Twitter’s recently announced capability to filter out tweets on a country-by-country basis is not a means of proactively censoring content, CEO Dick Costolo said on Monday evening at the “Dive Into Media” conference hosted by All Things D.
The micro-blogging site garnered backlash from users last week over the announcement that it is now able to block tweets that run afoul of certain countries’ restrictions on speech. The new policy will simply allow the company to transparently deal with valid government requests to remove certain content, Costolo said.
“This is purely a reactive capability, we don’t proactively go do anything,” he said.
When the company is issued a legal takedown order, it will now be able to withhold that content from users in that specific country, while keeping it available to others.
“There has been no change in our stance or attitude or policy with respect to content on Twitter,” Costolo said. He added that Twitter believes “this is the most honest, transparent, and forward-looking way for a company to deal with the myriad of complex issues around the world that you experience when you have to operate in these countries.”
Twitter needs to have such a policy to operate in certain countries, Costolo said. The move is not an attempt, however, to expand Twitter into China, where the social media site is currently blocked.
“I don’t think the current environment in China is one which we think we could operate,” he said. “We would love for people in China to be able to use Twitter the way we want them to be able to use it, which is speaking freely and letting their voices to be heard by as many people around the world as possible, we would love that.”
During the interview, Costolo also touched on a range of other topics, including the company’s stance on a future initial public offering and Twitter’s role in the 2012 election.
“I really think 2012 is going to be the Twitter election,” he said.
Almost all the Republican presidential candidates have used Twitter’s suite of advertising products. Lawmakers are also actively engaging in a “real-time feedback loop” on the site. And during President Obama’s State of the Union address, there was a “collective groan” on Twitter when he made a joke about spilled milk.
“Candidates that don’t participate on Twitter while the conversation is happening will be left behind,” Costolo said. “Tomorrow morning will be too late to react to what was said the day before.”
Meanwhile, he added that it will be “fascinating” to see if Facebook files papers for an initial public offering this week, as it is expected to do, but Twitter is focusing on its own goals, not what its rival is doing.
“We are going to be really patient about the way we build the business,” he said. “We are trying to build a decades-long, lasting business.”
Costolo hinted that Twitter will also likely need to go public at some point, but said he is not worrying about that right now. Asked directly whether there is going to be an IPO for Twitter in the future, Costolo went quiet for several seconds before saying “I choose not to answer that question.”
For more, see Before Facebook: A Look Back at Major Tech IPOs.
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Article source: http://www.pcmag.com/article2/0,2817,2399619,00.asp
BY SHAYNDI RAICE
Facebook Inc. is widening its lead in the online display-advertising market, just days ahead of an expected filing for an initial public offering.
The social network’s share of the U.S. display ad market—or banner advertisements on the Internet—grew to 27.9% for 2011, compared with 21% a year earlier, according to new data released Monday by research firm comScore Inc.
That puts Facebook far ahead of its closest competitor, Yahoo Inc., which had 11% of the display-ad market, up only slightly from 10.9% in 2010. Trailing far …
Article source: http://online.wsj.com/article/SB10001424052970203920204577193361056850828.html
Facebook’s new “Timeline” profile page, which will become mandatory for all users within the next few weeks, is driving away “friends” just when the social networking giant wants to attract investors as it plans to go public.
Sophos, a British network security company with offices in Burlington, polled 4,100 Facebook users and more than half said they were worried about Facebook’s latest unpopular change, Timeline, which arranges your old posts into a chronological scrapbook, perhaps unearthing memories you’d like to forget. The author of the poll, Sophos’ Graham Cluely, said in a blog post he had already deleted his Facebook account. That’s bad news for a company planning to file for a multibillion-dollar initial public offering on Wednesday.
“Here’s the problem with Facebook,” said Todd Van Hoosear of Cambridge-based marketing firm Fresh Ground. “It’s not that you’re sharing too much, it’s that your friends are sharing too much.”
Van Hoosear said he likes Timeline, but a friend of his quit Facebook because he was uncomfortable with how much information the site could gather even if you didn’t update your profile yourself, because “friends” tag you in photos or mention you in posts. Van Hoosear added that every now and then Facebook’s massive trove of personal information gives him pause.
