guess is
that a lot of companies i want IPO that
were internet companies like linkedin
like Groupon and even Zynga which is
more of a video game but let’s say you
know it’s still a tech new media ish
stock I think most of those flopped and
investors will probably take whatever
money that they would have put in those
assets as well as Google and they’re
going to put it in in facebook so I
think it’s going to be a massive company
from a consumer adoption perspective as
it already is but that will continue
financially I don’t think it’s going to
put up the numbers that people see in
the apple and Google’s even though
you’re comparing apples to oranges but
from a purely stock perspective it’ll be
very well because people will want to
put money in there everybody knows
facebook even if they don’t spend time
on it right so I mean we’ve talked about
Google already but everyone is comparing
this IPO to Google’s so is that kind of
a fair comparison and out of the
okay I mean it’s fair in the sense that
you have to internet companies who lead
there there’s respective industry
respectively search and our social
network it’s fair to say well how much
money were they generating again Google
was generating 960 million in revenue
and 100 million in profit when I went
IPO Facebook is generating three billion
or you know 3.7 billion in revenue and a
billion in profit so Facebook wins there
however I think search is a much easier
industry to monetize somebody searches
for Madrid you got a result for hotels
in Madrid that’s easy to monetize I’ve
never even looked at ads on Facebook let
alone clicked on an ad on facebook even
though Facebook claims in their
perspectives in the s-1 that they helped
Procter & Gamble sell nine percent more
deodorant you know I can tell you that
you know watchmojo has helped Procter
and Gamble’s so whatever it doesn’t
necessarily mean you could spin the
facts is what i’m getting at not being
too cynical there the point i want to
make is it’s it’s fair to compare to
google in terms of where google was but
it’s actually unfair in the broad macro
space google basically brought back the
internet from the you know disaster it
rose from the ashes of the Nasdaq
meltdown and the dot-com bubble bursting
so when Google IPO in made investors
realize that hey the internet is
actually coming back Facebook you could
almost argue is like in the middle to
late stages of a bull run in internet
assets already so from that perspective
it’s really very very different but in
terms of headlines in terms of like from
an outsider you look at it it’s the
first big it’s the biggest IPO since
Google without a doubt okay is there
anything surprising about the s-1 yeah I
mean Zynga generating twelve percent of
Facebook’s revenues is surprising this
is what was most surprising half of the
people who are users on facebook visit
the site every day that’s not bad but
what’s more interesting is like half of
the users on facebook visit the site on
their mobile devices their iPhones or
blackberries there whatever windows
seven phones so what’s interesting
though is that Facebook is yet to make
any money from the removal because
they’re not putting any at so that was
very surprising other things a few
people on Twitter ironically where I
followed the three stats that’s
interesting
facebook with a hundred billion dollar
valuation with 3,000 employees is worth
three times the four largest ad agency
is combined who have 300,000 employees
another one Facebook revenue per
employee 1.1 million Walmart’s revenue
per employee two hundred dollars and the
last but not least apples EBITDA was 45
billion dollars Facebook’s was 1.8
billion but Facebook is going to be
worth one-fourth of Apple so I get
random stats from the Twitter community
but pretty interesting long story short
I guess not that this is should be
treated as financial advice purely for
entertainment go speak to an expert if
you have a bunch of money lying around
should you put it into facebook if you
have money and you’re willing it to go
to zero and you were going to be
investing it let’s say in other Internet
companies I you know I think Facebook is
a good bet and I’m going to end it on
this analogy when Google when IPO I said
one hundred dollars a share which
translated to 23 billion-dollar
valuation I went back to my roots in
finance and said that’s too expensive so
I kept my money and all these other
internet stocks that seemed more fair
priced I got shafted why because
everybody basically took money out of
other search companies and other media
companies in li ahoo and all that and
basically put the money in the top horse
which was Google so for that reason
history repeats itself i would say
facebook is probably a stock you should
consider but talk to your analyst look
into your crystal ball don’t take this
as financial advice fair enough okay
that’s hip mojo show 26 visit us on
facebook
host Ashley and Carver solution and I’m
Rebecca Brayton all right so Rebecca how
much time you spent on Facebook be
honest as you’re my boss I don’t spend
that much time on Facebook especially a
word like it when you’re at home when
you’re doing your own you know I tried
wasting exercises really I I spend most
