Questions for Facebook IPO Investors

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By Barry Ritholtz - February 1st, 2012, 7:15AM

Last year (January 12th, 2011) I posed 5 Questions for Facebook Investors into the then private company Facebook:

1. Facebook (FB) claims 500 million subscribers. How many of these are active users — at least once or twice per week? How many of these are dead accounts, with no activity for 30 days? 90 days or more?

2. What is the average revenue per subscriber? How are you planning to grow this?

3. How much churn does Facebook go through? For every 100 new subscribers, how many subscribers leave?

4. What is the life cycle of the typical Facebook subscriber? How active are they for how long, what sort of arc do they cut across theirFB life cycle?

5. Besides advertising, how will you monetize your user base? Are you selling their data to buyers? What about anonymized data — are you selling this also?

Bonus question: What is the subscriber growth like outside of the US? Where are your fastest growing areas? What area is not seeing big penetration ?

OK, that’s more like 15 question about their users, growth and monetization prospects from a Private Equity/Venture Capital perspective.

Today, on the eve of their Form S-1 SEC filing for an IPO, there are additional questions that are worth asking of a soon to be publicly traded company:

1. What is the IPO offering price going to be? What market capitalization will FB come public at?

2. What are the key pricing metrics? P/E, growth rate, price to book, price to sales?

3. What are FB’s future growth rate? At 800 million users, where do they begin to plateau? Top out?

4. What is FB’s plans for penetrating China?

5. How are the privacy concerns going to be handled? What else might come out of the closer FTC  scrutiny of web companies use of personal data?

6. How long are insiders/VCs going to be locked up? Are they committed holding onto shares for the long haul, or are they cashing out at the IPO or as soon as possible thereafter?

The VC money is often called the smart money, where as the public IPO is often the dumb money.

Remember, Google stunned the world during their road show by revealing monstrous revenues and enormous profits. It stunned the analyst community, who had no idea as to how profitable the search giant actually was.

Will Facebook be able to do the same? Can the social media giant monetize users as effectively as Google — we shall soon find out!

SecondMarket: Private Company Market 2011 Report

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By Barry Ritholtz - January 20th, 2012, 1:30PM

SecondMarket went hog wild with a series of infographics showing their activities for 2011.

The only thing you wont find are the actual prices of recent trades — which makes this less of a market or exchange and more of a private equity association. That’s my big caveat with them: Real markets show real prices.

Anyway, here are the key data points:

• More than $558 million in transactions (up 55% year over year);
• 61.4% of all transactions were consumer Web and Social related; 22.1% were consumer products and services;
• Top 3 Buyer-types: Asset Managers (31.3%), Family Offices (29.6%) and Hedge Funds (16.6%)
• Top 3 Seller-types: Ex Employees (79.3%), Current Employees (11.1%), Investors (3.7%)
• Most Watched Private Companies: Facebook, Twitter, FourSquare, Dropbox, Yelp

Lots of charts follow . . .

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More charts after the jump

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The Entrepreneur’s Index

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By Barry Ritholtz - January 18th, 2012, 2:30PM

click for full graphic

complete graphic after the jump

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Small Business Success/Failure Rates

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By Barry Ritholtz - January 4th, 2012, 2:30PM

What really causes small business to fail?

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full graphic after the jump

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An Intro to Crowdfunding

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By Barry Ritholtz - December 27th, 2011, 2:30PM


via crowdsourcing.org

full graphic after the jump

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Technology Footprint: Starting Up in New York

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By Barry Ritholtz - December 26th, 2011, 4:45PM

At a friend’s house for a Christmas day party (yesterday), I speak with her 20-something nephew, who has worked at several NY area start ups. I mentioned this map, and he said it misses lots of small and newer start ups — the density is even greater.

I believe 2011 was the year NYC start ups received more invested Venture Capital money than Boston for the first time. Given the massive difference in size, that is fairly astonishing.

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click for larger version

Source: NYT

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Source:
Re-engineering New York: More Than a Sci-Fi Dream?
GINIA BELLAFANTE November 18, 2011
http://www.nytimes.com/2011/11/20/nyregion/new-york-as-a-tech-hot-spot-is-it-just-a-sci-fi-dream.html

The Myth Of The Long Tail

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By Bob Lefsetz - November 9th, 2011, 1:00PM

Just because everything’s available, that does not mean anybody wants it.

In other words, you can get your song on iTunes, but nobody other than your mother and your boyfriend might buy it.

Furthermore, when you try and market it, you’ll find resistance. A public hyped ad infinitum has a shit detector nonpareil, but it’s even worse, you can’t even get through to them, they delete your e-mail, they block you from having access.

