On the third day of Facebook’s public trading, Lou Kerner spoke on Bloomberg TV, discussing the outlook for the company’s stock.
Lou Kerner said Facebook’s IPO represents a divide between old guard and the new tech community. “The world’s never seen an IPO with as much global demand outside of Wall Street as there exists for Facebook,” Kerner said. “It can have a highly successful offering even if traditional, institutional investors are tepid.”
Read the full article here: http://nyp.st/IEQUkt
Lou Kerner on Bloomberg TV
Guest Post by Liza Hausman Vice President of Marketing, Gigya
In 1999 “Permission Marketing” was the buzzword of the year when Seth Godin wrote a book about “turning strangers into friends and friends into customers.” As Godin told marketers, “By talking only to volunteers, Permission Marketing guarantees that consumers pay more attention to the marketing message. It serves both customers and marketers in a symbiotic exchange.”
Today, technologies like Facebook Connect and Twitter for Websites are helping to create a new concept of permission marketing. Using these technologies on their own sites, businesses are able to establish a permission-based relationship with their users and customers that complements their efforts on Facebook, Twitter or other social sites.
The Huffington Post is the poster child for this new social-data-based permission marketing approach. Readers raise their hands by using their existing Facebook, Twitter or other social identity to register, giving HuffPo access to data with which the site can socialize the user experience. Readers can see what their friends are reading and sharing on their site, giving them a powerful social filter for relevant content. It also means The Huffington Post can sell advertising on their own site based on everything they know about the user from a social perspective.
The Huffington Post’s application of Facebook Connect and similar technologies to create a social news experience has been the key driver of its phenomenal traffic growth over the past year plus. Social advertising is also a key source of its revenue growth.
But it is the layers on top of the Social Sign-on foundation that are the most promising for the future of advertising. In addition to basic demographic targeting, sites could offer advertising based on interest data, targeting fans of True Blood or Android. Sites could also sell against social influence and activity — factors such as the number of friends, their propensity to share and their history of driving new visitors to the site, or even the number of items “Liked” as an indicator of engagement. Reward programs driven by game mechanics are a key part of the nurturing process in this new model, where a loyal, engaged and most importantly non-anonymous audience is the new currency of marketing.
Challenges do remain, but a permission-based approach will be a competitive imperative, and those that are able to embrace and experiment with its possibilities will be able to more effectively increase customer value, command higher CPMs and ensure their social efforts deliver real ROI.
Guest Post by Venessa Miemis, The Future of Facebook Project, excerpts from full blog post at EmergentByDesign.com
Credits as Currency
Facebook Credits are a virtual currency used within Facebook for the purchase of virtual goods related to applications managed on the Facebook platform. They’re like tokens you’d use to play games at Chuck E. Cheese’s — great for casual entertainment, but not particularly threatening to the real world economy. Yet.
“Increasingly, as we move later into the decade, physical currency will be harder to differentiate from virtual currencies like Facebook Credits,” said Brett King, author of Bank 2.0. “We’ll start to see a new economy emerging through social media where virtual currencies will be a very real part of the way people trade and sell information, collaborate on ideas and value various products and services.”
“We may see a kind of gamification of the real world take place through Facebook Credits, where a variety of outside vendors, businesses, and service providers can give us Facebook Credits, enable us to pay with Facebook Credits, and reward us with Facebook Credits for taking actions that they want us to take,” explained Nova Spivack, a technology entrepreneur and founder of Lucid Ventures.
Identity as Currency
Every time you upload a photo, make a comment, add a friend, click a link, or make a purchase, that data is being harvested to create a map of you. By analyzing slices of this data, a wealth of information can be extracted and predicted about you. As a related example, Google vice-president Marissa Meyer claimed at this year’s SXSW festival, credit card companies can look at spending habits and predict with 98% accuracy, two years in advance, when a couple is going to divorce. “[Identity] will become the battleground within which this entire learning will take place, because today all the artifacts of a human being belong to physical and logical governments, and not to social networks. But the ability to move any form of asset between the virtual world and the physical world needs a commonality of understanding of identity,” said JP Rangaswami, Chief Scientist for salesforce.com.
Reputation as Currency
Just as a positive score in your eBay account matters if you plan to continue doing business there, we’re on the verge of having robust social scoring metrics that will become increasingly important for businesses and individuals to consider.
