Yesterday I was interviewed on Sky Business News by Nigel Freitas in relation to the Facebook IPO and implications to Australian Business. I have summarised our view and the questions asked by Nigel below.
What are your views on the Facebook IPO?
If you take the Facebook $104b market cap to support the $1b Instagram acquisition (a 13-person company with no revenue stream at all) you derive a 89-to-1 price to earnings ratio.
To give you some perspective Google and Apple are selling for 18 and 17 times earnings respectively.
What are the latest Facebook user statistics in Australia?
A key measurement of Facebook’s $104b valuation is average revenue per user (ARPU) or how Facebook is turning you and I into revenue producing customers. Today ARPU is $1.17 based on last quarter.
This values the 10.9m Australian Facebook users at $51m per year.
You recently blogged about the Australian impacts of the Facebook IPO – could you tell us more?
We see three key impacts in Australia, namely:
1) Facebook will become corporate Australia’s best ‘friend’ – as a result of moving from a private to a public company Facebook is going to be under pressure to support its valuation. We will see them investing in their corporate sales organisation.
2) Online marketing spend will move – we have already seen this with announcements from the CEO of Procter & Gamble and Ford (20%). Losers will be Google and traditional media.
3) Acquisition – Facebook will be ready to invest to support revenue growth. Facebook is built as a platform to integrate to e.g. Instagram (although Facebook issued another 23m shares to support this acquisition). Zynga (Farmville) today accounts for 12% of Facebook revenues. Facebook will seek innovative acquisitions to support repeatable revenue opportunities. Australian innovators on the Facebook platform would be well positioned.
What advice would you have for corporate Australia?
Social success is driven by you and not Facebook. This is the classic example of Ford who has driven close to 10m Facebook users to connect with them versus Kia Motors.
The answer is simple – Facebook is a site that connects nearly a billion people to each other globally. It is your job to create a vibrant and engaged community that is aligned to your business objectives. Clear and organized strategy for content messaging, process integration and customer needs as the focus.
What about Zuckerberg’s “The Hacker Way”?
“The Hacker Way” is Facebook’s innovation framework supported by Social principals.
Clearly the IPOs of both LinkedIn and Facebook have legitimized Social to support Innovation, Collaboration, Corporate Communication, Employee Engagement, and Customer Engagement.
Corporate Australia must evaluate how Social can aid these outcomes to support business objectives. The replacement of legacy email systems and intranets should be high on the agenda of corporate Australia.
Would you buy?
Through its platform Facebook could be anything it wanted to be - digitally. Even a Bank. I am buying!
- FB ad revenue for 2012 will be $4.2 billion - up 32% from 2011 - and will reach $12.6 billion by 2017
- Mark Zuckerberg has shown himself to be a very good manager and CEO and has steered FB though many privacy issues successfully.
- Capturing more ad revenue is in #1 and also there is even more revenue which FB will capture in the non-ad space and in particular virtual money.
- This all means that Facebook has the best software platform, people, customers, and opportunities of any company on the face of the planet to be anything that they want to be - digitally.
- They almost certainly will become the worlds biggest virtual currency provider. That's just throwing a switch for them. They could become a bank overnight in any market they chose, it's just a matter of which regulatory environments are most attractive for them to enter.
Do you have any views on the Facebook IPO? Please share them.....