“My life didn’t start when I signed up for Facebook,” he said.
Emerson College marketing professor David Gerzof Richard likes Timeline for its clean design, but said Facebook’s big changes often freak out users. On the other hand, he said, there aren’t a lot of alternatives.
“People get bent out of shape and say they’re going to quit, and a couple of people do,” he said. “But where are they going to go? It’s the only game in town.”
From the time you opt into Timeline at facebook.com/timeline, or after Facebook does it for you, you’ll have a week to clean up your image, deleting all those embarrassing photos and crazy rants. For some, that’s plenty of time.
“I only needed about five minutes,” Gerzof Richard said. “It’s not brain surgery.”
Article source: http://bostonherald.com/business/technology/general/view/20220131timing_is_everything_facebook_users_wary_of_new_feature_as_social_network_gears_up_to_go_public
— Zynga Inc., developer of online games, first day of trading on Dec. 16, 2011
Pricing: $10 per share
First-day close: $9.50, down 5 percent from IPO price
Monday’s close: $10.39, up 4 percent from IPO price
Trading range since IPO: $7.97 to $11.50
— Jive Software Inc., creator of tools to run social networks for businesses, first day of trading on Dec. 13
Pricing: $12 per share
First-day close: $15.05, up 25 percent from IPO price
Monday’s close: $14.84, up 24 percent from IPO price
Trading range since IPO: $14.18 to $16.86
— Angie’s List Inc., consumer-reviews site, first day of trading on Nov. 17
Pricing: $13 per share
First-day close: $16.26, up 25 percent from IPO price
Monday’s close: $14.74, up 13 percent from IPO price
Trading range since IPO: $10.77 to $18.75
— Groupon Inc., online deals company, first day of trading on Nov. 4
Pricing: $20 per share
First-day close: $26.11, up 31 percent from IPO price
Monday’s close: $19.63, down 2 percent from IPO price.
Trading range since IPO: $14.85 to $31.14
— Pandora Media Inc., Internet radio company, first day of trading on June 15
Pricing: $16 per share
First-day close: $17.42, up 9 percent from IPO price
Monday’s close: $13.66, down 15 percent from IPO price
Trading range since IPO: $9.15 to $26
— LinkedIn Corp., online professional network, first day of trading on May 19
Pricing: $45 per share
First-day close: $94.25, more than double IPO price
Friday’s close: $75.11, up 67 percent from IPO price
Trading range since IPO: $55.98 to $122.70
— Demand Media Inc., online content publisher, first day of trading on Jan. 26, 2011
Pricing: $17 per share
First-day close: $22.65, up 33 percent
Monday’s close: $6.73, down 60 percent from IPO price
Trading range since IPO: $5.24 to $27.38
Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Article source: http://www.washingtonpost.com/business/with-facebooks-expected-ipo-nearing-a-look-at-how-other-ipo-stocks-have-fared/2012/01/31/gIQAybUHeQ_story.html
Last updated at 1:08 PM on 31st January 2012
Two British tourists were barred from entering America after joking on Twitter that they were going to ‘destroy America’ and ‘dig up Marilyn Monroe’.
Leigh Van Bryan, 26, was handcuffed and kept under armed guard in a cell with Mexican drug dealers for 12 hours after landing in Los Angeles with pal Emily Bunting.
The Department of Homeland Security flagged him as a potential threat when he posted an excited tweet to his pals about his forthcoming trip to Hollywood which read: ‘Free this week, for quick gossip/prep before I go and destroy America?’
Leigh Van Bryan was due to go to Los Angeles with his friend Emily Banting but was stopped when he arrived in the U.S. over tweets he had sent
Offending tweet: Mr Bryan told security officials that ‘destroy’ is slang for party in the UK, but that was not enough to convince them
After making their way through
passport control at Los Angeles International Airport (LAX) last Monday
afternoon the pair were detained by armed guards.
Despite telling officials the term
‘destroy’ was British slang for ‘party’, they were held on suspicion of
planning to ‘commit crimes’ and had their passports confiscated.
