Tech Stocks

Twitter IPO – should you buy twitter shares?

twitterTwitter, the Internet short message board / micro blogging site (a social media platform) is planning to float on the stock markets. Twitter is the third largest social media website after Facebook and Google+.

Twitter is estimated to be worth $15 billion. It filed with US regulators on 12th September 2013 to float on the stock exchange. Currently there is not a planned date for the IPO. Twitter is hoping to float on the New York Stock Exchange, rather than NASDAQ where most new tech stocks trade.

Until Google launched its own platform, Twitter was ranked as number two after Facebook.

Twitter has huge potential as a business. It has only recently started to introduce advertised / promoted posts on the platform. Millions of people use it, and unlike Facebook and Google+ it has many high profile celebrities as its users. For celebrities, Twitter provides a way to speak direct with their fans without having to go through managers, or having to employ web designers.

Twitter is all about conversation – instantly speaking out to millions of people and spreading news and ideas. Twitter is all public, unlike Facebook and Google+ where much of the content is made private.

Who owns Twitter?

Evan Williams

Evan Williams is a co-founder of Twitter and also its largest individual shareholder. He owns 15 per cent of the business and will become a billionaire when the company floats.

Evan Williams also created Blogger, a blogging platform that is now owned by Google, and  Medium, which is based on the Twitter idea but for people who want to say more.

Evan developed Pyra Labs, the company that developed Blogger. Pyra Labs was bought by Google in 2003.

Jack Dorsey

Jack Dorsey is another co-founder, he is a web developer and businessman. It has not been disclosed what percentage of Twitter Jack owns, but it is thought to be a little less than Evan’s share.

Noah Glass

Noah co-founded Twitter and also launched a podcasting company, Odeo, in 2007. He worked at Industrial Light and Magic and Macromedia’s former company, Macromind.

Biz Stone

Biz Stone is the fourth co-founder of Twitter. He also helped build Xanga, Blogger, Odeo, The Obvious Corporation and Medium. He founded Jelly Industries where he is CEO.

Dick Costolo

Dick Costolo is Twitter’s CEO. He is the most senior of the board. He took over the CEO role from Evan Williams while Evan was on paternity leave. He co-founded FeedBurner and after Google bought the business in 2007 he became a Googler (Google employee). He left Google in 2009 to join Twitter. Costolo is on President Obama’s National Security Telecommunications Advisory Committee.

Investors

Twitter has many investors, both individuals and corporations, which include, but not limited to:

Individuals

  • Brian Pokorny (Managing Partner of SV Angel)
  • Marc Andreessen (co-author of Mosaic and co-founder of Netscape)
  • Naval Ravikant (founder of Angellist, co-founde of Epinions.com and others)
  • Greg Yaitanes (Film and TV director)
  • Ron Conway (founder and Managing Partner of the Angel Investors LP funds)
  • Chris Sacca (former Google employee and manager of Lowercase Capital)
  • Kevin Rose (co-founded Revision3, Digg, Pownce, and Milk)
  • Timothy Ferris (writer, author of The 4-Hour Workweek: Escape 9-5, Live Anywhere)

Corporates

  • SV Angel
  • Bezo Expeditions
  • Charles River Ventures
  • Union Square Ventures
  • Digital Garage
  • Spark Capital
  • Benchmark
  • Institutional Venture Partners
  • Insight Venture Partners
  • Morgan Stanley
  • Kleiner Perkins, Caufield & Byers
  • DST Global
  • DFJ Growth
  • T. Rowe Price

 

Google Announce 2 for 1 Stock Split

Google Inc (NASDAQ:GOOG) have announced that they will split their shares at a rate of 2 for 1. Stock splits are the most common way for American companies to lower share price to increase liquidity of stock. Other than a doubling of shares for shareholders no other change will occur – no change to value of the shares. Dividends will simply be halved per share.

