Facebook Shares Continue To Soar, U.S. Investors Shut Out of Goldman Offering

The Facebook shares auctions being run by SecondMarket and SharesPost continue to reflect the ever increasing investor demand for Facebook shares.  The latest SecondMarket auction, on January 12, cleared the shares at a price of $28.26, for a total market cap of about $70.5 billion, given the estimated 2.5 billion shares outstanding.  The shares have almost double in price since October, prior to the first auctions and Goldman Sachs investment.

There are obviously a lot of people making a lot of money in Facebook shares.  Just who, and how much, is revealed in the graph  on the following page produced by French “internet professional” Nico Lanter.  However, the graph was based on a Facebook value of $50 billion, so you need to gross everything up by 40% to see how many billions of dollars are held in Facebook shares by each of the shareholders noted.

The $1.5 billion attributed to “Goldman Sachs Clients” above will not include any U.S. investors after Goldman decided to limit the offering to non-U.S. residents to ensure they don’t run afoul of any SEC regulations.  In a statement, Goldman said it “….concluded that the level of media attention might not be consistent with the proper completion of a U.S. private placement under U.S. law,” and that the move “was based on the sole judgment of Goldman Sachs and was not required or requested by any other party.”  In its statement, Goldman Sachs said “we regret the consequences of this decision, but Goldman Sachs believes this is the most prudent path to take.”   Goldman Sachs probably doesn’t regret it as much as many of it’s U.S. clients who were poised to become Facebook shareholders.

Facebook Branded Phone Rumors Continue, Facebook Enabled Devices Abound at CES

TechRadar, among others, is reporting that a new Android handset from INQ, the Cloud Touch will be the first Facebook branded mobile phone.  INQ, a fully owned subsidiary of Hutchison Whampoa, was founded in 2008 by Frank Meehan, who was previously General Manager of 3G Handsets and Applications for Hutchison Whampoa. INQ is backed by Li Ka-shing who is Chairman of Hutchison Whampoa and is also an investor in Facebook and Spotify.  On its website, INQ describes itself this way: “We’re here to revolutionize how you connect with your friends. The last transformation of the mobile came with the arrival of text messaging, over ten years ago. So we’ve decided to do things differently.  Through our platform, we’ll enhance the way you use your phone to stay in touch with your friends. Our phones make using services that’d normally chain you to your desktop, such as Facebook, Windows Live, Skype and eBay, as simple as sending a text.”

The INQ Cloud Touch is one of two Facebook phones reportedly poised to hit the market in 2011.  One features a Qwerty-style keyboard and touch screen. The second device is solely touchscreen.    A description of the INQ Cloud Touch in a Bluetooth certification states:

“An Android smartphone built to make messaging faster and smarter. It’s designed around the way people naturally communicate and has Facebook built into its core. The homescreen features multiple entry points to different Facebook functions, while a dynamic widget displays a feed of status updates, albums, videos and photos.”   Many are expecting an announcement at to the Mobile World Congress in Barcelona in February.

There were numerous cool Facebook-enabled devices at CES, as highlighted by Inside Facebook including:

-                          Nook: a new color version of Barnes & Noble’s Nook with social features enabling users to share quotes and recommend books with their Facebook friends.

-                          HP Photosmart eStation: Comes with a removable 7-inch Android display which includes a Facebook app.  The Facebook Photos app lets users print photos from their profile and those of friends without connecting a computer to the printer.

-                          Kodak Pulse Digital Photo Frame:  Members can view their photos and those of friends as soon as they’re posted on Facebook using Kodak’s Pulse wireless digital photo frame. Photos from friends are automatically synched over Wi-Fi when friends upload new photos

-                          Western Digital TV Live Hub set top box: Allows users to access Facebook through their TV

-                          Motorola Xoom Tablet – Leveraging Android technology, the Xoom appears to be the first real competitor to the iPad.  While there is nothing Facebook-specific about the tablet, we believe that as with smart-phones, Andorid-driven competitors will help expand the market, much to the benefit of Facebook and all social media.

