Facebook Case

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Facebook, Inc. in Transition

Introduction:

It has been almost one year since Mark Zuckerberg decided to take his social media site public. Created on the dream of making the world more open and connected, Mark has devoted the past ten years to making that dream come true. Starting while still in college with a product called Facemash, Mark saw the potential for connecting people through the internet. He has devoted his entire adult life to Facebook which took six years to become profitable. Facebook quickly overtook competitors such as MySpace and became the social square of a global village. The user numbers grew exponentially and soon outnumbered the populations of many countries. The resulting global village was seen as ripe for advertising, profiteering, and soap-boxing. Through the growth, Mark was able to maintain and spread a sense of information democracy. All voices and opinions had equal pull and could reach audiences previously inaccessible. Formerly repressed people had an accessible outlet to outsiders. The simultaneous development of the smartphone industry provided portable and affordable platforms for Facebook everywhere. But what is all of this social capital worth? In 2011 an investor purchased a 1% stake in Facebook for $500 Million, which set Facebook’s net worth at $50 Billion. A year later when deciding to take the company public, Facebook negotiated an IPO price of $38 per share for a total company value of $104 Billion dollars. Many were skeptical that a social media company with few physical assets and no physical products was actually worth over $100 Billion. In fact, Facebook’s IPO was the highest initial value of any newly offered company. Mark himself was uneasy and not openly supportive of the jump to IPO. It was not a strategic business decision but rather a necessity based on the SEC’s rules (Facebook, Inc, 2013). Investors and users alike wondered how Facebook would maintain its dominance in the future, and ensure increasing shareholder wealth. Speculation ran wild that Facebook would begin to charge for its traditionally free service. Mark Zuckerberg had to do massive media campaigns on his own platform to regain control of Facebook’s image. The investors were right to be concerned. Facebook (FB) stock lost 35% percent of its value in the first 10 days of public trade, and to date has not recovered to the initial stock price of $38 per share. Zuckerberg has a history of leaving investors hanging, and even stood up many investors for an entire day in Boston (Gandel, 2012). Mark has more pressure than ever to develop new revenue streams through his Facebook platform to appease shareholders without pushing users away to the ever growing number of competitor social media sites. Mark has stated multiple times that profits are not his primary goal. Now he has to make shareholders happy.

Company & Management:

Facebook headquarters is located in Menlo Park, California. Located in the heart of the US tech world, they are well positioned to attract top talent and stay abreast of all industry occurrences and trends. They have about 10 offices within the United States and more than 20 offices worldwide. Mark Zuckerberg founded Facebook in 2004 and post IPO is Chairman, CEO, and owns 57% of shareholder voting power. Sheryl Sandberg is Chief Operating Officer of the company. Sheryl serves on more than four boards including ONE and the Walt Disney Company. She was formerly the Chief of Staff for the United States Department of the Treasury under the Clinton Administration. She also worked previously as economist for the World Bank. Her responsibilities for Facebook vary from marketing and business development to legalities and human resources for the company (Facebook3, 2013). Facebook’s Chief Financial Officer is David Ebersman. He came from working at Genentech as their Chief Financial Officer and Executive...
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