Google Annual Report

Yesterday Google reported a big increase in profits. It’s net income for the first quarter was up by 60% on last year, to £1.8 billion (USD2.89 billion).

Revenue exceeded USD10 billion in the first quarter of 2012 for the first time. Google’s growth in overseas business now accounts for over 50% of its revenue.

How Does Google Make Money?

Almost all of Google’s profits come from online advertising. Google Adwords is its advertising platform (the adverts displayed on Shareholders Portal are Google adverts).

Google displays its managed adverts on Google search engine results pages and on its publisher network. The publisher network is free to use by any website and is now the most popular advertising network in the world.

Google also makes money through its Android operating system for smartphones as well as its Google Checkout operations. However, Android is the fastest growing part of its business with over 850,000 new devices going online every.

Google currently holds around $49.3 billion in cash. It has the potential to grow significantly, although currently there are no plans for any major acquisitions. However, even though Google is cash rich there has been no dividend payment announced.

Paid clicks rose 39%

Google has seen a massive increase in the money it is making through its advertising network. Over the last 14 months Google has commenced a series of major updates to its search algorithm called Project Panda.

Project Panda started in February 2011 in the USA and then was rolled out globally from April 2011. This resulted in a major shakeup in its search engine results pages (SERPs). The project was designed to ensure that higher quality websites ranked better in the Google index. This has benefited both users (those who search) and customers (those who advertise).

The end result has contributed to a 39% increase in revenue.

Why is Google Splitting Its Stock?

As stock prices increase shares become less attractive to the smaller investor. Although big investment companies are the ones always discussed in the media, for most companies a majority of shares are owned by private individuals.

A 2 for 1 split simply halves the share price, making the price more attractive to the consumer. Of course, the value of the company is not altered in the corporate action.

Class C Non Voting Shares

The stock split is also issuing non-voting shares which simply means that shareholders will not increase be able to vote on meeting agenda items by holding the stock.

Major Shareholders

Sergey Brin and Larry Page, who are the founders of Google, remain major shareholders and keep the controlling stake in the company. It has always been Brin and Page’s objective to ensure that Google is protected from hostile takeover risk or influence from other parties, which is why they have decided to keep a controlling stake in the business.

“We have decided that maintaining this founder-led approach is in the best interests of Google, our shareholders and our users,” Sergey Brin and Larry Page.

You can read their full statement in the 2012 Founders’ Letter in the Investor Relations pages on Google.com.

They also say that they are building a corporate structure to ensure long term stability while also allowing them to innovate and develop new ideas and methodologies.

“New investors will fully share in Google’s long term economic future but will have little ability to influence its strategic decisions through their voting rights.”

Ex-date and Pay Date for Google Stock Split

Google have not yet announced the ex-date or pay date for the stock split.

Google Share Prices

Google is currently trading at USD651.51 and is up 2.37% on the back of this news.

For the latest prices and news on Google visit https://www.google.co.uk/finance?client=ob&q=NASDAQ:GOOG

Future of Google?

Google’s new social networking site, Google+, is growing and Google appear to be focusing on this at the moment. it is constantly updating and enhancing the service. Google+ now has around 170 million users, which although is still only 20% of Facebook’s 850 million users, it is growing at a significant rate.

Google’s own web browser, Chrome, is becoming more popular too, although it is not clear how this can help boost revenue.

 

Game Group Enters Administration – The Nail in the Coffin for Console and PC Games?

Today we learned that Game (The Game Group Plc), the high street computer game retailer, has gone into administration. It is feared the all stores will close within a week. Game suspended trading on 12st March 2012.

It seems that cash flow problems and investments were the main cause, with a failure to source new products from many of their suppliers. You can get a good picture of what is happening at Game from their Press Releases.

Game Plc. Press Release – Administration

“Further to our announcements of 21 March, the Board of GAME has completed its discussions with lenders and third parties without resolution, and has therefore today appointed PWC LLP to act as administrators for the Group. This decision is taken after careful consideration and ceaseless interrogation of every possible alternative. The Board would like to thank the teams of GAME and Gamestation colleagues around the world for their exemplary dedication, passion and professionalism.” – Game Group Plc.