Leigh was also quizzed about another
tweet which quoted hit US comedy Family Guy which read: ’3 weeks today,
we’re totally in LA p****** people off on Hollywood Blvd and diggin’
Marilyn Monroe up!
Federal agents even searched his
suitcase looking for spades and shovels, claiming Emily was planning to
act as Leigh’s ‘look out’ while he raided Marilyn’s tomb.
Bar manager Leigh, from Coventry, and
Emily, 24, from Birmingham, were then quizzed for five hours at LAX
before they were handcuffed and put into a van with illegal immigrants
and locked up overnight.
They spent 12 hours in separate
holding cells before being driven back to the airport where they were
put on a plane home via Paris.
Leigh, an Irish national, and Emily arrived at Birmingham Airport last Wednesday afternoon.
Emily said: ‘The officials told us we
were not allowed in to the country because of Leigh’s tweet. They
wanted to know what we were going to do.
‘They asked why we wanted to destroy America and we tried to explain it meant to get trashed and party.
‘I almost burst out laughing when they asked me if I was going to be Leigh’s lookout while he dug up Marilyn Monroe.
‘I couldn’t believe it because it was a quote from the comedy Family Guy which is an American show.
As a result of this message, the pair’s luggage was searched for spades
‘It got even more ridiculous because
the officials searched our suitcases and said they were looking for
spades and shovels. They did a full body search on me too.
‘We just wanted to have a good time on holiday. That was all Leigh meant in his tweet. He would not hurt anyone.’
Leigh posted the tweet on January 16 before the pair flew to LA last Monday.
Leigh said: ‘It’s just so ridiculous
it’s almost funny but at the time it was really scary. The Homeland
Security agents were treating me like some kind of terrorist.
Paperwork handed to Mr Van Bryan confirms that he was questioned by the Department for Homeland Security before entry to the U.S. was denied
‘I kept saying to them they had got
the wrong meaning from my tweet but they just told me “you’ve really
f***** up with that tweet boy”.
‘When I was in the van I was handcuffed and put in a cage. I had a panic attack but the worse was yet to come.
‘When we arrived at the prison I was
shoved in a cell on my own but after an hour two huge Mexican men
covered in tattoos came in and started asking me who I was.
‘They told me they’d been arrested for taking cocaine over the border.
‘When the food arrived on the tray they took it all and just left me with a carton of apple juice.’
After 12 hours in custody they
returned to the airport where they were handed documents which stated
they had been refused entry to the US.
Emily’s charge sheet stated: ‘It is
believed that you are travelling with Leigh-Van Bryan who possibly has
the intentions of coming to the United States to commit crimes.’
Leigh’s charge sheet, alongside a
police mug shot and finger print, added: ‘He had posted on his Tweeter
website account that he was coming to the United States to dig up the
grave of Marilyn Monroe.
‘Also on his tweeter account Mr Bryan posted that he was coming to destroy America.’
Leigh and Emily have now been told they must apply for visas from the US Embassy in London before flying to the US again.
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Here’s what other readers have said. Why not add your thoughts,
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The comments below have not been moderated.
I don’t know why people still bother going to the US. First we just needed visas (= 5 hour wait at the embassy, verification of school attendance, employment, income…), now they want our fingerprints, retina scans and whatnot. There are so many more beautiful and interesting countries to see, so just leave those rotten self-obsessed fools to bother their own in their little enclave with their silly laws, suspicions and almighty police force. Who needs them anyway.
DONALD TRUMP 2012!
I am British, moved here from London, ever heard of the IRA and their Explosives?
I am afraid I am on the side of US Security!!
in the 90-s lots of Russian specialists immigrated to USA. that explains, why US security policy turns into f**g KGB-style .
there’s an old canonic Solvet Union joke:
On the CPSU party meeting, Rabinovich raises up:
- I don’t ask, where is our freedom. I’m asking where is our MEAT?
on the next meeting, guy called Shapiro, asks for a talk:
- I don’t ask were is our freedom… i even don’t bother you, where is meat. i ask you, where is Rabinovich?
Apologies to the British..but stupidity is practiced World Wide….
