Originally published in Spanish in the Mexican edition of Fortune Magazine:
Facebook, ¿el usuario tiene la razón?
Translated with AI.
Secondary markets are usually an excellent option for those looking to bid on a certain company that isn’t publicly traded to become the next blue chip – in other words, the next Apple or the next Google.
According to a New York Times report, Goldman Sachs could have invested $450 million in Facebook, Inc. in order to offer its wealthier clients the opportunity to add these shares to their secondary market portfolios.
This is interesting because the company, founded in February 2004, is the most successful social network in the world, today with a post-money valuation estimated at $50 billion. It managed to grow and position itself above those who were at the time industry leaders. We compare it to Yahoo! (NASDAQ: YHOO), for instance, whose current market cap is $21.83 billion, less than half the valuation of Facebook, or eBay (NASDAQ: EBAY) with a market cap of $37.39 billion, or even Dell (NASDAQ: DELL) at $26.43 billion. All of this is done outside of markets, with private capitalization and against many expert analysts driven around Manhattan in Town Cars. And the thing is that Facebook, like Google in its time, was criticized for an allegedly unviable business model and a strategy that would soon die out.
Google and Facebook, however, have something very strong in common, something that analysts, investors, and bankers sometimes do not like so much, and that is the total focus on the user, much before focusing on profitability, revenues, etc. Yes, it is true, money is very important for businesses, but new trends dictate that schools in Cambridge, New Haven, Pennsylvania, among others must reconsider their theories in the face of the dilemmas that Google, Facebook, and surely soon Twitter will show.
The user is the one who now commands, who gives feedback, and who fills any company with content, information, dynamism, traffic, and financial potential, especially the dot-coms and beyond them, the ones that manage social media. Google broke paradigms, removed display advertising from its service, listened to the user, and integrated search advertising, which is permissive, non-intrusive, focused, and minimalist. It listened to the advertiser, – its client -, and it democratized access to advertising on the giants, opened new horizons and possibilities for advertising, removed the term CPM from its commercial dictionary, and replaced it with CPC. At the time, it was said and thought that this would be the company’s biggest mistake and that it would bankrupt to giant Yahoo!
And what did Facebook do? It also spoke to its user, created a user-multiuser communication medium, integrated people’s greatest needs into a technological platform, and made it public little by little, it exploited the ego and the need for acceptance and relationships among people. It survived losses for years and finally managed to exploit the enormous traffic, user base, applications, services, biases, and user behavior patterns. That is why Facebook is worth so much today.
That’s why it entered the secondary market, and for the same reason, it has not yet entered the stock market. However, I do not rule out that Facebook is already preparing its IPO on NASDAQ and that it will soon start its roadshow. It will be interesting to see the opening price of the share, the initial offer, and how quickly its value will shoot up in the premarket and during the day. Facebook has a tough time if it’s about competing for first place. Google (NASDAQ: GOOG) has a market capitalization of $193.26 billion and an estimated stock value growth of 15% for the next 12 months. We’ll see what happens.