It may be saved by RBS, although at the moment the future for Game is unclear. In fact, the entire computer games market is unclear at the moment. So much has changed in the last 30 years and it is hard to see how a high street retailer will be able to really compete against online gaming.

The Rise and Fall of Computers and Consoles

The computer games industry has been a very turbulent one indeed. Many businesses have rapidly risen only to crash and burn the moment a new technology takes over. A few, like Eidos, have managed to stay on top, but most have floundered.

There are essentially 3 ways to play “computer games” – on a PC or Mac, on a console or online. This has actually been the case for over a decade now, in fact, you could argue it has been longer – people were playing chess by email long before the first multiplayer games were written.

The Early Computer Games

ZX Spectrum 128

ZX Spectrum 128

The early innovators in the computer games industry were Sinclair, Amstrad (Sir Alan Sugar’s first success) and Commodore. These were computers, with full keyboard and operating system, on which owners could install or write computer games. The first popular games were never bought, instead computer owners would have to copy code from magazines to play them. The age of computing was just beginning.

In time businesses grew which focused on producing computer games, and like today, there were budget brands as well as the premium titles. We had Mastertronic, U.S. Gold and Code Masters on the Spectrum, for the Commodore there were Gremlin Graphics, Piranha and Bulldog Software. There was some crossover, but many houses focused on one platform, much like today.

The Consoles

At the same time consoles were also popular with the Atari dominating the market during the 1980s and 1990s. Sega and Nintendo were developing in the late 1980s and 1990s. Consoles were always a more expensive option and generally a provided family gaming experiences as a large colour television was needed to play them. Even today most consoles sit next to the DVD player under the HD flat screen. In fact, the PlayStation 3 was the most economical way for a while to have a Blu-Ray player to connect to a high-def flat screen. But back the the history of computer games.

The Atari ST – A Dedicated Games Computer

Atari 1040STF 16-bit computer

Atari 1040STF 16-bit computer

After these computers the main player quickly became the Atari ST. One popular game publisher for the Atari was Sega, who re-wrote some of their classic arcade games such as After Burner. Other big titles included Bubble Bobble by Taito and Romstar, Civilization by MicroProse, Double Dragon by Taito, Dungeon Master by FTL Games, Battle Command by Ocean Software and Starglider by Argonaut Games.

These games all marked a change in gaming style and genre. We have the simple fun platform games of Bubble Bobble, empire building in Civilization, classic beat-em-up in Double Dragon and RPG with Dungeon Master. It was from these roots that games such as Flight Simulator, Age of Empires, Age of Mythology, Mortal Kombat, World of Warcraft, and the Halo series.

Other titles are still familiar today. In 1994 Bethesda Softworks released The Elder Scrolls: Arena. Its successors, written for both PC and the XBox – Morrowind, Oblivion and Skyrim have become some of the most popular single player role-playing games even produced.

From PCs to Consoles

However, very soon the PC took over. It had a great advantage of suddenly having more processing power and better graphics. The main benefit was the more households were buying them as Windows developed and therefore people stayed on the same platform. This provided stability for games houses. For a long time the PC ruled. Games such as The Sims, World of Warcraft, the Diablo series, Half-Life, StarCraft, Guild Wars, Myst, Battlefield 1942 and Counter-Strike are amongst the top games of all time.

But then, slowly, the console platforms started winning people back. Playstation made a big impact with the with the Playstation 2 in 2000. By the mid noughties, Playstation and Microsoft’s Xbox had cornered the games market.

However, all this started to change with the rise of modern communications. Mostly driven by a new age of plasma and LCD televisions with surround sound, console games came back into fashion with the XBox, Playstation and Nintendo controlling the market.

