Here is an obvious truth overlooked by too many: Almost all companies die. They have a theoretically infinite lifespan, but eventually, their day in the sun passes, their parts are sold off for scrap, they fade into the dim dusty pages of history.  Sure, Europe has centuries old breweries and specialty foods companies, but they are notable because they are exceptions.

Think back to the original Dow Jones Industrials, filled as it was with Steam and Leather Belt companies, all gone bankrupt nearly a century ago. How many of the original companies in the DJIA are still even in existence?

Microsoft (MSFT) was once technology’s behemoth, the 800 pound gorilla, an unstoppable anti-competitive monopolist. And today? It was a great 20 year run, but its mostly over. They still have the cash horde and engineering chops to create a smash hit like the Kinect, and they are a cash cow, but the odds are, their glory days are behind them.

Mister Softee came of age in a different era, the early days of micro-computing. While some companies manage to have a second act — Apple (AAPL) and IBM are notable examples — they too, remain the exception.

Today, tech companies’ lifespans are measured in internet years. Any firms dominance of any given space is likely to cover a much smaller period — way less than a decade in real time. The obvious poster child for this syndrome? My Space (NWS). Even mighty Google (GOOG) is seeing market share growth in search slip as competitors nip at its heels.

All of which leads me to the question of the day: Has Facebook missed its IPO window?

There is a legitimacy, power and capital advantages to being public. But their was a coyness to the dance, perhaps even an arrogance that seems to have crept into Facebook’s management. Meanwhile, deep pocketed competitors like Google and Microsoft, along with other social techs like Twitter, are chasing the social network giant.

And there are signs that Google Plus is a worthy competitor: They quickly amassed 10 million users, and that is while they are in Beta. They are very intelligently integrating Google+ into all of their other offerings. But most fascinating of all, Google’s offering is revealing the flaws, weaknesses and blemishes that Facebook has managed to keep fairly subdued. The well publicized privacy concerns has been the most public problem, but to my eye, G+ looks to have been designed to emphasize what FB does poorly.

Back to our question of the day: I doubt Facebook has missed its IPO window. However, it is likely that G+ has shaved some shave billions off the IPO price. And if the ongoing growth of G+ stays steady or even accelerates, it may slice $10s of billions off the vaunted $100 billion dollar IPO price.

Last, consider this: As a non-public company, Facebook can freely make whatever claim they choose about their business. 750 million? What the hell, sure! But once you are a public firm, one cannot make material misrepresentations to investors. Is that number truly accurate? What is the arc of activity of users? At what point do they become less active, lower time spending users? How many of those registered accounts are very active, somewhat active,  neglected or dead?

