Zuckerberg's Big Facebook Mistake

http://www.forbes.com/sites/nathanvardi/2012/07/27/mark-zuckerbergs-big-facebook-mistake/

by sampsonjs • 14 years ago

49 29 14 years ago

jfb• 14 years ago

The mistake, if it turns out to be one, was not in shunning capital markets, but rather, building a business that required capital on a scale that only the capital market could provide.

Zarkonnen• 14 years ago

Quite. I think the whole article can be abbreviated to "Facebook large but not very profitable".

bsphil• 14 years ago

Which hasn't been news for years in the first place.

Way to go, Forbes.

bostonscott• 14 years ago

When it came to monetizing search, Google was lucky in that someone else already figured out how to do that (GoTo.com). No comparably effective model exists for monetizing high traffic websites (social media or otherwise), despite many attempts over the past two decades. Not even close.

If Zuck took Facebook public 5 years ago, they would have gotten much less money, and they would have been distracted by investors calling for them to focus on building out that business model rather than attracting users - and Zuck may have lost controlling power in the company (less money + less users = less leverage for Zuck).

cube13• 14 years ago

>If Zuck took Facebook public 5 years ago, they would have gotten much less money, and they would have been distracted by investors calling for them to focus on building out that business model rather than attracting users - and Zuck may have lost controlling power in the company (less money + less users = less leverage for Zuck).

Would this be a bad thing? The entire reason that Facebook needed to go public was because they needed the money to pay off their investors.

AznHisoka• 14 years ago

So who's gonna pay off the public shareholders of FB now? Where's the greater fool?

ramirez60• 14 years ago

That's not why FB went public. They went because they had to...

caycep• 14 years ago

an IPO is an IPO - aside from all the hyperventilating over share price over these first few weeks, Zuck and Co now have raised the capital they need. Let's see how things are in one year. Facebook's long term prospects will be built on the quality of their products, not the jitters of the short term investor.

blurpin• 14 years ago

totally agree with you. One major point of that article was that, had Facebook IPO'd sooner, it would have been better off with the discipline that comes with being a public company. Baloney. I can think of a ton of companies that have manipulated their way under the watchful gaze of Wall Street. this follow up post makes some great counter points:

http://www.forbes.com/sites/tomiogeron/2012/07/27/post-ipo-f...

gojomo• 14 years ago

Facebook is making money and has a giant warchest from the IPO.

The main risk of being public is to employee morale, but the right internal culture/messaging, and (occasionally) option-repricing/reissuing can manage that.

zeroonetwothree• 14 years ago

Most FB employees have RSUs, not options.

momma-joe• 14 years ago

You can have the greatest product in the world, if you don't make money from it the company is worth zilch! stepping out of SV shows these companies what the real world is. You can take that to the bank.

Me1000• 14 years ago

Sure, Facebook had a billion dollars in revenue last quarter.

pooriaazimi• 14 years ago

Only half of it was profit though: http://www.gmanetwork.com/news/story/267151/economy/finance/...

vwoolf• 14 years ago

I stopped reading here: "The roadblocks he faced in building the world’s biggest social-networking company were tiny, like an overdramatized civil lawsuit" and also wished for a "downvote" button. This trivializes what it takes to build a multi-billion-dollar company—any multi-billion-dollar company.

temphn• 14 years ago

  The roadblocks he faced in building the world’s biggest 
  social-networking company were tiny

Nathan Vardi is just completely ignorant. I'm surprised to see something so colossally stupid in Forbes. Say what you will about them, Zuckerberg fended off dozens of competitors (ranging from Myspace to Apple's Ping to now Google itself) to rise to world dominance. Facebook didn't just "happen".

sadga• 14 years ago

I don't know why you are surprised. Forbes is not a reputable publication. It's "People Magazine / US Weekly" for people in the business world. It's not Bloomberg News.

http://www.hnsearch.com/search#request/submissions&q=for...

ramblerman• 14 years ago

The IPO has thus far been a disaster for overy eager investors and maybe that's where the hate from Forbes originates, but the notion that it changes much for Zuckerberg himself is laughable.

"[Facebook] still needed money", is just so wrong. The IPO was about Zuckerberg and close colleageaus being able to cash out a little bit and overcoming the shareholder limit.

I highly doubt it has any impact on his plans for facebook. A pretty poor assesment by a publication like "Forbes"

angersock• 14 years ago

It my be just me, but did anyone else sense a lot of Wall Street/banker/etc. "Heh, look at those adorable little web people, trying to do something?"

To wit: Start-up entrepreneurs cannot evade the discipline of the capital markets any more than can the prime ministers of Spain and Italy.

Honestly? Isn't that a bit self-congratulatory? How about places like Barclays--can they evade the discipline?

jusben1369• 14 years ago

There's a little hyperbole and overly simplified statements in here but this article really hit the nail on the head. Zuckerberg missed the most explosive part of his curve to go out by waiting so long. He took onboard investors who did not push the company - they knew they were good for a great exit no matter what. Now he's going to end up with low morale and scrambling to mature the platform.

He danced with the Devil and right now the Devil is up on points going into the 7th round.......

InclinedPlane• 14 years ago

Mistake?

For Facebook investors perhaps. But not for Zuckerberg. He gamed the IPO system like a champ, extracting far more hard cash from investors and financial institutions than he should have been able to based on the fundamentals of his company.

Consider. Here's this company that is nominally a "publicly traded corporation" that still has over 50% of the stock in one person's hands, Zuck. And it's sitting on a pile of many billions of dollars of cold hard cash (representing well over a decade of potential accumulated profits at present levels). All of the early investors and employees have cashed out to the tune of millions or even billions per person. Meanwhile, Facebook is using its corporate cash hoard to buy up competitors and fill out the empire.

They played this game remarkably. They played the banks, they played the financial analysts, they played the investors. They've got theirs and they are far more secure of a company than they were before the IPO.

ruggeri• 14 years ago

Where was the content here? What was the point of this article? It's a bunch of cobbled together nonsense with no logical flow.

Pardon someone grumpy to be up early on a Saturday, but please don't post things that make no damn sense.

Zuckerberg's Big Facebook Mistake

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