These two twits should be jailed just for the fun of watching “dumb” work so well…
The land of the free? Right. A lot of time could have been avoided with the use of urbandictionary and YouTube.
The DHS agents should realize that it isn’t possible for one person to destroy America, and even if it was, the criminal masterminds behind such a plot would be highly unlikely to announce their intentions publicly in advance using their own names. These facts alone ought to have clued them in to the possibility that comments sandwiched between masses of typical Twitter light-hearted banter might themselves have been typical Twitter light-hearted banter.
Of course the point is moot since even if some super-villain wanted to do it and was in possession of the vast resources required, it simply isn’t possible to destroy something which is already destroyed. America is already destroyed, and the DHS agents themselves are just one of the many prominent signs of that destruction.
Hans Gruber I suspect being of German descent you hate the UK so don’t try to pretend most Americans don’t like us: it is just the likes of you Herr Gruber
- German follower, London, 30/1/2012 22:13=======Hahahaha. Excellent stuff. You’ve really made my day German follower. You’re not terribly bright, are you? I’d advise you to re-read my post. I didn’t say most Americans disliked the Brits, I was referring to past (and present) British governments who had deluded themselves into believing that both countries really did have an extra special relationship. Regardless of how many times the US proved this to be untrue. America comes first. ALWAYS. I know it hurts, but it’s a fact. I remember (with laughter), when Obama referred to Sarkozy as a special friend. There were so many wounded and jealous responses from countless Brits. It was embarrassing.
By the way, I haven’t got a drop of German blood in me. Just sitting here waiting for John McClane to release my detonators.
Everything harrps back to 911 doesn’t it? And yet there are so many unanswered questions regarding it.
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Article source: http://www.dailymail.co.uk/news/article-2093796/Emily-Bunting-Leigh-Van-Bryan-UK-tourists-arrested-destroy-America-Twitter-jokes.html?ito=feeds-newsxml
King Bhumibol Adulyadej … Thai authorities monitor the internet 24 hours a day for material deemed offensive to the monarchy. Photo: AP
BANGKOK: Thailand has become the first government to publicly endorse Twitter’s controversial decision to censor messages in certain countries.
Twitter announced last week it would permit country-specific censorship of content that could violate local laws, prompting debate worldwide over freedom of speech.
In Thailand, where censorship laws are already heavily enforced, the information and communication technology minister, Jeerawan Boonperm, called Twitter’s decision a “welcome development” and said the ministry already received “good co-operation” from internet companies such as Google and Facebook.
The Thai government would soon be contacting Twitter to “discuss ways in which they can collaborate”, she told the Bangkok Post.
In China, the state-run Global Times also endorsed the new rules: “It is impossible to have boundless freedom, even on the internet and even in countries that make freedom their main selling point,” it said.
Twitter is blocked in China, but many users access the site by accessing external networks.
According to the regulations, a tweet from Thailand could be blocked at the request of an individual, a company, or the government. However, while it will be invisible to users in Thailand, the tweet can still be seen by users in other countries.
Thailand has some of the toughest censorship laws in the world, ranking it 153 out of 178 in Reporters Without Borders’ 2011 Press Freedom Index. Thailand’s lese-majeste regulations inhibit defamatory, insulting or threatening comments about the royal family, which are punishable by up to 15 years in prison, but under Thailand’s 2007 computer crimes act prosecutors have been able to increase sentences.
Last year, a 61-year-old Thai national was jailed for 20 years for sending defamatory text messages about the monarchy, while a Thai-US citizen received a two-and-a-half year prison sentence for translating a banned biography of the king.
While the information ministry has blocked thousands of websites in recent years – mostly related to online gambling, pornography and lese-majeste cases – this week’s endorsement comes at a time of heightened tension over censorship rules.
A lese-majeste monitoring centre was opened in December and is manned 24 hours a day by staff trawling the net for offensive material. Facebook users already face potential jail time if they click “like” or “share” on any sites deemed offensive to the monarchy, while anyone sending a link, forwarding or revisiting websites with lese-majeste content also need beware, authorities have said.