Now It’s Available, Now It’s Not, Contact Information Latest Privacy Misstep

In a blog post on Friday, January 14th at 9pm, Facebook announced “We are now making a user’s address and mobile phone number accessible as part of the User Graph object. Because this is sensitive information, we have created the new user address and user_mobile_phone permissions. These permissions must be explicitly granted to your application by the user via our standard permissions dialogs.”  A sample of the request for permission is below:

While Facebook has struggled with privacy concerns in the past, user concern appears to have diminished in the last number of months, as our recent Facebook survey revealed:

However, the response to the change in policy was swift and negative from the media, and Facebook responded three days later by halting the practice.  In a blog post, Facebook wrote “Over the weekend, we got some useful feedback that we could make people more clearly aware of when they are granting access to this data. We agree, and we are making changes to help ensure you only share this information when you intend to do so. We’ll be working to launch these updates as soon as possible, and will be temporarily disabling this feature until those changes are ready. We look forward to re-enabling this improved feature in the next few weeks.”

Zynga’s Cityville Is Aggregating A Giant Metropolis, Becomes The First Game on Facebook To Pass 100 Million MAUs

Zynga’s CityVille surged past 100mm Monthly Active Users (MAUs) on January 13, just 41 days after its release, becoming the first game in Facebook history to break that milestone. Cityville become the biggest game in Facebook history on January 1, by surpassing the 83.7 million mark set by Zynga’s Farmville on March 11, 2010.  Cityville’s monstrous success is based on numerous factors, (quality

of the game, localization in six European languages), but none is as big as the cross promotion only available to Zynga with its current base of over 300mm total MAUs across all its games, more than 6X the size of CrowdStar, the 2nd largest aggregator of MAUs on the Facebook platform.  The cross promotion for Cityville runs the gamut from a big Cityville button that is displayed all the time while Zynga gamers are playing any other Zynga games, to your new neighbor on Farmville who provides links to Cityville.  Zynga also asks its gamers to help spread the word, including asking farmers to spread the word to their Farmville friends when playing Cityville.

Zynga’s Cityville crushed the growth of Zynga’s Frontierville, which was previously the fastest game to 20 million MAUs:

We estimate that more than 70% of Cityville’s users are outside the U.S., with the game a hit in both Asia and Europe.  However, while Zynga can get people to try the game, getting them to return and become regular users is more difficult.  The current ratio of people who logged on yesterday (as measured by DAUs – Daily Active Users), as a percentage of users who logged in to Cityville in the last month, is currently lower than the ratio for other Zynga games:

Based on the monstrous success of Cityville, total MAUs for the ten largest social gaming developers on Facebook hit an all time high this week at 490 million, up more than 25% since Cityville was introduced in December.

Finally, it’s interesting to put Cityville in to perspective with regards to the other 20 largest games in terms of MAUs in the history of Facebook.  Figure 9 highlights how Cityville is currently has about the same number of MAUs as total combined MAUs of the 3rd, 4th and 5th largest games ever.     Of the top games in the chart below, Happy Aquarium, at 7th largest, is the first not developed by Zynga (it ‘s a CrowdStar game).  Finally, as of the 15th, Zynga controlled over 60% of the total MAUs of the top 10 developers combined.

Cityville should accelerate the growth of Facebook gamers, which is already on a steep trajectory per the figure below, which highlights that over 37% of U.S. Facebook users 18+ are already playing games on Facebook, a 20% increase in just two months.

Dissecting a Twitter Phenomena, #LessAmbitiousMovies

As we continue to try and understand what Twitter is, and what it will evolve into, we find it interesting to look at certain events on Twitter and try and understand the dynamics. Such an event occurred on January 5th, when we checked in to our Twitter feed and found it full of tweets about #LessAmbitiousFilms. For anyone who spends time on Twitter knows that a hashtag (a keyword with a number sign in front of it) refers to an ongoing dialogue, making it easier to find via search. The hashtag was the brain child of Twitter user Chris Messina, who first used it on August 23, 2007.

