Facebook gave potential investors something more to worry about yesterday than Mark Zuckerberg’s hoodie. According to its amended S-1, Facebook is seeing a shift in how users access the site from the desktop client to mobile devices. Unfortunately, the company said, “We do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven.” The problem is that the social network is unable to serve up as many ads to mobile users as it can to those using a desktop, which means its ability to monetize its user base through advertising is eroding. At the same time, Facebook announced a new app store to make it easier for users to find and access apps, which could eventually emerge as a new profit center to supplement ad revenue. In any case, it’s yet another reminder to investors that Facebook’s business model is still very much a work in progress.
Wedbush Securities analyst Michael Pachter certainly stepped in it yesterday in comments to Bloomberg criticizing Facebook CEO Mark Zuckerberg for showing up for his IPO roadshow appearance in his trademark black hoodie. In Pachter’s view, the move showed “immaturity” on Zuckerberg’s part. “I think that he has to realize he’s bringing investors in as a new constituency right now, and I think he’s got to show them the respect that they deserve because he’s asking them for their money,” according to the analyst. That set off a firestorm among tech bloggers, who called Pachter everything from a “doofus” to a “complete douchebag” for not recognizing that the product matters more than the CEO’s attire. The best line came from Om, who wondered in a blog post, “Will a Yahoo patent on Hoodies mysteriously emerge and stop Zuck from being a hoodie-maven?” Ultimately, I think Pachter’s comments say more about Wall Street than about Zuckerberg. It is Wall Street that doesn’t understand that the point of running a business is not simply to generate fees for bankers and arbitrage opportunities for traders. It’s also to produce a product of value to its users. I doubt it really bothers Zuckerberg much. But if he does get down about it he can commiserate with Barack Obama, who has also earned the undying enmity of Wall Street despite the marked improvement in the stock market since he took office and the watered-down “reform” he shepherded through Congress.
Does Facebook have a Mark Zuckerberg problem? If eyebrows were raised when Facebook’s initial S-1 revealed Zuckerberg’s near complete control of the board and voting shares, they’re positively twitching now in the wake of a series of moves that could delay the company’s keenly anticipated IPO and reduce its initial valuation. FIrst came Facebook’s impulsive acquisition of Instagram for $1 billion, which according to the Wall Street Journal was entirely a Zuckerberg deal. Then came the $550 million deal with Microsoft for a group of patents Microsoft had just acquired from AOL. All that was happening while investors were trying to get their heads around Facebook’s less-than-impressive numbers in its last full quarter before the IPO. It’s enough to have some analysts wondering whether Zuckerberg just isn’t that into making a big pile of dough right now and is more interested in making Facebook into a company built to last. Even his house has been criticized for not being ostentatious enough. If so, good for Zuckerberg. Wall Street is not the only party in interests and it would be great if more companies focused more on their business and less on their share price.
Groupon may, or may not, ultimately succeed as a business. But it certainly hasn’t been cheated of its time in the spotlight. First, it pioneered the online daily deals business, becoming a start-up super-star and spawning hundreds of imitators. Then it became a poster-child for how not to conduct an IPO, forced to issue multiple re-statements of its finances in the weeks between registration and offering, only to see its stock crater almost immediately after hitting the Street. Now, it finds itself at the center of the debate over the future of financial regulation. Groupon’s latest earnings restatement comes on the eve of President Barack Obama’s expected signing of the JOBS Act, which, among other things, aims to make it easier for start-ups to raise capital by relaxing some of the disclosure and reporting requirements for early-stage public companies. Many analysts now worry that the law could end up producing more Groupon-like fiascoes for investors by making it easier for companies to hide problems. Others, however, argue it was investors’ own fault for grossly overvaluing Groupon’s business in the first place. Now if Groupon could just figure out how to turn notoriety into a business model it might really have something.
There is a lot riding on Facebook Credits. But for established media companies, the mandatory use of the in-app Payments system could be less than appealing. Will the company be able to become a major distributor of paid premium content? It depends if it wants to.
In its IPO filing Facebook mentions the word “mobile” 123 times but didn’t use the term in positive ways. In fact, Facebook’s S-1 filing is one big warning to investors: Its growth is being driven by user behavior that it has so far failed to monetize.
Machine data analytics software maker Splunk has filed for an IPO to raise up to $125 million. Just when you thought the big data market couldn’t get any steamer, boom, an IPO filing from one of the hottest company’s in the space. Splunk raised $40 million in funding from August Capital, JK&B Capital, Ignition Partners and Sevin Rosen Funds and now it’s pay back time.
According to the S-1, Splunk isn’t profitable yet. In the nine months ended Oct. 31, 2011, Splunk’s revenue was $77.8 million, up from $43.5 million the same period a year earlier. But the company reported a net loss of $9.7 million during that period, up from $2 million a year earlier, as it increased spending on sales and marketing.
Splunk’s top line revenue is growing quickly however. Its software is used to monitor and analyze real-time machine data such as logs, config files, messages and alerts on company servers or network devices or on machines hosted in the cloud. It’s customers include Credit Suisse, Bank Of America, Comcast, Salesforce, Zynga, LinkedIn, T-Mobile, Swisscom, Shutterfly, Heroku and the US Departments of Labor and Energy.
Despite many challenges — from disappointing EV sales to the headaches in subsidizing solar — the cleantech sector survived 2011. Where is it headed next? It is clear that early-stage companies and ideas hold the keys to future growth, much like the first wave of Internet companies did for later companies like Twitter, Groupon and Square. But in a market where VC funding primarily goes toward later-stage companies, the question is, How will those early-stage players find adequate funding?
The Wall Street Journal is reporting that Millennial Media is planning to public early next year, citing an unnamed source. Millennial doesn’t grab as many headlines as some others in the space, but it certainly grabs market share: It claims about 17 percent of the U.S. market, according to IDC, second to Google’s 24 percent but more than Apple’s 15 percent. Those figures illustrate just how competitive the mobile-ad space remains, and Millennial has done an amazing job competing against much bigger players. And with the market finally coming into its own — it’s set to double next year to $4.1 billion, according to IDC — there will be an enormous amount of opportunity in the coming months and years.
It’s the last full week before everyone essentially checks out until January, which means a lot of us are scrambling to get things done. For a number of companies, an IPO is an item on this year’s pre-Christmas to-do list, including Jive Software, Zynga and others.