Despite open and repeated calls for relaxed censorship laws, Yingluck Shinawatra last week said the monarchy should be respected and vowed to “protect the institution, not exploit it”.
Thailand’s endorsement could have profound ramifications across the region, said Sunai Phasuk of Human Rights Watch Thailand, while it already “adds more damage to an already worrying trend in Thailand”.
“Twitter gives space to different opinions and views, and that is so important in a restricted society – it gives people a chance to speak up,” he said. “But if this censorship is welcomed by Thailand, then other countries, with worse records for human rights and freedom of speech, will find that they have an ally.”
Guardian News Media
Article source: http://www.smh.com.au/technology/technology-news/thailand-backs-twitter-censorship-20120131-1qqub.html
BY GEORGE STAHL
DANA POINT, Calif. — Twitter’s recently announced censorship policy was meant to be a transparent way to handle government requests for the removal of certain content, not a signal that the message site was proactively monitoring its “tweets,” Chief Executive Dick Costolo said.
Twitter touched off a torrent of criticism after announcing last week it can remove messages from the online service–known as tweets–within specific countries if asked to do so. Monday, Mr. Costolo said the policy was designed for the company to exist in certain countries, not as a means of censorship.
“There’s been no change in our stance …
Article source: http://online.wsj.com/article/SB10001424052970204740904577194021894304072.html
Ahead of its Facebook’s rumored filing for an initial public offering (IPO) this week, the company has seen both bad news and good news. This is more of the latter. It appears Facebook is widening its lead in the display advertising: more than 1 in 4 of all U.S. display ads are from the social networking giant.
More specifically, Facebook’s captured 27.9 percent of the U.S. display advertising market in 2011. It had just 21 percent a year earlier, according to comScore. Facebook surpassed Yahoo in its share of display ads in 2009. Now it has more than double Yahoo’s market share in 2010 and 2011: 10.9 percent and 11 percent, respectively. Both Microsoft and Google finished 2011 with less than 5 percent.
Facebook had a tough time convincing Madison Avenue to put their dollars into social media, but the social networking giant eventually managed to pull it off. “If you go back several years there was some hesitation for a lot of brands to advertise on social media,” comScore analyst Andrew Lipsman told The Wall Street Journal. “That’s really changed.”
Facebook’s main source of revenue is its online advertising business, so its market share performance is closely watched for growth. While it is doing very well in display advertising, it is still just a small player in the overall online advertising market. Last month, we learned Facebook had just 3.1 percent market share of global advertising expenditure in 2010, though it did double from 2009. Ahead of Facebook were of course Google, Yahoo, and Microsoft.
Still, Facebook has managed to establish itself as a major advertising supplier: the company has a unique offering to businesses that are willing to gamble a little with their marketing dollars. Many are finding advantages, such as being able to target users with a precision not found in most other forms of advertising, and are thus increasingly investing in Facebook pages and Facebook apps instead of spending their budgets on Yahoo, MSN, and AOL.
With its quickly growing user base (800 million monthly active users and counting), the company’s social graph is exploding across all demographics, which only further fuels improved ad targeting, performance, and revenue as well. Facebook marketing executives often argue that the social network’s ads are more effective than alternatives because they often come from a friend.
Article source: http://www.zdnet.com/blog/facebook/facebook-widens-lead-in-display-ad-market-share/8210
Apple Inc. has 1 Infinite Loop and Genentech Inc. has 1 DNA Way. But Facebook Inc. now lays claim to Silicon Valley’s premier vanity address: 1 Hacker Way.
After journeying from a Harvard dorm room to a rented house in Palo Alto to a series of temporary corporate offices it quickly outgrew, the 8-year-old social networking giant has set down permanent roots just in time for its initial public offering.
And its splashy new campus in Menlo Park has quickly become the envy of its Silicon Valley neighbors.
Facebook, the hottest company to come out of the region since Google Inc., is expected to file papers this week to sell its stock to the public in an offering that could raise $10 billion and value the company as high as $100 billion.
On a recent afternoon the 57-acre campus hummed expectantly as more than 2,000 employees, about half of whom will probably become instant millionaires, were still settling in to their new digs. In all, the company has more than 3,000 employees in 35 offices in 20 countries.