It’s impossible to go to a conference without a twitter screen scrolling all the related tweets found via the hashtag. Another popular use of hashtags is to start memes. #ff (for Follow Friday) is popular every Friday, when Twitter users highlight accounts they like to follow. According to Twitter, more than 10 percent of all tweets contain hashtags.

Sometimes these Hashtag memes catch fire and become trends that dominate the Twitter-sphere for some short period of time, and that’s exactly what happened with the “#lessambitiousmovies” tag. The Twitter blog looked at the latest how #lessambitiousmovies started, how it spread, and how it died, and its all quite interesting.

The meme actually started out as #lessambitiousfilms, with the first one found by Twitter to have come from Rob McCallum at about 10pm on January 3rd:

(Rob apparently agreed, as his twitter bio describing himself says “Just here, saying stuff about films, comics and writing and that. I began that insane Lessambitiousfilms/movies hash tag nonsense. I’m sorry”) Twitter then graphed the hashtag velocity as the hashtag morphed from “films” to “movies”

So the obvious question from looking at the data is what happened at point “A” on the graph above? Twitter attributes to spike to a few key accounts, highlighting Daily Show creator Lizz Winstead and her dozens of tweets to her 15,000 followers as a the start of flood, and her tweets got some re-tweets from bloggers with even larger bases of followers, and so the rise began. At the peek, over 1,000 tweets a minute were being sent. Over 100,000 people sent a total of over 400,000 tweets. Twitter attributes the spike occurring at point “B”, to a #lessambitious tweet by Katy Perry to her 5.2 million followers. But it did not re-ignite the meme.

The big lesson that Twitter says is to be learned from its research is the importance of getting your tweets in front of the right engaged audience, who can greatly amplify your tweets. While Katy Perry has a big following, they are broadly less engaged.

Our favorite #lessambitiousmovie??

Guest Post: “How Facebook Ships Code”, reprinted with permission from the author Yee Lee

While we often point to the implementation of the newsfeed and the opening of the API as seminal moments in Facebook’s history that helped propel Facebook past MySpace to become the dominant social network on the planet, we recognize those technology leaps were the residue of a developer focused organization. We found this article to give great insight into the Facebook organization, and are pleased to reprint it with the authors permission.