Superfast Broadband, Social Media and Online Gaming

Although the first massive online multiplayer game was World of Warcraft, this was still a game that had to be purchased on CD / DVD when it was first released. Today faster Internet connections and better computers and mobile phones have seen a seismic shift in gaming. More people are now play free games online, both on their PCs and on their mobile phones, than are playing on consoles or traditional PC games.

Zynga

Zynga started producing games for Facebook in 2007. They have produced many games that work across the popular platforms (Facebook, Google+ and Myspace) including the likes of CityVille, CastleVille, Zynga Poker, FarmVille, and Empires & Allies. Empire Building games are the key. They keep people engage for months or years at a time and constantly evolve to bring new features to the players. Gone are the days that you buy a game to play until you complete it. Nowadays the games are always one step ahead.

By December 2011 Zynga floated on the NASDAQ stock market. It is having a rocky ride, but it is still dominating the games market.

Game in Liquidation

The impact is dramatic. The old games houses that had dedicated themselves to producing console and PC games are suffering and the retail industry is feeling the bite too. In March 2012, UK high street retailer Game, went into liquidation. People are no longer buying enough games, either for PC or consoles.

The games market has undergone the biggest change in its relatively short history. In 30 years we have seen consoles and computers battle it out for dominance only to see faster Internet connections and social media sites, specifically Facebook, steal the market almost overnight.

While the traditional games are struggling, a new age in gaming technology is here and it is likely to dominate for a long time to come. This could be another reason to look at Arm Holdings, as they make the computer chips that run in many of the smart phones and tablets on which games are played today.

Many more great games …..

Note, with have omitted many platforms and games. We could not mention them all. We know that diehard gamers will be distraught by the lack of mention of the BBC, Acorn and Amiga, or ignoring classic games such as Lemmings, Elite and Paperboy. If you want to catch up on your old favourite computer games Wikipedia is an amazing source of information. Start with the pages Arcade game, History of video games and PC game and continue surfing from there.

Image credits

Atari ST photo by Pixel8.

Facebook Announces $5 Billion IPO

Market Update – 2nd February 2012

Facebook have announced plans to float on the stock market. It is looking to raise $5 billion in an IPO. It has filed its intention to list with the Securities and Exchange Commission.

Form S-1 REGISTRATION STATEMENT Under The Securities Act of 1933 – Facebook, Inc. SEC.gov

It is valued at around $75 billion, less than the initial $100 billion figure that was quoted by many. However, some analysts think that this figure is still too high and the interest in the stock will mostly be driven by brand awareness and not by sound analysis of its potentials, risk and market development.

Facebook has been growing at a staggering rate but some people feel that it is reached its peak already. Around 480 million people log on every day, however, it does not seem to be gaining new clients (users) as quickly as it once did. However, it is now investing heavily in mobile and expects most new users to be solely mobile users.

Terms of the Facebook IPO

Facebook, Inc. is offering _____ shares of its Class A common stock and the selling stockholders are offering _____ shares of Class A common stock. We will not receive any proceeds from the sale of shares by the selling stockholders. This is our initial public offering and no public market currently exists for our shares of Class A common stock. We anticipate that the initial public offering price will be between $ _____ and $ _____ per share.

We have two classes of authorized common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten votes per share and is convertible at any time into one share of Class A common stock. Outstanding shares of Class B common stock will represent approximately _____ % of the voting power of our outstanding capital stock following this offering, and outstanding shares of Class A common stock and Class B common stock held by, or subject to voting control by, our founder, Chairman, and CEO, Mark Zuckerberg, will represent approximately _____ % of the voting power of our outstanding capital stock following this offering.

We intend to apply to list our Class A common stock on under the symbol “FB.”

There are a few blanks in there still to be completed.

When will Facebook Float?

“Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.”

It was not so long ago that Mark Zuckerberg said that he was not in any hurry to float Facebook. It’s cash flow is strong and there seemed little reason to raise capital through a stock market flotation. So the big question is why?

