Archive for May 19th, 2012
EA’s Origin is jumping on the Kickstarter bandwagon – no, not by Kickstarting an EA game (that would be hilarious) but instead, by presenting itself as an ally to crowd-funded games.
EA announced today that it will waive distribution fees for crowd-funded games for 90 days after launch. The offer is extended only to “fully-funded, complete and ready-to-publish games designed for digital download to PC platforms.” InXile’s Brian Fargo and Pinkerton Road’s Jane Jensen voiced their support in the press release.
“The public support for crowd-funding creative game ideas coming from small developers today is nothing short of phenomenal,” said Origin SVP David DeMartini in the announcement. “It’s also incredibly healthy for the gaming industry. Gamers around the world deserve a chance to play every great new game, and by waiving distribution fees on Origin we can help make that a reality for successfully crowd-funded developers.” EA also gets a nice patina of indirect indie cred by supporting Kickstarted games.
NEW YORK: After all the hype, Facebook’s first day as a public company ended where it began. Its stock closed at $38.23, up 23 cents, after pricing Thursday night at $38 per share.
After an anxiety-filled half-hour delay, its stock began trading on the Nasdaq Stock Market for the first time as investors were finally able to put a dollar value on the company that turned online social networking into a global cultural phenomenon.
The stock opened at 11:32 a.m. at $42.05, but soon dipped to $38.01. By noon, it was up again at $40.40, a 6 percent increase. It fluttered throughout the afternoon, but it never hit the double-digit jump that many Facebook-watchers had expected. By the end of the day, more than 500 million shares had changed hands
The closing price means Facebook is worth about $105 billion, more than Amazon.com, McDonalds and storied Silicon Valley icons Hewlett-Packard and Cisco. But as many people looked for a big first-day pop in Facebook’s share price, the single-digit increase was somewhat of a letdown.
“It wasn’t quite as exciting as it could have been,” said Nick Einhorn, an analyst with IPO advisory firm Renaissance Capital. “But I don’t think we should view it as a failure.”
Indeed, the small jump in price could be seen as an indication that Facebook and the investment banks that arranged the initial public offering priced the stock in an appropriate range. It’s also a supply and demand issue. Facebook offered nearly 20 percent of its available stock in the IPO, so there was enough to meet demand. In comparison, Google offered just 7.2 percent of its stock when it went public in 2004, and rose 18 percent on day one.
To IPOdesktop’s Francis Gaskins, it means mom-and-pop investors are becoming “much more educated and careful” about not buying into hype. And he said that the banks taking Facebook public have learned from the 10 IPOs of social media companies in the past year and are better able to gauge how much stock to make available in an initial offering.
It might not have been possible for the social network to live up to the hype that led up to its IPO. It’s Facebook, after all, a place where people are emotionally invested in endless online diversions and rekindled friendships, an endless depository of baby photos, favorite songs and fleeting memories.
“It’s probably one of the first times there has been an IPO where everyone sort of has a stake in the outcome,” said Gartner analyst Brian Blau. While most Facebook users won’t see a penny from the offering, they are all intimately familiar with the company.
his signature hoodie, he pushed the button that signals the opening of the stock market in New York. The morning’s events followed an all-night “hackathon” at the company, where engineers stayed up coding software and conjuring up new ideas for Facebook and its 900 million users.
“Right now this all seems like a big deal. Going public is an important milestone in our history. But here’s the thing, our mission isn’t to be a public company. Our mission is to make the world more open and connected,” Zuckerberg said. “In the past eight years, all of you out there have built the largest community in the history of the world. You’ve done amazing things that we never would have dreamed of and I can’t wait to see what you guys all do going forward.”
Afterward, employees tried to get back to business as usual, building the company under immense new pressure to meet shareholders’ expectations. To remind everyone not to get caught up in the hoopla, Facebook’s employees were given t-shirts that read “Stay focused & keep hacking.”
On Thursday, Facebook and the investment bankers settled on a price of $38 per share. The company and its early investors raised $16 billion in the offering, which valued Facebook at $104 billion. That makes Facebook the most valuable US company to ever go public.
Now, the stock market will begin assigning a dollar value to Facebook that will rise and fall with investor whims. It will be subject to broad economic forces and held accountable for profit it earns, or loses, from one quarter to the next.
But Facebook is one a rare companies whose IPO transcends Wall Street’s money lust. It is a cultural touchstone for the way technology reshapes our lives. Since its start as a scrappy network for college students, Facebook has come to define social networking by getting people around the world to share everything from photos of their pets to their deepest thoughts.
It has done so while becoming one of the few profitable Internet companies to go public recently. It had net income of $205 million in the first three months of 2012, on revenue of $1.06 billion. In all of 2011, it earned $1 billion, up from $606 million a year earlier. That’s a far cry from 2007, when it posted a net loss of $138 million and revenue of $153 million. The company makes most of its money from advertising. It also takes a cut from the money people spend on virtual items in Facebook games such as “FarmVille.”
