University of Maryland, R. H. Smith Business School Case Report Facebook INC: The Initial Public Offering Group Members Ao Zhou 114214195 Zehua Huang 114352699 Emily Buczkowski 112344252 Rui Cao 114368911 Julian Gooch 112364922 University of Maryland, R. H. Smith Business School Summary Facebook is an emerging internet-based company which has astonishing growth in the past decade. Its substantial user base, subsequently massive database and pioneer brand image provide Facebook with the profitability base of its business. The main goal in this case is to evaluate the opportunity of investing Facebook in its IPO. Here we use both DCF valuation and Multiples valuation method to measure if Facebook is fairly …show more content…
With Facebook’s giant user database collected when they register and upload information, advertisers are able to push ads to their target groups, making their advertising more efficient and useful. And as the leading firm in social network, Facebook has a considerable demand for advertising, which means it could enjoy a premium as price-maker. Additionally, Facebook is the very first company and also the most successful company in social network field. When people talk about social network, the first word comes up into their mind is Facebook. That becomes an irreplaceable advantage in competition for users and therefore, generates implicit value for Facebook. Comparative advantages: First of all, as mentioned above, its comparative advantage partly lie on extensive and proprietary database, which can provide a considerable amount of useful relation or information that other competitors can offer for both advertisers and users, and a unique brand image as the founder of social network. What’s more, Facebook has a user base internationally and generates half of its revenue from outside US. None of its competitors could achieve this while they either focus on professional field or are limited in specific regions. Lastly, Facebook’s interactivity in games and apps is among one of the best in the industry. While users attached more games or apps
Social media, Facebook specifically, has become one of the most successful forms of websites on the Internet. According to Facebook Company statistics (Info, 2016) there are over 1.65 billion monthly active users as of March 31, 2016. Additionally there are 1.09 billion daily active users for
Through their websites, many other companies are incorporating Social Media. Alone in 2010 there have been 2.5 million websites of companies that have incorporated themselves with Facebook. And now so many more companies are also choosing LinkedIn to employee the most brilliant people. The “fastest
Facebook was launched on February 4, 2004 by nineteen year old named Mark Zuckerberg (Carlson). In 2010 it became one of the most popular websites in the world, visited by over 400 million people per month. The sudden popularity of Facebook was so extraordinary, that a movie called “The Social Network” came out telling the story of its development (The Social Network). This site created an innovative way for its users to exchange messages, post status updates, post photos, and join common interest groups. In addition to that users can like and comment on
handle business. Facebook is one of the main social media cites around the world. Society
Shortly after Myspace, Facebook began in 2004. Mark Zuckerberg, a student and computer programmer at
Facebook is one of the top social media platforms with more than 1.23 billion active users worldwide. 62% of the 1.23 billion users log in on a daily basis making it the best medium to reach for new customers. Today, businesses both big and small use Facebook as an advertising source to help their brand expand.
Facebook is the biggest social media network on the internet with a massive following which continues to expand. Mark Zuckerberg alongside his college roommates created and launched the world’s most popular social media site on 4 February, 2004. Zuckerberg previously developed other sites for fellow students to
Facebook is a social networking site that is free of charge for its users. It allows the individual the opportunity to stay connected with friends and family, sharing updates, photographs and user status. The company grosses more than $1 billion per quarter in advertising revenue and online games (Ritholtz, 2014). In this respect, Facebook is much more that a social network. It is a versatile and sophisticated corporation that has revolutionized the way people share their lives and communicate. Their mission is “to give people the power to share and make the world more open and connected. People use Facebook to stay connected with friends and family, to discover what’s going on in the
Facebook relies on ad advertisements in their business model. Facebook platform empowers developers to build applications and web sites that integrate with Facebook to reach its global network of users and to build personalized and social products.
In this day and age, social media has become an integral part of our lives. It has created a platform for people to share information instantly and communicate with people all around the world. Facebook is the most outstanding example of successful social media network. According to the first quarter 2015 earnings announcement by Facebook, the site has achieved 1.44 billion active users per month, and 65% of which are daily active users. Other social networking sites such as Twitter, Instagram and LinkedIn are also a powerful means of communication. With such a large audience, social networking sites provide ample opportunities to acquire information, network, and connect with friends.
The intrinsic value of Facebook stock was very difficult to find, since the company is relatively new and has been growing at an extreme rate. Based on the most recent sale of Facebook stock via a private transaction the per share price was $44 in March. However, based on the DCF analysis by professor Aswath Damodaran the intrinsic value of a single Facebook share would be $32.44. The problem is whenever using DCF analysis; the analysis is very sensitive to all assumptions uses, which were plenty in the case of Facebook. The price talk from underwriters varied immensely within the time from of February when the Red Herring was filed, all the way to May. At the very beginning, price talks were anywhere from $20 – mid $30’s. They were set to offer 337,415,352 shares. As the broader market continued in bullish trend and momentum for the Facebook IPO became greater. Price talks now shifted to $28-$35 range. Knowing that demand for the stock was said to be growing it was noted that many IPO are priced conservative to leave room for a pop on the first day of trading. On May 11 CNBC made a statement along the lines that demand was much greater than supply for the stock. Shortly after on May 14, the price talks had now moved to $34-$38 range and now offering 421,233,615 shares, the additional shares were all of insiders. This would set the companies valuation at
Third, for the further development, Facebook raises its reputation and amplifies its brand value. More people get to know the company and join in the Facebook. That is to say, Facebook attracts more users and expands the market share.
Less dependency on complementors. As Facebook is the largest social media platform and part of the digital giants, it has hard power unlike most other firms, they can enter any industry with relative ease just because they have the resources available to do so. This is a treat to a multisided platform as the company is not reliant on complementors unless they have some data that is invaluable and unattainable by the giant (Facebook) itself.
Revenue streams are diverse and continue to grow 2012 estimates are $4.51 billion. The company has several major corporate business partners and in 2012 launched its first IPO. which has shown a strong initial stock performance. Facebook is an early adapter of technology and was one of the first social networking sites to optimize its platform for mobile devices. Its technical platform allows for millions of applications, including Zynga.
According to Forbes, there are about 1 billion social media accounts all over the world, these accounts makes almost all of the countries of the world connected with each other.Social media is a very common in today’s modern world, social media is considered to be one of humanity’s greatest achievements and accomplishments. Never before humans were connected to each other as in today’s world. and almost everybody has a Facebook account, there are about 500 million Facebook accounts. Facebook allow its users to chat with each other, to see each other’s pictures, and to comment on any post. Which is very useful in the business and marketing world.