It all comes down to distribution.

There are a limited number of television channels, a limited number of radio stations, and there used to be a limited number of records for sale. Not only could you not get your indie record into a store, if per chance you did, if it sold, you couldn’t get paid. That was the power of the majors, their ability to get paid, their control of distribution.

And now distribution is completely flat in music. Anybody can offer their wares for sale and get paid. And the end result is everybody just wants the best stuff.

That’s what we’re doing online, all day long, searching for the best stuff.

We live in a winner take all society. Just look at the video game business. Huge winners and huge losers.

Now of course the flattening of distribution allows for niches to be populated that were hard to find or get to previously. But don’t expect these niches to blow up. Yes, we’ve got niches and superstars. And expect more superstars down the line, it’s human nature, we want to belong to the club, we want to be able to converse with others.

You’ve been sold a bill of goods. Excited by the Net, you bought the words of charlatans, who had no familiarity with art, who thought that the proletariat was now going to triumph.

You don’t want to be taught calculus by a high school dropout. And now, online, you can find out everybody’s CV, where they went to college, where they worked, the info is such that you can divine the winners.

It’s tough for consumer goods. Everyone just goes online and sees what product to buy. Furthermore, it’s hard to overcharge! With comparison sites fleshing out costs instantly.

And you can now find out what act is worth listening to instantly.

What’s worse, so many bad acts have asked for attention that it’s hard to penetrate the public, we’re not interested when there’s a little buzz, we only care when there’s huge buzz!

Look online. There’s one Google, one Amazon, one iTunes. Sure, there are competitors, but they’re also-rans. Same deal in music. When the best are so accessible, we don’t need the mediocre!

It’s a race to the top. Now it’s even harder to make it!

You can feel good that you’re selling your CD and MP3s, but that does not mean you’re going to make it.

If you want to play the Top Forty game, the major labels have a leg up, you can’t get on radio without them, not radio that reaches anybody and means anything. The majors are a filter.

And in the rest of the world, it’s every man for himself. And the only determining factor is quality.

You’re a hobbyist, you’re not a professional. If you’re truly lucky, you might become a journeyman, able to pay your bills playing music. But if you’re planning on being a star, you have to be incredibly good.

No one wants to hear this. Especially a generation brought up getting trophies for last place. Music is more cutthroat and competitive than ever before. The public is right there, on the other side of the computer, but it’s almost impossible to get people to care.

If you’re a great marketer, good at Facebook and Twitter, hire yourself out as such. Just because you can promote a product, that does not mean it’s going to sell. Social media only works if the music is great.

Good is not good enough.

We’re talking great. One listen great. Fifteen seconds great. Or something so left field that our friends tell us to give it five times through and we think it’s the new “Dark Side Of The Moon”.

Music is like America at large. There’s the 1% and everybody else. You may think you can make it, but you can’t. You’re part of the 99%. You’re a fan.

Sure, someone makes it into the 1%. You know who? Graduates of Ivy League schools who get jobs in finance and literally work 90 hours a week. Did you pay those dues, are you truly willing to work that hard?

Of course there are those who drop out of school, but are you as savvy as Steve Jobs and Bill Gates? Do your colleagues look at you with awe, are they rendered speechless when you play? If not, you’re not gonna make it. Sorry.

Not only do you have to have the skills, you have to be able to innovate. It’s like getting a position with the New York Philharmonic and being able to write the score too!

Just because you can buy a ticket, that does not mean you can win.

Everybody can play the lottery, but almost no one wins.

Almost no one wins making music. The odds are incredibly long. And if you think luck is key, you’re never going to win. You make your own luck. Through hard work!

So good luck.

Know that no one wants to hear your music other than you and your relatives. It’s ultimately got to be so good that people find you, as opposed to the opposite. Are you really that good?


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Networked Society ‘On the Brink’

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By Barry Ritholtz - November 7th, 2011, 6:00PM

In On The Brink we discuss the past, present and future of connectivity with a mix of people including David Rowan, chief editor of Wired UK; Caterina Fake, founder of Flickr; and Eric Wahlforss, the co-founder of Soundcloud. Each of the interviewees discusses the emerging opportunities being enabled by technology as we enter the Networked Society. Concepts such as borderless opportunities and creativity, new open business models, and today’s ‘dumb society’ are brought up and discussed.

http://ericsson.com/networkedsociety

Hat tip GigaOm

Jim Goetz: Y Combinator’s Startup School @Stanford

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By Guest Author - November 6th, 2011, 4:30PM

The China Startup Report

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By Barry Ritholtz - November 1st, 2011, 1:00PM

A 15-minute Crash Course by Bowei Gai (October 2011)

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