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Secondary market information makes Facebook worth almost as much as the biggest tech companies
Barely a week after we reported on Facebook’s $35 billion valuation on the secondary market, then based on shares sold by Accel Partners, the social site’s value has skyrocketed to its absolute highest--$50 billion.
Most recently, $40 million in Facebook shares have been reshuffled in auctions on SecondMarket, leaving shares at $20.76 with 1.9 million shares traded. According to the report, 2.5 billion shares are left outstanding (taking into account the 5-1 stock split earlier this year), placing Facebook’s valuation at roughly $50 billion, the highest ever for the private company.
For the sake of comparison, Twitter, which once upon a time was seen as a potential major competitor to Facebook, was last rumored to be raising a new giant round of funding (possibly from Digital Sky Technologies) at a $3 billion valuation. Similarly, Groupon, a DST-funded company (reported to have already been purchased by Google for $2.5 billion), was reportedly looking for new funding at a $3 billion valuation. And the biggest business built on Facebook’s platform, Zynga (a DST-funded company), was last reported to be valued at $5 billion.
Neither of these companies come close in valuation to Facebook, though. Actually, it’s more fun to compare Facebook’s latest valuation to the market caps for the biggest and most successful publicly traded technology companies.
Already left in the dust a week ago was Yahoo, whose plummeting value over the past five years has it now sitting on a $21 billion market cap, less than half of Facebook’s current valuation. Facebook's second market value of $50 billion puts it just past eBay, whose market cap is $39 billion right now.
Four obvious tech companies with higher market cap value are Amazon ($81 billion), Google ($186 billion), Microsoft ($217 billion) and Apple ($291 billion).
The difference between Facebook and these companies? Apple and Microsoft sell computers, Google sells search advertising and Amazon sells, well, everything. What does Facebook sell? The question of how the biggest social network in the world will start making money is not yet settled, neither by advertising nor by Credits, yet apparently many investors on the secondary market seem to have faith in the company’s ambitions.
Here’s the letter reportedly sent out to SecondMarket auction participants:
To All Facebook Market Participants:
Thank you for your feedback and participation in last week’s Facebook auction. As we had hoped, there was robust seller and buyer participation — the auction fully cleared at a per share price of $20.76. In addition, there was overwhelmingly positive feedback on the auction process. As a result, we will be continuing to conduct these auctions for the foreseeable future. For this week, the process will remain reasonably similar, with slight tweaks to the timeline. The reserve price for this week will be $20.60, the same as last week.
If you own shares that you are eligible to sell and wish to participate as a seller, please complete the attached Seller Information Sheet and submit it to SecondMarket at firstname.lastname@example.org by tonight, Monday, November 29th, at midnight EST.
If you would like to participate as a buyer, please complete the attached Buyer Information Sheet and submit it to SecondMarket at email@example.com by Wednesday, December 1st at 12:00 PM EST.
Please see below for more detailed results on last week’s auction and for this week’s auction calendar:
11/22-11/26 Auction Results:
Total Number of Shares Offered for Sale: 1,896,265
Number of Shares Cleared in Auction: 1,896,265
Reserve Price: $20.60
Clearing Price: $20.76
11/29-12/3 Auction Timeline:
· Monday, November 29th at 10:00 AM EST – Auction process commences
· Monday, November 29th at 11:59 PM EST – Seller order forms due
· Tuesday, November 30th at 9:00 AM EST – Buyers informed of share quantity available
· Wednesday, December 1st at 12:00 PM EST – Buyer order forms due
· Wednesday, December 1st at 5:00 PM EST – Participants informed of auction results
· Wednesday, December 1st at 8:00 PM EST – Transaction documentation distributed to buyers and sellers
· Friday, December 3rd at 4:00 PM EST – Completed transaction documentation due from buyers and sellers
· Friday, December 3rd at 7:00 PM EST – Notice to be sent to Facebook, Inc.
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Zynga is the largest social gaming company with 8.5 million daily users and 45 million monthly users. Zynga’s games are available on Facebook, MySpace, Bebo, Hi5, Friendster, Yahoo! and the iPhone, and include Texas Hold’Em Poker, Mafia Wars, YoVille, Vampires, Street Racing, Scramble and Word Twist. The company is funded by Kleiner Perkins Caufield & Byers, IVP, Union Square Ventures, Foundry Group, Avalon Ventures, Pilot Group, Reid Hoffman and Peter Thiel. Zynga is headquartered at the Chip Factory in San Francisco. For more information, please visit www.zynga.com.
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What is Twitter?
Twitter is an online information network that allows anyone with an account to post 140 character messages, called tweets. It is free to sign up. Users then follow other accounts which they are interested in, and view the tweets of everyone they follow in their "timeline." Most Twitter accounts are public, where one does not need to approve a request to follow, or need to follow back. This makes Twitter a powerful "one to many" broadcast platform where individuals, companies or organizations can reach millions of followers with a single message. Twitter is accessible from Twitter.com, our mobile website, SMS, our mobile apps for iPhone, Android, Blackberry, our iPad application, or 3rd party clients built by outside developers using our API. Twitter accounts can also be private, where the owner must approve follower requests.
Where did the idea for Twitter come from?
Twitter started as an internal project within the podcasting company Odeo. Jack Dorsey, and engineer, had long been interested in status updates. Jack developed the idea, along with Biz Stone, and the first prototype was built in two weeks in March 2006 and launched publicly in August of 2006. The service grew popular very quickly and it soon made sense for Twitter to move outside of Odea. In May 2007, Twitter Inc was founded.
How is Twitter built?
Our engineering team works with a web application framework called Ruby on Rails. We all work on Apple computers except for testing purposes.
We built Twitter using Ruby on Rails because it allows us to work quickly and easily--our team likes to deploy features and changes multiple times per day. Rails provides skeleton code frameworks so we don't have to re-invent the wheel every time we want to add something simple like a sign in form or a picture upload feature.
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There are a few ways that Twitter makes money. We have licensing deals in place with Google, Yahoo!, and Microsoft's Bing to give them access to the "firehose" - a stream of tweets so that they can more easily incorporate those tweets into their search results.
In Summer 2010, we launched our Promoted Tweets product. Promoted Tweets are a special kind of tweet which appear at the top of search results within Twitter.com, if a company has bid on that keyword. Unlike search results in search engines, Promoted Tweets are normal tweets from a business, so they are as interactive as any other tweet - you can @reply, favorite or retweet a Promoted Tweet.
At the same time, we launched Promoted Trends, where companies can place a trend (clearly marked Promoted) within Twitter's Trending Topics. These are especially effective for upcoming launches, like a movie or album release.
Lastly, we started a Twitter account called @earlybird where we partner with other companies to provide users with a special, short-term deal. For example, we partnered with Virgin America for a special day of fares on Virginamerica.com that were only accessible through the link in the @earlybird tweet.
What's next for Twitter?
We continue to focus on building a product that provides value for users.
We're building Twitter, Inc into a successful, revenue-generating company that attracts world-class talent with an inspiring culture and attitude towards doing business.