How Facebook Ships Code
January 17, 2011 — yeeguy
I’m fascinated by the way Facebook operates. It’s a very unique environment, not easily replicated (nor would their system work for all companies, even if they tried). These are notes gathered from talking with many friends at Facebook about how the company develops and releases software.
Seems like others are also interested in Facebook… The company’s developer-driven culture is coming under greater public scrutiny and other companies are grappling with if/how to implement developer-driven culture. The company is pretty secretive about its internal processes, though. Facebook’s Engineering team releases public Notes on new features and some internal systems, but these are mostly “what” kinds of articles, not “how”… So it’s not easy for outsiders to see how Facebook is able to innovate and optimize their service so much more effectively than other companies. In my own attempt as an outsider to understand more about how Facebook operates, I assembled these observations over a period of months. Out of respect for the privacy of my sources, I’ve removed all names and mention of specific features/products. And I’ve also waited for over six months to publish these notes, so they’re surely a bit out-of-date. I hope that releasing these notes will help shed some light on how Facebook has managed to push decision-making “down” in its organization without descending into chaos… It’s hard to argue with Facebook’s results or the coherence of Facebook’s product offerings. I think and hope that many consumer internet companies can learn from Facebook’s example.
HUGE thanks to the many folks who helped put together this view inside of Facebook. Thanks are also due to folks like epriest and fryfrog who have written up corrections and edits.
• as of June 2010, the company has nearly 2000 employees, up from roughly 1100 employees 10 months ago. Nearly doubling staff in under a year!
• the two largest teams are Engineering and Ops, with roughly 400-500 team members each. Between the two they make up about 50% of the company.
• product manager to engineer ratio is roughly 1-to-7 or 1-to-10
• all engineers go through 4 to 6 week “Boot Camp” training where they learn the Facebook system by fixing bugs and listening to lectures given by more senior/tenured engineers. estimate 10% of each boot camp’s trainee class don’t make it and are counseled out of the organization.
• after boot camp, all engineers get access to live DB (comes with standard lecture about “with great power comes great responsibility” and a clear list of “fire-able offenses”, e.g., sharing private user data)
• any engineer can modify any part of FB’s code base and check-in at-will
• very engineering driven culture. ”product managers are essentially useless here.” is a quote from an engineer. engineers can modify specs mid-process, re-order work projects, and inject new feature ideas anytime. [EDITORIAL] The author of this blog post is a product manager, so this sentiment really caught my attention. As you’ll see in the rest of these notes, though, it’s apparent that Facebook’s culture has really embraced product management practices so it’s not as though the role of product management is somehow ignored or omitted. Rather, the culture of the company seems to be set so that *everyone* feels responsibility for the product.
• during monthly cross-team meetings, the engineers are the ones who present progress reports. product marketing and product management attend these meetings, but if they are particularly outspoken, there is actually feedback to the leadership that “product spoke too much at the last meeting.” they really want engineers to publicly own products and be the main point of contact for the things they built.
• resourcing for projects is purely voluntary.
o a PM lobbies group of engineers, tries to get them excited about their ideas.
o Engineers decide which ones sound interesting to work on.
o Engineer talks to their manager, says “I’d like to work on these 5 things this week.”
o Engineering Manager mostly leaves engineers’ preferences alone, may sometimes ask that certain tasks get done first.
o Engineers handle entire feature themselves — front end javascript, backend database code, and everything in between. If they want help from a Designer (there are a limited staff of dedicated designers available), they need to get a Designer interested enough in their project to take it on. Same for Architect help. But in general, expectation is that engineers will handle everything they need themselves.
• arguments about whether or not a feature idea is worth doing or not generally get resolved by just spending a week implementing it and then testing it on a sample of users, e.g., 1% of Nevada users.
• engineers generally want to work on infrastructure, scalability and “hard problems” — that’s where all the prestige is. can be hard to get engineers excited about working on front-end projects and user interfaces. this is the opposite of what you find in some consumer businesses where everyone wants to work on stuff that customers touch so you can point to a particular user experience and say “I built that.” At facebook, the back-end stuff like news feed algorithms, ad-targeting algorithms, memcache optimizations, etc. are the juicy projects that engineers want.
• News Feed is important enough that Zuckerberg reviews any changes to it, but that’s an exceptional case.