of my time on Twitter to be honest yeah
same year I’ve become quite the Twitter
addict and a lot of my friends are
pointing it out although I say it’s
really more my newsroom that’s my excuse
okay so I don’t spend much time on
Facebook either but it is a rather
popular site and this week they filed
for an IPO so we just want to cover that
a bit and I believe you have some
questions yes so this led to a lot of
questions from a lot of people so first
things first how does fake ships yeah
Facebook actually make money and how did
how much do they generate times have
changed even internet companies make
money so Facebook generates largely
money from advertising which is the
number one way that internet businesses
generate money but they also have been
building up their credits or payments
business they’re going to make a 1
billion dollars in net income basically
profit off 3.7 billion in revenue of
that 3.7 3.2 comes from advertising and
the payments just to explain the
payments credit side of things a few
years ago video game makers Zynga was
basically leveraging the facebook
platform and monetizing that experience
and facebook said timeout if you’re
going to be charging people you can’t
use your payment system you got to use
ours so large a large portion of that
growth has come from sorry of the
Facebook credit payments growth has come
from zynga and Zynga generates twelve
percent of Facebook’s revenues okay so
according to the IPO how much is
Facebook raising and what is it worth
and is it a deal is it a deal or no deal
well Facebook originally was rumored to
raise up to 10 billion dollars let’s
actually go back what happens in an IPO
or initial public offering is a company
that previously was private basically
says you know we might have some
investors venture capital firms and
private
and employees but we’re now going to
sell as a first offering to the public
and you basically say let’s say if
you’re worth a hundred billion dollars
you then say if we’re going to sell ten
percent to the public then we’re going
to get ten percent of a billion ten
billion dollars to go and hire more
staff expand by other companies so it
was rumored that Facebook was going to
raise ten billion dollars by selling ten
percent of its stock at a hundred
billion dollar valuation that’s not
actually what’s going to happen although
it’s surprisingly close Facebook is only
only going to raise five billion dollars
and it’s still a lot of money it’s the
biggest tech IPO in mark sacrifice yeah
poor mark zuckerberg we’ll talk about
Mark Zuckerberg in a bit but basically
Facebook analysts are giving it a
valuation of anywhere from 75 probably
low range 85 billion to as high as a
hundred billion and historically
investment bankers usually price and IPO
below its fair value so that the stock
pops because that’s great for marketing
so this being said Mark Zuckerberg who
is one of the few founder young founder
CEOs who stayed at his company as the
CEO almost ten years eight years and
he’ll be taking one of the biggest
internet brands public so that hats off
to mark and his team he holds twenty
eight percent of the stock so he’s worth
as little as 16 billion to as high as
like 30 billion making him you know
automatically overnight one of the
richest men on earth and he deserves a
lot of praise despite what the cynics
might say okay is it a deal well that’s
the big question is it a deal yes and no
Facebook is going to become the
bellwether the the bellwether of the
internet stock so if right now somebody
has been investing in Google because
they want to have exposure to the
internet well Google’s like an 11 year
old you know more like a 12 13 year old
company it’s been public for almost a
decade so Google is somewhat mature as a
stock so if somebody really wants to
pour money into Facebook even though
Facebook is expensive from a price to
revenue or price to earnings perspective
it will get a lot of demand for its
stock because people are willing to be
patient so even if it’s going to be a
very you know expensive stock relative
to earnings investors won’t care because
they’re like listen this company is
going to
a billion users this year so we’re
willing to wait for the earnings to
catch up to the price it’s a deal in
that sense that demand will far outstrip
supply of stock but it’s not a deal from
a purely financial perspective but who
cares about that it is Facebook really
worth all the hype when are they going
to keep up with the momentum um okay
well they’re going to keep up i think
with the momentum from a user
perspective because i do think though
that they were going to become the
natural monopoly in terms of like
profiles and all that is it worth the
hype put at you this way their revenues
grew from 2009 to 2010 by a hundred
fifty percent but then from 2010 2 2011
they only grew by fifty percent the
problem is as you get bigger and as your
revenues get bigger the growth is harder
to accomplish so even though at face
value the relative percentage seems like
it’s slowing down the absolute numbers
are staggering 3.7 billion dollars in
revenue for a billion dollars of profit
is a profit machine and it’s true that
today Facebook as it goes IPO is