When the opinions about a brand can be displayed more robustly, we’ll know not only that you “like” a brand, but why. This gives information on both sides — the reputation of the brand, and the values of the individual. As Brett King pointed out, “Social metrics, and the use of platforms like Facebook will have very real feedback in respect to the valuation of a brand economically, and obviously that will have an effect directly on revenues that are possible for providers in that space. So unless you’re playing in the social brand space, unless you’re engaged in the conversation, your social metrics are going to be affected in a negative way, and that will have an effect on revenue, profitability, and the value of your brand.”
As technology writer Kevin Kelly said, “What we know from our very short history of living online is that community precedes commerce; there’s no commerce without community. What Facebook is doing is sort of blowing up the community to be 500 million or even a billion very soon. When we have a community of a billion, it means that the potential for commerce is enormous, is immense, and we’ve never seen that before.”
Facebook will continue to grow and face new challenges as it threatens the control that traditional institutional structures have had over currency and personal identity. The implications of one entity owning this amount of information is beyond the scope of this article, but it certainly deserves a critical assessment. That huge privacy breach and wake up call hasn’t happened yet, so it’s not too late to ask what’s at stake when your data is contained in someone else’s silo.
Facebook Value Stays Steady at $77.8B
The market for trading private shares is still in its infancy, and while there are hundreds of private companies with shares available for trading, Facebook continues to dominate trading actively, with Twitter, Groupon, Linkedin, Zynga & Yelp also getting investor attention, but with limited trading activity to date.
For the fourth straight week, this week’s Facebook auction took place on Wednesday and cleared at a price of $31.50 implying a value of $77.8 billion.
Other Private Company Trading Activity:
- Twitter (230 million shares issued):
- 70k shares traded $32 on 3/28/2011 implying a $7.4 billion valuation.
- 27k shares traded $31 on 3/16/2011 implying a $7.1 billion valuation.
- 35k shares traded $34.50 on 3/4/2011 implying a $7.9 billion valuation.
- Groupon (300 million shares issued):
- 25k shares were traded at a pre split price of $47.67 or a $7.2 billion valuation on 3/10/2011 (Groupon shares have split 2:1 resulting in 300 million shares issued)
- Zynga (310 millions shares issued):
- $9.3 billion valuation implied by trade on 2/26/2011
- LinkedIn (91 million shares issued):
- $2.8 billion valuation implied by trade on 3/21/2011
Facebook Dominates Social Networking Landscape, Surpasses 250mm Mobile Users
Facebook’s dominance of social networking is on full display in the below chart recently released by Pingdom which shows every social network with over 1 MM daily visitors.
We expect Facebook’s membership to continue to grow, particularly in the less saturated demographics (55+) and in countries with lower penetration. But we also believe that there are massive opportunities for other networks that either offer a unique communications platform (e.g. Twitter), or meet vertical needs (e.g. LinkedIn for work, Badoo for dating).
Also this week, Facebook had several major mobile announcements. The announcement that got the most press was the revelation that Facebook had surpassed 250 million mobile users.
The second, and more meaningful, was the rollout of a major upgrade to its mobile platform (m.facebook.com).
On March 31st, Facebook announced:
“Today we’re excited to start rolling out a major upgrade to m.facebook.com that delivers the best possible mobile Web experience no matter what device you’re using. Previously, we solved this problem by building multiple versions of mobile Facebook: m.facebook.com for less feature-rich mobile devices and touch.facebook.com for touch devices.
There are two major problems with this approach:
- 2. Every time we launched a new feature, we had to build it multiple times across different code bases: once for facebook.com, then again for m.facebook.com, touch.facebook.com, and in native applications as well. Honestly, we weren’t very good at doing this, so certain features were missing on different devices.
With the new m.facebook.com, users with high-end touch devices will see a rich touch-friendly interface; for users with feature phones, the site will look and work great.”
The bottom line is that the world’s dominant social network has a keen appreciation for the global secular trend to mobile, and is operating its business accordingly.
As a Facebook spokesperson stated: “We think it’s important to provide an excellent mobile Web experience. Now, whenever we launch new features on the mobile site, they’ll be available on any mobile browser, presented in the best possible experience. We’re excited to roll out the new m.facebook.com site to everyone over the next few weeks.”