As FB dithers going public, some of the buzz following the Social Network movie has attenuated. Do not be surprised if the valuation buzz does so as well . . .

~~~

DISCLOSURE: No positions in any company mentioned.

Category: IPOs, Venture Capital, Web/Tech

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

23 Responses to “Has Facebook Missed Its IPO Window?”

  1. Chief Tomahawk says:

    “There is a legitimacy, power and capital advantages to being public.”

    I bet the secretaries, who’ve read about their Silicon Valley counterparts becoming overnight millionaires thanks to going public with an IPO, will be the ones to push senior mgmt. into taking FB public.

  2. [...] Barry: Facebook might've waited too long.  (TBP) [...]

  3. Ted Kavadas says:

    RE: “Back to our question of the day: I doubt Facebook has missed its IPO window. However, it is likely that G+ has shaved some shave billions off the IPO price.”

    I agree – I think that it is highly possible that facebook has missed the window of its potential peak IPO valuation.

    However, as there is a raging bubble in many tech companies – public and private – if facebook does the IPO while this bubble “lasts” I’m sure the valuation will still be very high.

    I don’t believe that this tech bubble is fully recognized, nor do I think its broader significance is fully comprehended. Here is my latest blog post on the subject, for those interested:

    http://economicgreenfield.blogspot.com/2011/06/groupon-linkedin-ipos-broader.html

  4. Irwin Fletcher says:

    Agree.

    I know more people getting off Facebook than joining. (just a data point)
    The novelty wears off.

  5. Transor Z says:

    Terrific topic, Barry. A few embedded questions in your post I don’t have answers to but maybe other readers will have insights:

    1) How is revenue currently flowing to Zuckerberg et al? Someone’s getting paid by the likes of Zynga, which just filed for its own IPO.

    2) And what are the compliance implications for FB going public? Barry, you cite valuation as a material representation, but what other “flaws, weaknesses and blemishes” of FB will come to light if they go public?

  6. Blunt Instrument says:

    How many of the original companies in the DJIA are still even in existence?

    According to this article, as of 2004, 11 of the 12 were still in existance.

  7. Mike in Nola says:

    Facebook may have missed its IPO window more because it missed the valuation peak resulting from Bernanke’s pumping of the markets which are now caught up the Euro crisis and debt limit problems along with the slide in the economy which will bring down all stock prices.

    Google brings in tons of cash, all from ads which is nice, but people overestimate its power other than as a spoiler that will have some impact on competitors profits.

    No doubt Google+ is having some impact because of all the press, but you have to be skeptical of its long term viability. Google’s reminds me of an ADHD adolescent. It has a history of abruptly releasing and then killing off offerings that don’t seem to be working out, Google’s business model consists of throwing stuff against the wall to see what sticks, all financed by ad revenues. and any new offering’s long term prospects should be looked at skeptically. This is its thiird foray into social networking, earlier ones being Wave and Buzz, the later being introduced less than 18 months ago and already axed.
    t has a lot more failures than people realize. See, e.g. http://searchengineland.com/lets-celebrate-googles-biggest-failures-48165 0r Google “Google failures”.

    This is why Google Docs still struggles attracting serious business users; its popularity is with those looking for a freebie or the ABM crowd. Serious people know that, whatever it’s problems, MSFT is not going about to go out of business or to drop support for either the old Office or the new Office 360 cloud based service which is a lot more polished than Google’s.

    Even Googles other big hit, Android, has problems with it’s underlying design, and not being very polished. Its ignorance of patents is turning into a nice source of cash for MSFT as OEM after OEM caves in to demands for licensing fees from MSFT. HTC has caved and allegedly $15/handset is the demand to Samsung. While the final figure will likely be half that, it’s still a nice piece of change. http://techcrunch.com/2011/06/29/microsoft-scares-two-more-android-makers-into-paying-up-over-patents/
    or
    http://www.betanews.com/article/Microsoft-wants-15-for-every-Samsung-Android-device-sold/1309988878

    So while the Google+ buzz (pun intended) may have some short term effect, it will be limited. Facebooks more serious problems are the vagaries of the stock market and the possibility that it will fall out of fashion like Myspace or other fads before that.

  8. streeteye says:

    They had to raise a lot of capital during not -too-great times for equity when the IPO window was closed. And Zuckerberg ended up keeping 24% and a lot of insiders with big stakes, and it doesn’t seem to have hampered making hires and acquisitions.

    So they did pretty well going that route. If the IPO window had been open early and they had raised the money in public markets with a hot IPO and big secondaries, they might have done a little better. But not a whole lot, and that was more risky. Supposed they had gone public really early and needed to go back to the market for more money in 1Q 2009.

    From the insiders’ point of view, giving employees the opportunity for better exits or stock market investors the shot at a big pop is not necessarily a plus.

    http://whoownsfacebook.com/

  9. AHodge says:

    I hate facebook
    after telling my friends for years just email me
    its all totally 100% nothing but superficial vanity i signed up myself
    big mistake
    lets all migrate somewhere else

  10. ashpelham2 says:

    I’m just not sure that the intent of the Facebook people has ever been to actually take it public. I think they have an inherent dislike of all things related to financial reporting and regulation. I think they have probably missed a great opportunity, but for a bigger reason. Certainly money matters to these people, but they may truly have never been in love with the idea of being a publicly held outfit. I can understand the appeal of keeping things “simple”. Well, as simple as something with the worldwide reach of FB can have.

