Instagram: Conference Call and Deck

In the wake of Facebook’s acquisition of Instagram, Lou Kerner recently hosted a conference call and published a new deck profiling the deal. Robert Scoble, Peter Relan and Vic Singh (whose slides are below), participated in the call.

To listen to a replay of the call, dial 888-632-8973, or 585-295-6791 (if outside the U.S.), The replay code is 599-456-76#

The Social Internet

While I thoroughly enjoyed my time as a Wall Street analyst, compliance issues hampered my ability to blog on SecondShares.  Now that I’m back angel investing, I look forward to sharing thoughts and analysis on the social and mobile companies I refer to as “Social Internet” companies.  Just as the siloed internet companies disrupted the offline leaders (e.g. Amazon v Walmart), Social Internet companies that are BORN social, will disrupt incumbent firs internet leaders.  I first outlined my thesis in the only real thought piece I wrote a year ago.  I now update those thoughts in a deck “The Social Internet“.  While the deck is meant to be given live (which I love doing, as it’s such a fun dynamic topic to discuss), a lot of value can be derived by reviewing the slides.   Enjoy the deck, share it, and I look forward to future posts.

This Week In Private Shares Trading

The Facebook auction that took place on Wednesday cleared at a price of $31.25, flat versus last week, and implying a value of $77.2 billion.

Facebook had traded at its high of $31.50 for four straight weeks, beginning on March 9th, before moving down slightly.  The high price of $31.50 implied a value of $77.8 billion.

Figure 1: Facebook Shares Trading at $31.25, Implying a Value of Just over $77 BN

Source: Company data, Wedbush Securities, Inc.


 

This Week in Social Gaming

From the time we began tracking the social gaming sector in April 2010, the three largest developers in terms of aggregate MAUS have remained at the top.  Zynga has extended its lead growing users 7% since we began tracking in April 2010.  We also note, two weeks ago, John Schappert, left his position as COO of Electronic Arts to join Zynga.  Schappert had been at EA since June 2009.

Of the developers, Wooga has made the most significant increases, growing another 25% from last month and ascending to the fourth spot powered by the success of Bubble Island, Monster World, and Diamond Dash.

Figure 1: Change in MAUs Since April 2010 for the Top 10 Facebook Game Developers

Source: Wedbush Securities,  appdata

Of the top ten titles, Zynga has developed seven with its Cityville capturing almost twice as many active users as the number two title, Zynga’s Farmville.

Figure 2: Zynga Boasts 7 of top 10 Gaming Titles

Source: Wedbush Securities, appdata

 

Another notable occurrence in the Facebook app ecosystem is the emergence of the dating app by Badoo as the second biggest application on the Facebook platform, with over 57 million monthly active users (MAUs).  When Badoo ascended to the number two spot last month, passing Farmville in terms of MAUs, it became the first time in over a year that Zynga apps didn’t control the top two spots.

Badoo was on a trajectory to likely surpass Cityville and become Facebook’s largest app had Facebook not worked with Badoo to alter some of the more viral elements of the app.

 

Figure 3: Badoo Dominates Non-Gaming Apps

Source: appdata

 

RENREN IPO 30 Times Oversubscribed

RENREN IPO 30 TIMES OVERSUBSCRIBED

On Wednesday May 4, China-based social networking company Renren IPO’d to raise almost $750 million.  The IPO was priced at the high end of the range at $14 ($12 to $14), after the price range was revised 30% higher a week earlier due to high demand.

 

Renren’s net revenues were $76.5 million in 2010, up 64% from $46.7 million in 2009 and up from $13.8 million in 2008.  Renren had a net loss in 2010 of $64.1 million, down from $70.1 million in 2009.  The IPO valued Renren at $5.5 billion, or 67 times 2010 net revenues (Goldman Sachs-Facebook funding was priced at 25 times estimated 2010 revenues), and we estimate that the IPO pricing valued Renren between 20 to 25 times 2012 revenues.

 

The Renren book was 30 times oversubscribed, and even after the resignation of the head of the audit committee and revision of its unique user numbers leading up to the offering, the book held together with very few accounts dropping out.  Based on the tremendous amount of demand, the allocations had to be limited to many accounts.  We note that 3 to 4 times covered is typically considered a good deal and recent Chinese IPOs have been 10x covered

 

Money has poured into Chinese Internet companies as the country is currently adding 10 million Internet users every month to a current Internet user base of 457 million (still only 34% penetration).  In addition to this massive user base, China’s online advertising market is growing rapidly with estimates that it will triple to almost $13 billion by 2014 (roughly 14% of the global online revenue estimate).  In addition to the growing digital advertising opportunity, China’s social gaming market is thriving with an estimated gamer population in excess of 300 million, producing revenue of $4 billion (roughly double the U.S. market).

 

Figure 1: China’s Online Ad Market Expected to Triple by 2014

Source: Renren via Mashable

 

Figure 2: Chinese Second Internet Landscape — Chinese Internet Companies & Their U.S. Counterparts

Source: Ogilvy