Facebook Continues to Build Its Washington Presence
Undoubtedly, one of the major risks to Facebook remains government regulations. Anytime a company gets as big and powerful as Facebook, the company attracts government scrutiny like moths to a flame. Facebook clearly recognizes this. In fact, Facebook’s COO, Sheryl Sandberg, is a former Clinton administration official, and Facebook’s General Counsel (Ted Ullyot) is a former clerk for Supreme Court Justice Antonin Scalia. So it’s no surprise to see Facebook continuing to take the appropriate measures to make sure that Washington understands and appreciates their perspective, and is best able to place Facebook’s actions in the right context.
The latest rumored addition to the Facebook Washington team is Robert Gibbs, the former Communications Director for President Obama. Gibbs would bring an intimate knowledge of Obama’s agenda as it relates to the regulatory issues facing Facebook, as well as strong relationships within the administration. Obama is widely perceived to be a fan of Facebook. One of Facebook’s founders, Chris Hughes, played an important role in Obama’s campaign by heading the Facebook Connect integration. More recently, Mark Zuckerberg sat next to the President at dinner as part of a group of tech titans that dined with Obama in Silicon Valley.
While the fight over talented programmers gets the most press in the Valley, recruiting the right talent in Washington D.C. may prove a similarly important key to Facebook’s future success.
Guest Post by Mitchell C. Littman, Esq.
So, what is a Secondary Market Transaction?
A Secondary Market Transaction is a negotiated private sale of restricted securities of an Issuer whose securities are not publicly traded. Some transactions are effected directly from Seller to Buyer and in some instances one or both parties may be represented by a broker-dealer who may earn a commission on the transaction.
Who are the Issuers?
The Issuers that have attracted the most market attention have been social networking and technology firms that have chosen to remain private but that have (i) used equity and equity-linked reward systems in attracting and incentivizing employees and (ii) received private equity or venture capital investments from some combination of angels and institutional investors.
Who are the Sellers?
The overwhelming majority of Sellers have been founders or early-stage employees that have left the employ of the Issuer, though there has been some selling by early stage investors (primarily angels, rather than VCs who have tended to participate in follow-on rounds). Ex-employees have typically obtained their Shares through the exercise of stock options or by receipt of restricted stock grants.
What securities are they selling?
Most sales are of Common Stock, though there have been some sales of Preferred Stock. Some Issuers have two classes of Common Stock – a class with super-voting rights and a plain vanilla class of Common Stock. In such cases, the vanilla class is invariably the security being sold. All such shares are typically deemed to be ‘restricted securities’ under applicable Federal and state securities laws.
Additional Hurdles to Effecting a Purchase and Sale: ROFR’s and Co-Sale Rights
In addition to the outright prohibition on Transfers, most Restricted Stock Purchase Agreements or Option Exercise Agreements include provisions granting a “Right of First Refusal” (a “ROFR”) under which the Issuer (or its designee), within a prescribed period of time after receipt of a Transfer Notice, may elect to purchase the Shares on substantially the same terms as those proposed in the Transfer Notice.
In some instances, particularly where the Shares to be transferred consist of Preferred Stock, other early stage investors in the Issuer may also have ROFR’s and/or Co-Sale rights entitling them to also sell Shares along with the Seller.
The exercise of any of these rights by the Issuer or another stockholder effectively derails the purchase by the Buyer.
Virtually all ROFR and Co-Sale provisions provide that, in the event the rights are NOT exercised, the Seller has a fixed number of days in which to complete the Transfer to the Buyer. In the event the transaction is not completed within the allotted time, any subsequent attempt at Transfer must once again pass through the ROFR and/or Co-Sale process.
Effecting the Purchase and Sale: The Stock Transfer Agreement
The core document for effecting the purchase and sale of the Shares is the “Stock Transfer Agreement” (also sometimes called a “Stock Purchase Agreement”) (the “STA”).
The typical STA contains:
• The principal terms of the sale, i.e., number of Shares to be sold, price and the like
• Representations and warranties of the Seller include Title to Shares; Absence of any lien or encumbrance; Power and authority to sell.
• Representations, warranties and covenants of Buyer include Power and authority; Sale was not effected through any public advertising or general solicitation; Buyer is taking for investment intent; Buyer is sophisticated and has sufficient access to information
• Buyer absolves Seller for any liability due to the fact that Seller may have superior information regarding the Issuer Buyer agrees to be bound by same restrictions as were applicable to the Shares in the hands of the Seller
Assuming the ROFR is not exercised, the parties may proceed to a closing. Generally speaking, the Seller and Buyer execute and deliver the STA to the Issuer for its approval.
Seller delivers Stock Certificates to the Issuer or its Transfer Agent.