    Not everyone wants to cowtow to the geeks on Wall Street. Some people would like to get rich and NOT involve the clingy hands of Amerika’s banks and government. They’ve deflected as much negative publicity as they can. Hell, I got off facebook for only one reason anyway: I was tired of my wife keeping up with every little move I made. Twitter is so much more 1 way in it’s communication-style. I prefer to give you information about me, not the other way around.

  11. Chad says:

    First, I think FB missed it’s peak window. Though, I still think they will be way overvalued. All Facebook did was take everything we already had (email, chatrooms, etc.) make them worse and mash them together.

    It should be noted that a few FB power users I know, who are young (graduating from college), are not using FB anyomre, and neither are their friends. They use Twitter instead because it’s closer to be ing instantaneous.

    I dont’ see FB survives. They remind me more of a Netscape than a Microsoft or Google.

  12. [...] Almost every company eventually dies. With that in mind The Big Picture asks if Facebook has missed its IPO window. [...]

  13. riley says:

    “Think back to the original Dow Jones Industrials, filled as it was with Steam and Leather Belt companies, all gone bankrupt nearly a century ago. How many of the original companies in the DJIA are still even in existence?”

    If government operated then the way it does now they would all still be in business. Business failure is no longer allowed.

    ~~~

    BR: I disagree — big bank failure is not allowed — everyone else, apparently, can go to hell . . .

  14. [...] Has Facebook missed its IPO window?  (Big Picture) [...]

  15. realgm says:

    I think Google+ will be better than Facebook.

    I never liked Facebook to begin with. Unfortunately, that’s the only way I can contact certain “friends”, so I was forced into using it. I would ditch it the first second when I no longer need to contact certain people with it.

  16. Mike in Nola says:

    realgm: Whether it’s better doesn’t matter a lot. I haven’t used either and won’t if I can help it. If you ever give google your real identity, they will almost certainly be able to match it up with any other google accounts you may have using IP addresses, hardware addresses or your local network characteristics.

    But, back to the point. Most reviewers, even those who use iPhones, have said that the Windows Phone 7 interface is better than the iPhone or Android. But, it’s going up against two platforms with large user bases and the vast majority aren’t going to bother trying it.

    Similar situation for Google. 10 million v. 700 million. A big cliff to climb.

  17. [...] at The Big Picture today, Barry Ritholz is pondering whether Facebook has missed its IPO window. His answer: No, but Barry thinks Google+ may be shaving [...]

  18. realgm says:

    Windows Phone 7 is pretty far from the quality of iOS or Andriod. Maybe Windows Phone 8 would do the job, but we will see.

    User-base is important, but if Google+ can start doing all the stuffs that Facebook does and be even better, I don’t see why people would stick with Facebook over the long run. It’s pretty much like Friendster and MySpace. Once a superior product is out, people would go for the better one.

    Facebook obviously still have the edge, but frankly, they have no technological advantage and it’s an easy to copy concept.

    Mr Softie had a hard time catching Google in search because the algorithm with Google is simply more superior, and Mr Softie has yet to improve Bing enough to be better (catching up, but still not there yet).

    Facebook on the other hand has no significantly technological advantage over Google. If they cannot build up something that Google can’t do or can’t figure out quickly, then it may get eaten alive sooner or later.

  19. JT23456 says:

    IBM just had they’re 100 year anniversary – Apple is Jobs and when he passes – what ??

    Please ask more intelligent questions.

  20. Mike in Nola says:

    realgm:
    Probably a useless discussion, as the “Mr. Softie” bit indicates. I just used WP7 as an example of superiour UI not equating to popularity.

    Apparently you equate popularity with quality. See, e.g.
    http://www.penny-arcade.com/2011/7/11/windows-phone-7/

    Apparently Steve thought enough of the UI that he just copied the dedicated camera button idea. Well, at least as well as it could be shoehorned into the existing phone. No doubt, if Google+ has some superior features, they will be coopted by FB.

  21. clokey says:

    Although Facebook may be making a mistake by waiting until the first quarter of 2012 to launch its IPO, hot offerings from LinkedIn, Zynga, and Groupon should be more than enough to keep social-networking IPOs front and center in the minds of investors. LinkedIn (IPO price: $45) hit $122 mid-morning on IPO day and I wouldn’t be surprised if we witness the same sort of run-ups when Groupon and Zynga hit the market. That’s not to say that there is anything rational about these companies’ valuations–theres not. But given that people are prone to trade on excitement and fear, it seems likely that after witnessing large first-day moves in other social-networking companies, traders will be find Facebook’s IPO simply irresistible. Also, it is important to note that Facebook has had no trouble selling shares in the secondary market–check out statistics on SharesPost.com and SecondMarket.com. Finally, although Google+ might be able to expose some of Facebook’s weaknesses, it will also afford FB the opportunity to see what its own weaknesses are by monitoring Google+’s success.

    Colin Lokey
    http://blog.lokeyisstreetsmart.com

  22. [...] Has Facebook Missed Its IPO Window? (July 15th, 2011) [...]

  23. death_is_a_star says:

    “[Microsoft] still have the cash horde and…”

    Barry, that should be “cash hoard”, not “cash horde”.