Possible Takeovers?

For Facebook to really grow and dominate they may need to look to make some constructive partnerships and even some aggressive acquisitions. Mobile is the hot trend at the moment and Facebook currently hardly involved at all. Their website is present on all mobile smartphones but Facebook do not provide their own mobile service. Advertising is hot too and currently Facebook struggle to provide any form of targeted adverts to its members on mobile devices. These are two areas that they could be looking to expand into.

Bigger than Yahoo!

Valued at $100 billion Facebook is currently bigger than Yahoo! Although to be fair, Yahoo! is not exactly growing at the moment, they continue to drop more products and some tech analysts fear that Yahoo! may eventually be merged into a multitude of competing businesses in the near future.

Facebook history

Facebook was founded in 2001 by Mark Zuckerberg while he was studying at Harvard University. It has quickly grown in the last 7 years to have over 800 million users. What is so striking about Facebook’ success is that it has always managed to stay on top of its growth. Many small websites would very quickly fail when experiencing such high demand, but Facebook has had next to no downtime during its lifetime. This is a great credit to the company and all those who manage its servers and infrastructure.

One of the Biggest IPOs in History

To date only 13 companies have been valued at over $10 billion on their IPO. The top American companies prior to Facebook were:

  • Visa Inc. at $19.7 billion in 2008
  • General Motors Co. at $18.1 billion in 2010
  • AT&T Wireless Services Inc. at $10.6 billion in 2000

The largest IPO in the world so far was the Industrial & Commercial Bank of China, which released $21.9 billion of shares in 2006. It ended its first day valued at $148 billion.

How Much Does Mark Zuckerberg Earn?

According to the SEC registration statement Mark Zuckerberg had a basic salary of $500,000 in 2009, with a bonus of $220,500 and additional benefits worth $783,529 – a total of $1,487,362.

This is actually considerably less than the CEOs and Vice Presidents who all received stock awards:

  • Sheryl K. Sandberg, Chief Operating Officer – $30,873,579
  • David A. Ebersman, Chief Financial Officer – $18,676,918
  • Mike Schroepfer, Vice President of Engineering – $24,727,128
  • Theodore W. Ullyot, Vice President, General Counsel and Secretary – $6,958,544
They will all be benefiting from the floatation / IPO of Facebook.

More on the Facebook IPO story:

Google Shareholders Not Impressed With 27% Growth

Google logoGoogle has seen its revenue increase by 27% for the final quarter, and 29% overall for 2011. However, this increase in revenue has still fallen short of shareholder expectations and as a result many people are selling. Google share price has dropped by 10% after the results were released, plummeting share price to $575 per share.

However, shares have already bounced back, and are currently trading at $639.57 (Jan 20, 6:42AM EST).

Some analysts fear that Google is investing too heavily in new areas of its business which is reducing the overall profits it gains from its advertising and search marketing business. Although Google has many products and services, its core business is still in placing adverts on its search engine. This is how it generates its revenue and it is this money that is reinvested back into new projects.

This year Google launched its Google+ Social Network and is determined to make it work – all staff bonuses will be partly determined based on the success (or failure) of its social network. Google recognises that in recent years the “web portal” has returned, i.e. Facebook.

In the earlier days of the Internet people would make a portal site, such as Yahoo!, their homepage and start their daily web searching and surfing from there. Then Google search came along and people chose to start their web journey with a blank screen and a search box. However, nowadays people go direct to Facebook or Twitter to see what their friends and acquaintances are talking about online, and Google has been left out of the picture. This is why it is now resolved to build a social network that can rival Facebook.

Of course, all this costs money. In the last year Google has been hiring more staff to help drive forward its other enterprises, such as its Chrome operating system and browser, as well as Google+, and this has resulted in Google’s costs rising by 54%.

