Ask HN: Why does Facebook need another $500 million? | Hacker News Reader

Ask HN: Why does Facebook need another $500 million?

20 pointsemilepetrone18 comments

From the MSNBC article, "(FB) said the new money will give Facebook the financial firepower to hire new employees away from competitors, develop new products and perhaps gobble up other companies - all without being a publicly traded company."

Why can't they do all of that now?

View on HN

Here is ticker guy's take on it.

"Facebook: Looking For Bagholders: Don't let it be you."

http://market-ticker.org/akcs-www?singlepost=2337946

I think that they are circumventing SEC regs on 500 of shareholders for privately held companies. GS could sell the stake to HNW but for the SEC it would appear that only GS is a shareholder.

So basically they get away with all the reporting requirement, Sarbanes-Oxley and what have you to tap public markets by going through GS.

Meanwhile GS passes off all the risk to HNW individuals and keeps some nice change for itself.

Frankly as a libertarian I do not see any problem with this. As long as GS does not come back looking for a bailout.

Latest update from John Cassidy (NewYorker) http://www.newyorker.com/online/blogs/johncassidy/2011/01/fa...

At a very modest average value of $70,000 per employee for 3000 employees, that's about 2 years' worth of salaries. That's not a lot of money for FB to spend.

They probably can do all of these things, but not at the rate that they would prefer. This funding round would allow them to speed up efforts by a significant factor.

I also wouldn't be surprised if a lot of the capital is actually used for construction. Every time Facebook signs a new lease, they outgrow it. This may buy a huge plot of land to build their own megacomplex.

I also believe they will use some of the new money to cash out early investors.

Do you think that early investors would want out now with an (Not Confirmed) IPO around the corner?

I think early investors always appreciate taking out a good chunk of their original investment if they can leave it with no downside and all upside

an IPO doesn't necessarily mean the valuation will go higher.

This seems more like a strategic investment. They're obviously partnering with Goldman Sachs for an (eventual) IPO, and the terms were probably good. Why not do it?

Let´s see when the next Web 2.0 FB challenger will come out and then the over $1.5 billion investors have plugged into FB will be gone with the wind :-)

They need it to start sending dozens of "Facebook CDs" to everyone, because that worked so well for AOL.

The strategy took AOL from a mere 200k users to 25million. It worked very very well for AOL. If they hadn't done it they'd likely be yet another long forgotten online services company like Prodigy, CompuServe or Genie.

But instead they're a multi-billion dollar company which everyone here has heard of.

They're not as profitable as they like us to think. I am guessing declining game ad spend and increasing cost from new users in countries that cannot be monetized.

You got it. As an advertiser/agency, US traffic is worth significantly more to me than international traffic, and I'm willing to pay a premium for it. Facebook growth in the US is slowing, and international traffic is not doing well.

In some ways, the Facebook ads ecosystem is a replay of the first .com bust. Ad-supported games are buying ads on other games to get users to click on their ads advertising more games. It's not sustainable at all.

Besides I think that some marketers are discovering that facebook is not that effective at converting users.

At least that is our experience. We are into enterprise software for researchers and though we can target even grad students at universities these grad students are not in the frame of mind to consider enterprise software while checking out profiles on fb.

Google just turns out to be much cheaper to per conversion.

And I think that our experience is not uncommon. If you are doing something cool/trendy/luxury/consumer facing business then may be facebook is for you. For the rest of the market Google is way more effective

I'm building a job board for developers, and Facebook is giving me cheaper conversions than anyone else. But you need to invest the time in building high-performing ads, the current ads we run are performing 50x better than our initial ads. Good ad copy and appropriate demographic choice is critical.

I suspect when a lot of people say they find Facebook ads not being effective, they've just stuck an ad up seen a 0.0001 CTR and given up. Not that I'm complaining, it makes the ads cheaper for me :-)

Facebook could do a lot more to make it easier for advertisers to build high-performing ads, but I suspect they're afraid that it'd mean that the advertisers would end up spending less money of Facebook.

Just to put a number on it Facebook was spending an estimated $50 Million a year just to lease space for its data centers in September (http://www.datacenterknowledge.com/archives/2010/09/16/faceb...).

Assume that more than doubles due to the cost of moving into other countries and their rising userbase. In that context $500 million doesn't even get them to through the IPO (Zuckerberg has said he won't even consider an IPO until 2012 at the earliest)

Again that's just space. Not employees, hardware, etc...

Reply on news.ycombinator.com