GSV Capital: Facebook

Investment Portfolio
Facebook

Why we like Facebook

Percent of GSV Portfolio: 20%

About

Facebook is the largest social networking platform in the world with close to 1 billion users and more than 430 million mobile users, which grew 76% in 2011. The Company experienced a user growth rate of 71% in 2010 and the site makes up 30% of global Internet users. Facebook's web traffic accounts for every 10th click on the web and the platform itself covers a variety of areas: gaming, daily deals, virtual goods, video, music, fan pages, et al. Facebook is clearly the most powerful global social networking platform today.

Thesis

Facebook has created one of the most important and impactful global communication and collaboration platforms. Huge network effects and engagement drive enormous monetization opportunities.

People

Mark Zuckerberg, Founder and CEO, has a very strong vision and has executed impressively. He has earned the reputation as a rising business leader much like the younger Steve Jobs or Bill Gates. Facebook has been focusing on long term growth rather than short term monetization and the company has been hiring best-in-class talent.

Key Board Members:

Reed Hastings
Marc Andreessen
Peter Thiel

Management Team

Sheryl Sandberg, COO: Prev. VP of Global Sales at GOOG; Chief of Staff at Treasury
Bret Taylor, CTO: Co-founder of FriendFeed, Creator of Google Maps
David Ebersman, CFO: Prior CFO at Genentech; prior analyst at Oppenheimer

Product

Facebook is the largest platform for user data generation and intelligence. It now competes with Google for ad revenues and is starting to pull ahead in terms of user intelligence because of the magnitude and quality of its user data. It's also a go-to platform for game developers like Zynga through its API. Facebook content include news, fan pages, daily deals -all products that are becoming important for future monetization. Facebook is closing on 1 billion users worldwide, up from 500 million two years ago. It has enormous traffic, with its page views accounting for 25% of all traffic in the U.S.

Potential

Facebook has the potential to be a very large and exceptionally profitable company because it has created the modern global social communication and collaboration platform. This is a true network effect model that is enjoying impressive growth. Revenue from the revamped ad platform is supporting company efforts to become a dominant player in video, music, education, and mass communication. Facebook has achieved critical mass and it is poised to become the market leader in many related social media applications.

Megatrends

Internet
Knowledge
Social
Globalization
Branding
Convergence

How Big Can This Be?

Impressive growth potential within the next 3-4 years by being the global communication and collaboration platform and the go-to channel for advertisers, consumer products, education, information analytics, etc.

Predictability

The Company has a very strong advertising platform with revenues more than doubling from prior year. Operating margins are expanding. Revenue sharing through its API is expected to be 30-40% in many cases.

Risks

Facebook could potentially face privacy issues and changes in government policy regarding privacy. Also, competition from incumbents such as Google (e.g., Google Plus) and alternative social networking sites represent ongoing threats.

Learn more about GSV's Four Ps Growth Investing Framework

% of GSV figures are based upon the fair value of each holding as of March 31, 2013, or the cost basis of the holding (exclusive of transaction costs) if the investment closed subsequent to March 31, 2013. In either case, these values are divided by the net assets of GSV Capital as of March 31, 2013.

Facebook: Featured Content

Facebook: News Feed

Facebook News

Jun 14, 2013

Facebook Will Launch A News Reader At June 20th Press Event

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Jun 12, 2013

Facebook Announces Searchable Hashtags, Promises More Features For Following Public Conversations

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Jun 11, 2013

At Facebook Shareholder Meeting, Zuckerberg Stands Behind His Initial PRISM Denial

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Jun 11, 2013

Yep, Facebook Ads Are Better With Social Context (According To A Salesforce ‘Benchmark’ Report)

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Jun 9, 2013

Facebook’s New Colocation And Image Recognition Patents Tease The Future Of Sharing

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Jun 7, 2013

Following Google’s Lead, Zuckerberg Says Facebook Isn’t Giving Govt “Direct Access” Either

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Jun 6, 2013

Facebook Home Gets A Much Needed Dock To Keep Your Favorite Apps Close

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Jun 6, 2013

Facebook To Simplify Ad-Buying Process By Eliminating Half Of Its 27 Ad Units

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Jun 4, 2013

Facebook To Webcast Its First-Ever Stockholders Meeting June 11th

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Jun 3, 2013

Facebook Messages Just Went Down For 90 Minutes For Some Web And Mobile Users, Back Now

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