• “There is mandatory code review for all changes (i.e., by one or more engineers). I think the article is just saying that Zuck doesn’t look at every change personally.”
• “All changes are reviewed by at least one person, and the system is easy for anyone else to look at and review your code even if you don’t invite them to. It would take intentionally malicious behavior to get un-reviewed code in.”
• . engineers responsible for testing, bug fixes, and post-launch maintenance of their own work. there are some unit-testing and integration-testing frameworks available, but only sporadically used.
• [ION thx fryfrog] “I would also add that we do have QA, just not an official QA group. Every employee at an office or connected via VPN is using a version of the site that includes all the changes that are next in line to go out. This version is updated frequently and is usually 1-12 hours ahead of what the world sees. All employees are strongly encouraged to report any bugs they see and these are very quickly actioned upon.”
• re: surprise at lack of QA or automated unit tests — “most engineers are capable of writing bug-free code. it’s just that they don’t have an incentive to do so at most companies. when there’s a QA department, it’s easy to just throw it over to them to find the errors.” [EDIT: please note that this was subjective opinion, I chose to include it in this post because of the stark contrast that this draws with standard development practice at other companies]
• [CORRECTION thx epriest] “We have automated testing, including “push-blocking” tests which must pass before the release goes out. We absolutely do not believe “most engineers are capable of writing bug-free code”, much less that this is a reasonable notion to base a business upon.”
• re: surprise at lack of PM influence/control — product managers have a lot of independence and freedom. The key to being influential is to have really good relationships with engineering managers. Need to be technical enough not to suggest stupid ideas. Aside from that, there’s no need to ask for any permission or pass any reviews when establishing roadmaps/backlogs. There are relatively few PMs, but they all feel like they have responsibility for a really important and personally-interesting area of the company.
• by default all code commits get packaged into weekly releases (Tuesdays)
• with extra effort, changes can go out same day
• tuesday code releases require all engineers who committed code in that week’s release candidate to be on-site
• engineers must be present in a specific IRC channel for “roll call” before the release begins or else suffer a public “shaming”
• ops team runs code releases by gradually rolling code out
o facebook has around 60,000 servers
o there are 9 levels for rolling out new code
o [CORRECTION thx epriest] “The nine push phases are not concentric. There are three concentric phases (p1 = internal release, p2 = small external release, p3 = full external release). The other six phases are auxiliary tiers like our internal tools, video upload hosts, etc.”
o the smallest level is only 6 servers
o e.g., new tuesday release is rolled out to 6 servers (level 1), ops team then observes those 6 servers and make sure that they are behaving correctly before rolling forward to the next level.
o if a release is causing any issues (e.g., throwing errors, etc.) then push is halted. the engineer who committed the offending changeset is paged to fix the problem. and then the release starts over again at level 1.
o so a release may go thru levels repeatedly: 1-2-3-fix. back to 1. 1-2-3-4-5-fix. back to 1. 1-2-3-4-5-6-7-8-9.
• ops team is really well-trained, well-respected, and very business-aware. their server metrics go beyond the usual error logs, load & memory utilization stats — also include user behavior. E.g., if a new release changes the percentage of users who engage with Facebook features, the ops team will see that in their metrics and may stop a release for that reason so they can investigate.
• during the release process, ops team uses an IRC-based paging system that can ping individual engineers via Facebook, email, IRC, IM, and SMS if needed to get their attention. not responding to ops team results in public shaming.
• once code has rolled out to level 9 and is stable, then done with weekly push.
• if a feature doesn’t get coded in time for a particular weekly push, it’s not that big a deal (unless there are hard external dependencies) — features will just generally get shipped whenever they’re completed.
• getting svn-blamed, publicly shamed, or slipping projects too often will result in an engineer getting fired. ”it’s a very high performance culture”. people that aren’t productive or aren’t super talented really stick out. Managers will literally take poor performers aside within 6 months of hiring and say “this just isn’t working out, you’re not a good culture fit”. this actually applies at every level of the company, even C-level and VP-level hires have been quickly dismissed if they aren’t super productive.
It’ll be super interesting to see how Facebook’s development culture evolves over time — and especially to see if the culture can continue scaling as the company grows into the thousands-of-employees.
What do you think? Would “developer-driven culture” work at your company?