generating more income it’s generally
more profit than Google was generating
revenue top line when Google and private
public there is a difference the overall
size of the advertising market online is
so much bigger today that you are
comparing apples to oranges my guess is
that a lot of companies i want IPO that
were internet companies like linkedin
like Groupon and even Zynga which is
more of a video game but let’s say you
know it’s still a tech new media ish
stock I think most of those flopped and
investors will probably take whatever
money that they would have put in those
assets as well as Google and they’re
going to put it in in facebook so I
think it’s going to be a massive company
from a consumer adoption perspective as
it already is but that will continue
financially I don’t think it’s going to
put up the numbers that people see in
the apple and Google’s even though
you’re comparing apples to oranges but
from a purely stock perspective it’ll be
very well because people will want to
put money in there everybody knows
facebook even if they don’t spend time
on it right so I mean we’ve talked about
Google already but everyone is comparing
this IPO to Google’s so is that kind of
a fair comparison and out of the
okay I mean it’s fair in the sense that
you have to internet companies who lead
there there’s respective industry
respectively search and our social
network it’s fair to say well how much
money were they generating again Google
was generating 960 million in revenue
and 100 million in profit when I went
IPO Facebook is generating three billion
or you know 3.7 billion in revenue and a
billion in profit so Facebook wins there
however I think search is a much easier
industry to monetize somebody searches
for Madrid you got a result for hotels
in Madrid that’s easy to monetize I’ve
never even looked at ads on Facebook let
alone clicked on an ad on facebook even
though Facebook claims in their
perspectives in the s-1 that they helped
Procter & Gamble sell nine percent more
deodorant you know I can tell you that
you know watchmojo has helped Procter
and Gamble’s so whatever it doesn’t
necessarily mean you could spin the
facts is what i’m getting at not being
too cynical there the point i want to
make is it’s it’s fair to compare to
google in terms of where google was but
it’s actually unfair in the broad macro
space google basically brought back the
internet from the you know disaster it
rose from the ashes of the Nasdaq
meltdown and the dot-com bubble bursting
so when Google IPO in made investors
realize that hey the internet is
actually coming back Facebook you could
almost argue is like in the middle to
late stages of a bull run in internet
assets already so from that perspective
it’s really very very different but in
terms of headlines in terms of like from
an outsider you look at it it’s the
first big it’s the biggest IPO since
Google without a doubt okay is there
anything surprising about the s-1 yeah I
mean Zynga generating twelve percent of
Facebook’s revenues is surprising this
is what was most surprising half of the
people who are users on facebook visit
the site every day that’s not bad but
what’s more interesting is like half of
the users on facebook visit the site on
their mobile devices their iPhones or
blackberries there whatever windows
seven phones so what’s interesting
though is that Facebook is yet to make
any money from the removal because
they’re not putting any at so that was
very surprising other things a few
people on Twitter ironically where I
followed the three stats that’s
interesting
facebook with a hundred billion dollar
valuation with 3,000 employees is worth
three times the four largest ad agency
is combined who have 300,000 employees
another one Facebook revenue per
employee 1.1 million Walmart’s revenue
per employee two hundred dollars and the
last but not least apples EBITDA was 45
billion dollars Facebook’s was 1.8
billion but Facebook is going to be
worth one-fourth of Apple so I get
random stats from the Twitter community
but pretty interesting long story short
I guess not that this is should be
treated as financial advice purely for
entertainment go speak to an expert if
you have a bunch of money lying around
should you put it into facebook if you
have money and you’re willing it to go
to zero and you were going to be
investing it let’s say in other Internet
companies I you know I think Facebook is
a good bet and I’m going to end it on
this analogy when Google when IPO I said
one hundred dollars a share which
translated to 23 billion-dollar
valuation I went back to my roots in
finance and said that’s too expensive so
I kept my money and all these other
internet stocks that seemed more fair
priced I got shafted why because
everybody basically took money out of
other search companies and other media
companies in li ahoo and all that and
basically put the money in the top horse
which was Google so for that reason
history repeats itself i would say
facebook is probably a stock you should
consider but talk to your analyst look
into your crystal ball don’t take this
as financial advice fair enough okay
that’s hip mojo show 26 visit us on
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