Thirty miles south of San Francisco on the edge of tidal mud flats and salt marshes, the nine-building complex has room for up to 3,600. The company is seeking approval from Menlo Park to boost its head count to as many as 6,600. It has campaigned for months to win over the nearby largely Mexican American neighborhood of Belle Haven and show that it will be a good neighbor to clear the way for its expansion.
The former home of Sun Microsystems was dubbed “Sun Quentin” because it’s bordered by water on three sides and by the Bayfront Expressway on the other side.
Facebook even bought a 22-acre site for a companion campus it plans to build on the other side of the divided highway that can be reached through an underground crossing that is wide enough for cars. Facebook will install a people mover in the crossing to ferry its staffers back and forth to the new campus that it hopes to have ready by 2014. The two campuses will give Facebook room for as many as 9,400 employees.
It’s all part of founder and Chief Executive Mark Zuckerberg’s drive to create an urban oasis for staffers, part of its take-no-prisoners effort to one-up its chief rivals such as Google in the heated wars for top engineers and executives.
“We are creating the new urban place to work,” said Facebook real estate chief John Tenanes.
Tenanes showed off slick maps of Facebook’s expansion plans in a conference room named Charlie Bit Me after the viral YouTube video. Employees voted on the irreverent themes for conference rooms. Ties resulted in mixed concepts such as drinks and “Star Wars”: Darth Jager, Skyywalker and Whiskey on the Ewoks.
Little remains of the more staid former Sun Microsystems, which favored private offices, wall-to-wall carpeting and glass-walled conference rooms.
Facebook has ripped open ceilings and walls to expose steel girders and ductwork, and peeled back carpets to concrete floors polished with swirls. There are no cubicles or offices, not even for Zuckerberg, just long tables with super-high-IQ workers plugging away.
That means Facebook can accommodate more staffers on the 1-million-square-foot campus than Sun did, Tenanes said. Sun dedicated about 270 square feet to each staffer, while Facebook dedicates just 150 square feet, Tenanes said. That helps Facebook use about 30% to 35% less energy, he added.
“Hack” has been doodled and scribbled on walls covered floor to ceiling in chalkboard paint in the real-life equivalent of Facebook users’ walls. (At the entrance to Facebook’s campus stands a giant wood sculpture that Facebook staffers created during a recent hack-athon that spells out “hack,” Facebook’s motto of moving fast and breaking things.)
Graffiti artist David Choe tagged the walls of the building that houses Zuckerberg and other Facebook executives. Breakaway spaces that Facebook calls “cozies” pop up everywhere for spontaneous meetings. Micro-kitchens stocked with typical Silicon Valley fuel — Red Bull, chips and other snacks — are strategically placed throughout the buildings so that no employee ever goes hungry. Vending machines dispense free soda or computer accessories.
Employees can even hit the full-service bar Friday afternoon. The Shady Lady features an old-school vinyl bar purchased on Craigslist. Or if they are feeling nostalgic, they can sit down at a gray mid-century metal desk topped with a Royal typewriter.
The main attraction especially around noon is the first of two cafés to dish up gourmet grub from top chefs. It sports the design of a circuit board to efficiently and quickly flow 2,000 people in and out in an hour and change. Food carts serving such delicacies as Korean tacos roam the campus.
The focal point of the campus is a leafy central courtyard that Sun Microsystems filled with manicured greenery that gave it the feel of an English garden, Tenanes said.
Facebook uprooted and replanted elsewhere the Italian plum trees and other assorted plants. Now a road still covered in construction dust and equipment slices through the 1,200-foot-long courtyard lined with half-painted low-slung stucco buildings. By March the transformation from corporate courtyard to urban main street will be complete. It will be lined with storefronts shaded by awnings.
Employees will stroll on sidewalks or ride bicycles and RipStiks (two-wheeled skateboards) down the middle of the street to a noodle joint, a bike shop, Philz Coffee stand, a dry cleaners, computer help desk, even a burger shack that some have dubbed Zuckerberger’s even before it opens for business. In a nod to Facebook’s original digs on University Avenue in downtown Palo Alto, Zuckerberg even joked about opening an Oriental rug store permanently going out of business.