Google hired an additional 1900 people during the first quarter and plans to hire another 6000 people this year. In recent years many people have criticised Google for its lack of customer support, and many new jobs have been creating in client facing teams. Google is working more closely with web advertising agencies and web publishers, by organising events and sending Googlers (Google employees) out into the field to spend time learning from the people who essentially keep the Internet alive. This of course is much more costly than the old approach of communicating via forums when time permits!

Android

Google also firmly believes that the future of the Internet is in mobile technology. As more people buy smartphones and tablets, more searches are being done on mobile devices. This opens a whole new world of opportunities for advertisers, and Google is determined to not only be in control of the mobile operating systems (Android) but also to ensure it maintains its market share in advertising as more people leave the PC based websites to spend more on advertising on mobile.

It is possible that in years to come the traditional PC advertising will wane away in much the same way that print advertising has decline in the last decade. Mobile, many people believe, is the future. The days of people sitting hunched over an computer or laptop are numbered.

Last year Google did announce that there is a tough year ahead and that some changes in the pipeline are vital for long term growth and may impact on short term profits. Shareholders were warned in early 2011, so mustn’t grumble really. Google is still the top tech stock and is positioning itself for the future rather than simply maximising profits today.

When Larry Page took over the role as CEO, Steven Levy, the author of In The Plex: How Google Thinks, Works, and Shapes Our Lives, predicted that,

“We’ll see audacious new products, particularly when other people think it’ll be difficult or even impossible — it’s not always about what people need right now, but what people need in 10 years.”

Investment for the future is paramount. Early in 2011 investors were concerned about the rise of Facebook, saying the Google will be left behind. In the last year Google has steamed ahead with its own social media platform and made big moves in the mobile internet arena too.

Yahoo! Announces Resignation of Jerry Yang

Jerry Yang

Jerry Yang

PRESS RELEASE FROM YAHOO!

SUNNYVALE, Calif.– (BUSINESS WIRE)– Yahoo! Inc. (NASDAQ: YHOO), the premier digital media company, today announced that Jerry Yang has resigned from its Board of Directors and all other positions with the company, effective today. In addition, Yang resigned from the Boards of Yahoo Japan Corporation and Alibaba Group Holding Limited, effective today.

In a letter to the Yahoo! Board Chairman Roy Bostock (who has had to fire himself), Yang wrote:

“My time at Yahoo!, from its founding to the present, has encompassed some of the most exciting and rewarding experiences of my life. However, the time has come for me to pursue other interests outside of Yahoo! As I leave the company I co-founded nearly 17 years ago, I am enthusiastic about the appointment of Scott Thompson as Chief Executive Officer and his ability, along with the entire Yahoo! leadership team, to guide Yahoo! into an exciting and successful future.”

Yang co-founded Yahoo! Inc. in 1995 with David Filo and served as a member of the Board of Directors since March 1995 and as Chief Executive Officer from June 2007 to January 2009. The Company went public in 1996.

Jerry Yang is a visionary and a pioneer, who has contributed enormously to Yahoo! during his many years of service,” said Roy Bostock, Chairman of the Yahoo! Board. “It has been a pleasure to work with Jerry. His unique strategic insights have been invaluable. He has always remained focused on the best interests of Yahoo!’s stakeholders, including shareholders, employees and more than 700 million users. And while I and the entire Board respect his decision, we will miss his remarkable perspective, vision and wise counsel. On behalf of the Board, we thank Jerry and wish him all the very best in his future endeavors.

Bostock concluded, “We appreciate Jerry’s comments and share his enthusiasm for the company’s prospects. With Scott Thompson leading an outstanding team of Yahoos to deliver innovative products and an engaging customer experience, Yahoo!’s future is bright.”

I am grateful for the warm welcome and support Jerry provided me during my early days here,” said Scott Thompson, Yahoo!’s Chief Executive Officer. “Jerry leaves behind a legacy of innovation and customer focus for this iconic brand, having shaped our culture by fostering a spirit of innovation that began 17 years ago and continues to grow even stronger today. Jerry has great confidence in the future of Yahoo!, and I share his confidence in the enormous potential of Yahoo! in the days ahead.