This article was originally posted at: http://framethink.wordpress.com/2011/01/17/how-facebook-ships-code/

Goldman Sachs To The World: “Facebook Really is Worth MORE Than $50 Billion”

Much ridicule was heaped on investors who were furiously bidding up the value of Facebook beyond $50 billion in the private markets in the past number of months:

Goldman just made all those recent investors look pretty smart with its $450 million investment in Facebook at a $50 billion value, which will be supplemented by $50 million from uber social media investor DST, and $1.5 billion from Goldman’s vast network of institutional and private investors.  We view the investment as a significant win for both sides as the smartest investment bank on the planet is effectively partnered with the most transformational internet company the world has ever seen.   While we believe Facebook will be free-cash-flow positive in 2011, even as it rapidly scales its cap-ex, the investment gives Facebook ample cash to invest in its business, and accelerate its pace of acquisitions of companies to acquire the technologies and talent it needs to continue to drive its growth.  Facebook will also benefit from the advice of Goldman which will help Facebook acquire the right companies, the right talent, the right lobbyists, and partner with the right companies around the world.

We believe Goldman may be an even bigger winner in this transaction.  First, it gets a seat at the table as Facebook strategizes who to acquire, partner with and hire.  Goldman’s reputation is also enhanced as the “go to” bank for leading social media companies, a position that was an opportunity available to Morgan Stanley and others, but seized by Goldman.  Finally, Goldman and its investors get the shares at a 15%+ discount relative to where the shares were trading in the increasingly liquid private market, and a 50% discount to where we think Facebook would trade if it were public.  As expected, the private market has heated up since the Goldman announcement was made last week, but there are no sizable transactions reported as of yet.

Details of the offering memorandum leaked, as Reuters reported that Facebook generated $1.2 billion in revenue in the first 9 months of 2010, and $355 million of operating profit.  As Facebook’s operations were scaling dramatically over the course of the year, we estimate that Facebook generated over $1.9 billion in revenue and close to $700 in operating profit for 2010.  As Facebook continues to scale, it appears poised to have EBITDA margins well ahead of Google’s.

The offering reportedly indicates that Facebook plans on reporting it’s financials in the first quarter of 2012, in order to comply with SEC regulations as it passes 500 investors on its cap table.  While many believe that Facebook is likely to go public once it is forced to report its financials, we believe Facebook may still choose to stay private, foregoing the additional scrutiny heaped on public companies as it continues to work its way to global ubiquity.

VC Funding of Social Media Companies Soars to $819 Million in the Fourth Quarter

In a comprehensive review of the thousands of VC transactions in 2010, we attempted to identify each investment that was made in a company we considered to be a Social Media focused company.  We then looked at each of those Social Media companies, and tried to identify each company that was, or will be, generating the majority of its revenue from the Facebook platform.  If you have a company that was left off the list or mis-classified in any way (timing of investment, lead VC, amount, description…), please let us know by writing us at twism2011@gmail.com.   We apologize ahead time for any mis-classifications, and will be updating the data in future publications.

VC funding of Social Media companies soared to $819mm in Q4, almost equaling the $856 million that was raised by Social Media companies in first nine months of 2010.  Total funding for the year reaches $1.67 billion.

The surge in Social Media company financing was driven by the average deal size, which reached $14.4 million in Q4, vs. the $5.9 million average investment during the first nine months.  The surge in average deal size in Q4 was helped by the $200 million investment in Twitter.  However, even excluding the Twitter investment from the analysis, the average deal size still would have been $11 million in Q4, still almost doubling the average deal size of the first nine months.  And Twitter was not even the largest deal of the year, given the $300 million raised by Zynga in the second quarter.  Below is a list of the 10 largest Social Media investments in 2010, which totaled $906 million, an average of $90 million.  The 10 largest transactions equaled 54% of the total amount raised in the 202 Social Media investments made by VCs in 2010.  Interestingly, 8 of the 10 largest fundings of 2010 took place in the fourth quarter.
We estimate that of the total $1.67B raised by social media companies in 2010, $619 million, or 30% of the total Social Media investments in 2010, was invested in companies whose primary business is leveraging the Facebook platform.

The second quarter figures in the chart above were skewed by the $300 million investment in Zynga, without which, the total amount raised by Facebook focused companies in the 4th quarter would have almost equaled the total amount raised in the first three quarters.

The chart below looks at the data by VCs, ranking them in terms of total amounts raised by deals in which they were identified as the lead.

In the following pages, we detail the data behind the charts above.  Once again, we look forward to hearing from the community to help us make the data as correct as possible.  In addition, we look forward to hearing from the community with regards to future financings.  While we recognize the data presented here is imperfect, we’re very confident it is directionally correct, and we feel it’s important to put a stake in the ground and highlight how rapidly the VC landscape is adjusting to the evolving Social Media landscape.