About halfway down will be an outdoor amphitheater with a Jumbotron that can hold 500 for movie nights or big company announcements.
One thing that still lingers from Sun Microsystems: All the doors, which Facebook recycled, some of which still bear the logo of the company that used to burn so brightly in Silicon Valley but was bought out by Oracle Corp. in 2010. It’s a subtle reminder of what can happen to companies that don’t stay on top of their game.
Article source: http://www.latimes.com/business/la-fi-facebook-campus-20120131,0,5571721.story
(Reuters) – Facebook’s initial public offering is likely to set a new standard for how low investment banks are willing to go on advisory fees to win big business.
The world’s largest online social network is expected to tap public markets for $10 billion in the coming months in an offering that will value the company at up to $100 billion, according to sources familiar with the planned IPO. It will be one of the biggest U.S. market debuts ever, and a prized trophy for the investment bankers seeking to win lead advisory roles.
That has set up a fierce competition on Wall Street, particularly between the presumed front-runners Morgan Stanley and Goldman Sachs Group Inc, which may offer their underwriting services for as little as 1 percent of gross proceeds, bankers and industry observers said.
That would be far less than the 7 percent fee that smaller deals typically fetch, or the 2 or 3 percent that large deals tend to command.
“The Facebook IPO will be iconic,” said James Montgomery, chief executive of San Francisco-based investment bank Montgomery Co, which advises tech companies on mergers, acquisitions and private placements.
Facebook can easily negotiate a 1 percent fee for the entire group of investment banks that will peddle its shares, Montgomery said, “much to the chagrin of the underwriters.”
Such a low fee is practically unheard of for investment banking deals, apart from the offerings of bailed-out companies General Motors Co, American International Group Inc and Ally Financial Inc, which sold shares held by the U.S. government in the aftermath of the financial crisis.
But Facebook has several advantages that will allow the company to haggle for a lower fee: it will be an easy sell as hoards of investors are keen to jump on the social media trend, and even a 1 percent fee would reap $100 million in revenue for investment banks, sending a lead advisor to the coveted No. 1 spot on IPO league tables.
“There’s no other IPO like this,” said Lee Simmons, a tech specialist at Dun Bradstreet. “It’s kind of the 800-pound gorilla for the tech sector.”
The Wall Street Journal reported that Facebook plans to file IPO documents with U.S. securities regulators as early as Wednesday, and is close to picking Morgan Stanley as the lead underwriter.
The typical IPO that raises less than $500 million incurs a 7 percent fee — what’s known as “the 7 percent solution.” But as IPOs grow in size, the fee percentage shrinks.
Investment banks usually earn fees of 4 percent to 5 percent on IPOs of more than $1 billion, but deals from Silicon Valley tend to carry a premium. U.S. tech IPOs of at least $1 billion carried an average fee of 5.8 percent from 2000 to 2012, on average, according to Thomson Reuters data.
In the case of Facebook — whose T-shirt-wearing, 27-year-old chief executive, Mark Zuckerberg, is said to appreciate status updates more than stock brokers — it’s unlikely advisors will be able to command the standard rate.
“These Valley types think this whole process could be automated and they don’t have to pay 7 percent to these flashy, French-cufflink-wearing Wall Street types,” said Eric Jackson, founder and managing member of Ironfire Capital, a technology-focused hedge fund, who has interacted professionally with executives at Facebook and other social-media companies.
Facebook’s offering will be the largest ever IPO from Silicon Valley, as well as the largest global high-tech IPO since the dot-com bubble burst. The most recent U.S. social-media IPO, Zynga Inc, raised just one-tenth of the proceeds Facebook is hoping for.
Winning a lead advisory role on Facebook has become a make-or-break contest for tech bankers such as Goldman’s George Lee, Morgan Stanley’s Michael Grimes and Credit Suisse’s Bill Brady.
Morgan Stanley and Goldman Sachs have been in communication with Facebook for months and already offered pitches to its executives in hopes of becoming lead adviser, according to sources briefed on the meetings.