Facebook’s public debut marks a new milestone in the history of the Internet. In 1995, Netscape Communications’ IPO gave people their first chance to invest in a company whose graphical Web browser made the Internet more engaging and easier to navigate. Its hotly anticipated IPO lit the fuse that ignited the dot-com boom. That explosion of entrepreneurial activity and investment culminated five years later in a devastating bust that obliterated the notion that the Internet had hatched a “new economy”.
It took Google’s IPO in 2004 to prove that an Internet company with a disruptive idea could be profitable. In the process, the Internet search leader is forcing other industries to adapt to a new order where people have come to expect to be able to find just about anything they want by entering a few words into a box on any device with an Internet connection.
Facebook’s IPO heralds a new phase of the Internet’s evolution. This social era makes connections among people as important as Google’s massive index of Web links. Still, the IPO will raise new pressures for Facebook to generate more revenue, perhaps by digging further into the trove of revealing information that people share on the network to sell even more targeted ads.
The IPO almost certainly will enrich other up-and-coming entrepreneurs as Zuckerberg uses the company’s cash and stock to buy other startups in an effort to being in other talented engineers and promising technology. That’s what has been doing for years. Since it went public in 2004, Google has spent $10.2 billion buying nearly 200 other companies. Those figures don’t include Google’s still-pending $12.5 billion acquisition of cellphone maker Motorola Mobility Holdings Inc., which is still awaiting regulatory approval in China.
Zuckerberg’s biggest deal so far came when he agreed to buy Instagram, a maker of a popular mobile app for photos, for $1 billion. Because most of the deal is being paid for in stock, Instagram is already getting richer. Based on the $38 price for Facebook’s stock, Instagram is in line to receive nearly $1.2 billion.
Though Zuckerberg rang the Nasdaq opening bell from California, people outside the stock market in Times Square snapped photos of a big blue Facebook sign that lit up the building. Some of them used their smart phones to check in to the Nasdaq on Facebook. Frederick Nolde, who was visiting from Richmond, Virginia, said he bought 100 shares through the online brokerage eTrade.
He thinks the company is worth $100 billion. “I think Google is a good comparison and it’s worth $200 to 300 billion. The real question is how they do in mobile. If they can figure that out they’ll do well.”
In Menlo Park, some mourned the one that got away. Venture capitalist Mark Siegel visited Facebook’s headquarters to ponder. Like many of his fellow tech startup investors with offices a short drive from Facebook on Silicon Valley’s famed Sand Hill Road, Siegel said he had chances to back Facebook early on but didn’t.
He said at the time, when competing social networks like Friendster and MySpace still had clout, it wasn’t clear that Facebook would come out on top. “In hindsight, any price would have been a good price to pay,” said Siegel, a managing director at Menlo Ventures. There’s still time. Bruno del Ama, the CEO of asset management firm Global X Funds, is waiting until Thursday, to get in on Facebook.
“On the first day you see a tremendous amount of volatility,” he said. In three days, short-sellers will be able to sell the stock, he added, so by day five, investors should see more stability. Global X has a fund focused on social media stocks, and del Ama expects “significant growth” in the sector in the coming decade. Facebook, right now, is the crown jewel of the space. And it’s likely here to stay, by virtue of its position.
“Once companies have built a network, it’s really difficult to displace them,” del Ama said, adding that while massive companies such as Google are trying to compete with Facebook, and may have better technology, “we care about where our friends are.”
Facebook has raised at least $16 billion with its initial public offering. It puts the value of the company at $104 billion, making founder Mark Zuckerberg one of the world’s richest men: he is worth $19 billion, not counting his hoodies.
It is easy to see signs of the crazed fever that had built up a tech bubble at the turn of the century, which valued America Online several times as much as Time Warner, only to see the valuations fall to reflect real earnings once the bubble burst and rational thought replaced euphoria.
The seeming lack of avenues for profitable deployment of lots of liquidity in most parts of the developed world certainly helps drive the demand for a piece of what promises to be future prosperity, and Facebook shares are likely to go up in the near term. But it is unlikely that its share price would not face a correction, once revenue growth fails to catch up with the feverish pace implicit in the company’s valuation.
This will not take away the huge war-chest the IPO has handed the company. Nor will it disappoint the venture capitalists who funded Facebook and now exit in style. The Facebook IPO success will boost creativity in three different ways.
One, the riches to be had from funding the right start-up will entice angel and venture investors to mediate capital to fund innovation as never before, across the world. Two, the number of tech-savvy youngsters who wish to try their hand at entrepreneurship would shoot up.
Three, with a host of small and large investors to answer to, Facebook would be under pressure to boost revenues, and seek to create new revenue-generating applications on its platform. It can use the money to both fund in-house research and to buy up companies and products that make creative use of the Facebook ecosystem.
At the societal level, the gap between digital natives and the rest will widen ever more.
The Facebook IPO, complete with its tech-to-riches storyline and new impetus to creativity, makes it all the more imperative that governments around the world invest in policy and infrastructure to make high-speed broadband ubiquitous and affordable. That imperative has a cutting edge in a poor country such as ours.