Wedbush to present “Wall Street’s View on Social Media” at a special breakfast event in Palo Alto on Jan. 28th

Is Facebook really worth $50B? Is Twitter worth $4B? What happens to Google in this new world order?  Is this all just a bubble waiting to burst or are we at a transformational crossroads providing significant wealth creation opportunities for investors, entrepreneurs, and MBA’s who choose the right start-up to join?  All these questions and more will be discussed by Lou Kerner, Wall Street’s first Social Media Analyst.

Lou will be joined by senior executives of some the most innovative social media companies of the day including Peter Relan (CrowdStar), Tom McInerney (Klout), Kris Dugan (Badgeville), Brian Garret (Que Pasa), Howard Lindzon (StockTwits), and Brian Wilhite (trueAnthem) in a highly interactive discussion.

If you have not received an invitation, please contact your Wedbush salesperson.  If you are a company or a VC mentioned, or one that should have been mentioned, in this report, you are welcome to attend the event as well.  Space is limited.  Please send your request to twism2011@gmail.com .

This Week in Social Media – Special Edition

  • Goldman’s $450 million investment in Facebook is a win/win for both companies as the smartest investment bank on the planet is effectively partnered with the most transformational internet company the world has ever seen.
  • While we believe Facebook could be free cash flow positive in 2011, even as it rapidly scales its cap-ex, the investment gives Facebook ample cash to accelerate its pace of acquisitions for both the technologies and talent it needs to continue to drive its growth.
  • Facebook will now also be receiving advice from Goldman who will help Facebook acquire the right companies, the right talent, and partner with the right companies around the world.
  • Goldman is also a huge winner as it now gets a seat at the table as Facebook strategizes who to acquire, partner with and hire.  Goldman’s reputation is also enhanced as it’s seen as Facebook’s banker.  Goldman also gets a 15%+ discount on Facebook shares relative to where its trading at in the increasingly liquid private market, and a 50% discount to where we think Facebook would trade if it were public.
  • We believe social media will continue to emerge as an increasingly critical part of every advertisers marketing campaign, to the benefit of Facebook and hundreds of other companies providing unique ways to reach, enable, and engage the global audience immersed in social media.

After more than tripling revenue in 2010, to almost $2 billion (in our estimate), we believe Facebook is poised to more than double revenue to $4 billion+ in 2011. We believe this growth is coming largely from offline budgets, with the rest coming from online display budgets that would have been spent on other leading online properties. We estimate Facebook could generate $1B+ in EBITDA from $4 billion in revenue, but will likely have $1B+ in capital expenditures as it continues to ramp its infrastructure to meet unprecedented demand. Therefore, the $500 million investment announced today, as well as the reported additional $1.5 billion to be raised by Goldman, positions Facebook to both invest in its infrastructure as well as acquire the technology and talent it will increasingly need as it continues to scale its operations and enhance its technology at a pace the world has never seen.

It’s interesting to note that in a recent poll conducted by Covario, a leading search marketing platform, showed that 95% of search marketers are advertising on Facebook, and they are budgeting “10-20% of their paid search advertising” for running ads on the Facebook social media platform in 2011. The budgets are coming from the display mix, not from paid search budgets, and the budgets are increasingly global.

We believe the $50 billion valuation is attractive for Goldman as it is at a 15%+ discount to the latest auctions run by SecondMarket and Sharespost in December, which both valued Facebook at over $60 billion. The ramp in Facebook’s value accelerated in the last few months as the private auctions became more transparent:

In our recently conducted bi-monthly poll of 2,500 U.S. consumers 18+ (to be released in detail later this week), everything continues to go up and to the right for Facebook, as Facebook memberships continues to grow (at a 22% CAGR the last two months), and the percentage of people logging in every day also continues to grow (at an 11% CAGR the last two months).

Lastly, while members are on Facebook, they are increasingly engaged with marketers/brands, which bodes well for future Facebook monetization opportunities. In fact, as the chart below indicates, our research indicates that Facebook recently passed a milestone with more than half of all U.S. adult members now fans of a brand.