Wall Street is now waiting to hear who will win the coveted “lead left” title, referring to where the top underwriter’s name will appear on the IPO prospectus.
“Facebook is one of the most well-known brands around the globe,” said George Papaioannou, a business professor at Hofstra University who has studied underwriting competition among investment banks. “The underwriters will have to do very little convincing to investors, and that gives Facebook a huge negotiating advantage.”
Investment banking fees are not usually the primary concern for IPO candidates, who must nail down the right offering price and sell shares to the right mix of investors, Papaioannou said.
If the offering price is too high, the company and its underwriters risk burning IPO investors. If the bar is set too low, the stock issuer risks leaving money on the table. And if the mix is not right — with more short-term traders than long-term investors — a stock can become highly volatile in the days and weeks following its debut on an exchange.
Zynga, which makes some of the most popular online games that are played on Facebook, is a prime example. Co-managed by Goldman and Morgan Stanley, the IPO was priced at $10 a share in mid-December. IPO investors watched the stock fall 5 percent on the first day of trading. Zynga was quoted at $9.72 on Friday.
Similarly, online coupon-deals site Groupon Inc priced its IPO at $20 a share on November 4, but its shares fell as much as 26 percent in the first two weeks of trading. The stock was trading at $19.78 on Friday. Goldman, Morgan Stanley and Credit Suisse were co-managers of the IPO.
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The other edge of the IPO sword can cut just as sharply for hot tech stocks.
LinkedIn Corp, which raised $353 million last May in an IPO priced at $45 a share, watched the stock soar as high as $122.70 on the first day of trading. LinkedIn shares have drifted down to the low $70 range, but the price range to date indicates that the company could have raised another $440 million to $1 billion in extra money if the IPO were priced more aggressively. Morgan Stanley was in the lead left position.
A sharp fluctuation in price soon after Facebook’s IPO “would really embarrass Facebook and the underwriters,” given the recent history of social-media IPOs, said Papaioannou
The Zynga, Groupon and LinkedIn deals garnered fees of 3 to 5 percent.
To be sure, the banks that are vying for a lead position on Facebook’s IPO will have to do more than lowball on price. They will also have to convince the Palo Alto, California-based company that the deal will go off without a hitch.
As Facebook’s size and influence have grown in recent years, its actions — whether changes to privacy policies on its popular networking site, or its interactions with Wall Street bankers — have come under intense public scrutiny.
Goldman’s handling of a private sale of $1.5 billion worth of Facebook shares to wealthy clients last year stirred enough controversy that the bank was forced to limit the offering to non-U.S. investors.
That misstep may have cost Goldman some goodwill with Facebook, industry observers said. And, as a company that makes money from a broad base of users, it also forces Facebook to consider whether its IPO will give unfair advantages to well-heeled investors.
“Two reasons I think Morgan Stanley will get the lead: one, they have a great retail distribution platform with the Smith Barney franchise and, two, I don’t think Facebook is overly happy with Goldman Sachs,” said Jeff Sica, president and CEO of SICA Wealth Management, who has bought shares of Facebook in private, pre-IPO markets for clients.
Morgan Stanley was the top bookrunner for global high-tech IPOs last year, with $2.2 billion in global proceeds and 10.9 percent market share. It also led the pack in U.S. high-tech IPOs, according to Thomson Reuters data. Goldman Sachs was the runner up with $1.9 billion in global fees and 9.2 percent market share, and ranked No. 3 in U.S. high-tech IPOs behind JPMorgan Chase Co.
A less measurable but equally important factor in obtaining the lead IPO position is whether bankers can connect with decision-makers at Facebook on a personal level.
“It’s really going to be the banker that understands and is sensitive to Zuckerberg and the executive team’s needs,” said Dun Bradstreet’s Simmons. “Whoever does that successfully will get the bragging rights, the proverbial brass ring of tech IPOs.”
(Reporting By Lauren Tara LaCapra, editing by Tiffany Wu)
Article source: http://www.reuters.com/article/2012/01/31/us-facebook-ipoview-idUSTRE80Q21920120131
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