Speculation is rife as to exactly when Facebook with start the initial public offering (IPO) of shares, with those in the know suggesting it will be the 18th May.
How attractive an offer is Facebook?
In the run up to the IPO, Facebook have published key data on their past, present and future income and investors are studying this in detail.
The numbers are the key for investors. Everyone knows that Facebook throws around huge numbers — 900 million users; 450 million of those active every day. The real hard cash figures can initially sound very appealing too…. profits tripled in the last three years to a very impressive $1billion last year.
However when you look at more recent figures one wonders if the bubble has deflated, or burst.
Profit in the most recent quarter is down 12% compared to the same period last year, and is actually at a two year low. Facebook have been making a big investment in data centres, marketing initiatives and staff rewards; all of which will affect the bank balance. They have also been on a shopping spree with the most recent of these being Instagram for $1billion.
Income mostly comes from advertising and in-app/game purchases, and although they have a vast user base they actually make on average $5 per user per year. Considering their size and the number of daily active users, this is not a massive return.
One has to wonder just how much bigger Facebook can become — certainly if it can not increase the $5 per person a year it would need to grow significantly to turn a bigger profit for investors. Is there room in the market to grow?
One things is clear, even when shares are available publicly, Mark Zuckerberg, founder, remains very much in control of key decisions and voting rights within the company. Something investors will have to accept if they want on the Facebook bus!
So the question … would you invest in Facebook or is it over-hyped?