Last year (January 12th, 2011) I posed 5 Questions for Facebook Investors into the then private company Facebook:
1. Facebook (FB) claims 500 million subscribers. How many of these are active users — at least once or twice per week? How many of these are dead accounts, with no activity for 30 days? 90 days or more?
2. What is the average revenue per subscriber? How are you planning to grow this?
3. How much churn does Facebook go through? For every 100 new subscribers, how many subscribers leave?
4. What is the life cycle of the typical Facebook subscriber? How active are they for how long, what sort of arc do they cut across theirFB life cycle?
5. Besides advertising, how will you monetize your user base? Are you selling their data to buyers? What about anonymized data — are you selling this also?
Bonus question: What is the subscriber growth like outside of the US? Where are your fastest growing areas? What area is not seeing big penetration ?
OK, that’s more like 15 question about their users, growth and monetization prospects from a Private Equity/Venture Capital perspective.
Today, on the eve of their Form S-1 SEC filing for an IPO, there are additional questions that are worth asking of a soon to be publicly traded company:
1. What is the IPO offering price going to be? What market capitalization will FB come public at?
2. What are the key pricing metrics? P/E, growth rate, price to book, price to sales?
3. What are FB’s future growth rate? At 800 million users, where do they begin to plateau? Top out?
4. What is FB’s plans for penetrating China?
5. How are the privacy concerns going to be handled? What else might come out of the closer FTC scrutiny of web companies use of personal data?
6. How long are insiders/VCs going to be locked up? Are they committed holding onto shares for the long haul, or are they cashing out at the IPO or as soon as possible thereafter?
The VC money is often called the smart money, where as the public IPO is often the dumb money.
Remember, Google stunned the world during their road show by revealing monstrous revenues and enormous profits. It stunned the analyst community, who had no idea as to how profitable the search giant actually was.
Will Facebook be able to do the same? Can the social media giant monetize users as effectively as Google — we shall soon find out!