(Some Issuers actually require that all Stock Certificates be held in escrow by Issuer’s counsel to facilitate transfer in the event of a ROFR exercise. In that case, the other parties will only receive photocopies of the certificates.)
Once approved, a virtual closing is conducted, with the Purchase Price being wired by the Buyer to the Seller and the STA signatures and the opinion of Seller’s counsel being released to the parties. Subsequently, the Issuer issues a new Stock Certificate in the name of the Buyer.
About Mitchell C. Littman, Esq.
Mitchell Littman is a founding partner of Littman Krooks LLP and heads the firm’s corporate and securities department. His practice includes public and private offerings, broker-dealer and investment banking matters, secondary market transactions, venture and private equity capital investments and mergers and acquisitions
About Wedbush Securities Private Shares Group
The Private Shares Group of Wedbush Securities covers the growing base of privately traded securities, with an emphasis on those in the social media space. The mandate of the group is to build our trading network in all private shares, source deal flow in the space (including “initial private offerings”), and to build funds and create other alternative investment opportunities across private shares for our institutional and accredited retail clients.
Jack Dorsey Returns to Twitter, Ev Williams Focusing On His Next Big Thing
Six months after turning over the Twitter CEO reigns to Dick Costolo, Ev Williams is becoming a part-time executive at the company that he co-founded five years ago.
Jack Dorsey, who co-founded Twitter with Ev is stepping in to take over product. Dorsey is tasked with making the user experience more intuitive and useful for average users. For users that have crossed the initial chasm and been able to figure out Twitter, the experience becomes incredibly powerful and sticky, however as we have previously mentioned, the company has a tremendous opportunity to drive value by improving the on-boarding experience, such that a higher percentage of visitors/initial site registrations turn into active users. As Twitter converts a higher percentage of registered users into active users, the platform will become increasingly more valuable to its users, and more pricey to advertisers.
To accomplish this task, Dorsey indicates that he will refocus the product on providing value to the majority of the user base that utilize Twitter to consume, rather than to create content by tweeting. Dorsey believes that the best aspect of Twitter is that it allows users to follow events in real-time, saying, ”That’s the value, not the brand ‘Twitter’… We need to refocus on that value.”
While we generally applaud the return of founders to their companies with their context and passion, we prefer them to return as full time employees when they take over major roles. Dorsey will continue to also be CEO of Square, the rapidly growing smart phone credit card processor. Twitter needs help, and the more mindshare it gets from Dorsey, the better.
Why Is Curtis Granderson Trending on Twitter?
One of our favorite aspects of Twitter is the persistent “Trending” module that lets you see what’s trending in the world. That’s how a lot people now find out when someone famous passed (e.g. Elizabeth Taylor), or somebody does something special (e.g. Celtic Ray Allen surpassing Reggie Miller for most career 3-pointers).
So when we saw Yankee Centerfielder Curtis Granderson trending, we assumed he had hit a grand slam or achieved some other kind of epic athletic achievement. In fact, all Curtis had done was walk to the plate for his first At Bat of the season. But behind the scenes, Granderson’s handlers leveraged one of the hottest trends in social media to give Granderson additional social media cred.
With 70 million views on YouTube in the last month, 13-year old Rebecca Black became a social media phenomenon with her hit, “Friday”. And when the song was played as Granderson’s theme music as he approached the plate, the Twitterverse went wild.
It didn’t take long for us to find the hilarious video on YouTube of Granderson searching for his perfect song. At the end of the video, when Granderson finally hears “Friday”, he begins to sob, because he’s finally found his song.
The coup de grace for us was when we read in the paper the next day that Granderson had in fact never even heard of the song. His handlers had in fact picked the song recently because of the intense global interest, and layered it in to the video far after the actual video was shot.
In our view, this was per social media genius.
@BronxZooCobra Has Its Charlie Sheen Moment
After escaping on Monday, the Bronx Zoo Cobra established the @BronxZoosCobra feed and amassed over 220K twitter followers in one week, attracting the massive following by tweeting gems like:
Hey @piersmorgan, @jack and @biz, What does a snake have to do to get this account verified?
- Does anyone know if the Whole Foods in Columbus Circle sells organic mice?
- “Dear @CharlieSheen, know what’s better than tiger’s blood? Cobra venom. #winning #snakeonthetown Also I’m 20 inches long. Just sayin’.”).
Despite being found, The Bronx Zoo Cobra continues to tweet.