Facebook is meeting with banks to discuss the sizing and timing of a potential initial public offering, CNBC’s Kate Kelly reports.
Facebook is also asking the banks it meets with to think about ways in which they can develop new products for Facebook users, perhaps with the help of Facebook Credits.
In these meetings, Facebook makes it clear that it has not necessarily decided to IPO yet, but that it is exploring the move as a strategic option.
Facebook has already announced that it will at least register with the SEC and begin disclosing its financials by this time next year. That does not mean Facebook will have to list on an exchange, however. Internally, an IPO is still regarded as a long-term event that may or may not happen.
The Facebook IPO would be a huge boon to any underwriter, and Facebook execs know it. We can imagine Facebook holding the IPO out as a carrot in order to encoruage banks to experiment with “social” banking products.
It is Mark Zuckerberg’s thesis that Facebook will make most of its money by helping other industriesby “adding social” and then taxing those industries for the privilege. Already, Facebook makes lots of money off of social games this way.
He said as much at the Web 2.0 conference in Silicon Valley last Fall:
“Over the next five years, most industries are going to get rethought to be social and designed around people…A social version of anything can almost always be much more engaging and out-perform a non-social version.
There are going to be some really good businesses built.
Our view is that we should play a role in helping to re-form and re-think all those industries, and we’ll get value proportional to what we put in. In gaming, we get some percentage of the value of those companies through ads and credits. But that’s all because we’re helping them.
If we’re helpful to other industries in building out what would be a good solution then there will be some way we get value from that. “
Facebook generated ~$250 million of net income in the fourth quarter of 2010, two sources briefed on Facebook’s finances tell us.
The company is on track to generate about $2 billion of EBITDA in 2011 (earnings before interest, taxes, depreciation and amortization). One of these sources says Facebook revenues will surpass $4 billion in 2011. That’s an impressive rate, but not as impressive as Google’s first few years:
Last week, private market SharesPost said it sold 150,000 Facebook shares in an auction that valued the company above $70 billion.
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