Forward Looking Statements

This press release contains forward-looking statements (including without limitation the quotations from our Chairman and management) concerning Yahoo!’s future management, strategic plans, growth opportunities and performance.

Risks and uncertainties may cause actual results to differ materially from the results predicted. The potential risks and uncertainties include, among others, the impact of management and organizational changes; the implementation and results of any strategic plans as well as Yahoo!’s ongoing strategic and cost initiatives; Yahoo!’s ability to compete with new or existing competitors; reduction in spending by, or loss of, advertising customers; the demand by customers for Yahoo!’s premium services; interruptions or delays in the provision of Yahoo!’s services; security breaches; acceptance by users of new products and services; risks related to joint ventures and the integration of acquisitions; risks related to Yahoo!’s international operations; failure to manage growth and diversification; adverse results in litigation, including intellectual property infringement claims and recent derivative and class actions related to Alipay; Yahoo!’s ability to protect its intellectual property and the value of its brands; dependence on key personnel; dependence on third parties for technology, services, content, and distribution; general economic conditions and changes in economic conditions; transition and implementation risks associated with the Search Agreement with Microsoft Corporation; and risks that the benefits of the Framework Agreement Yahoo! entered into with Alibaba Group, Softbank Corporation and certain other parties regarding Alipay may not be realized. All information set forth in this press release and its attachments is as of January 17, 2012. Yahoo! does not intend, and undertakes no duty, to update this information to reflect subsequent events or circumstances.

More information about potential factors that could affect Yahoo!’s business and financial results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Yahoo!’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and the Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, which are on file with the Securities and Exchange Commission (“SEC”) and available at the SEC’s website at www.sec.gov.

Sources:

News Provided by Acquire Media

Contact:

Media Relations:
Kekst and Company
Eric Berman, (212) 521-4894
or
Lissa Perlman, (212) 521-4830
or
Investor Relations:
Yahoo!
Marta Nichols, (408) 349-3527
Photo of Jerry Yang by Mitchell Aidelbaum

Review of Tech Stock IPOs – the Winners and Losers

It seems that tech stocks are on the agenda again. After the first tech stock bubble burst investors became extremely wary of technology stock, especially Internet stocks, and started to question the valuations that many companies have been given. This year we have seen IPOs from Demand Media, LinkedIn, Yandex and Groupon.

The hot news at the moment is that of Facebook’s imminent flotation. Currently it is valued at around $100 billion, however, annual revenue from advertising is “only” and few billion dollars. Either way, the Facebook IPO is set to dwarf even the mighty Google. If the valuation of Facebook is accurate this means that Facebook will be one of the largest companies in the world, bigger than Tesco Plc..

Before looking at the tech stock IPOs of 2011, lets remind ourselves of the great success story, Google.com.

Google Corp. NASDAQ: GOOG – IPO $1.67 billion in 2004

Google’s IPO, underwritten by Morgan Stanley and Credit Suisse First Boston, was on 25th August, 2004. It released 19,605,052 shares at $85 each which raised $1.67 billion. Google was valued at $23 billion. A majority of Google’s shares (271 million in total) remain in Google’s control. Yahoo! is one of Google’s biggest shareholders, owning 2.7 million shares (see Yahoo and Google Settle from internetnews.com for more on this).

Google IPO: a success. Google today is trading at $628.79. See www.google.com/finance?cid=694653 for the latest prices.

Demand Media NYSE:DMD – IPO 1.3 billion – January 2011

Demand Media announced its IPO in January 2011. It’s IPO price was declared to be $16-18, valuing the company at $1.3 billion. It was $22.68 per share on the close of its first day trading. Since then its share price has fallen to $8.02.

Demand Media IPO: A loser. Demand Media has lost 2/3 of its value since the IPO.

Demand Media’ strength was in volume of content online and a readership that relied heavily on search engines (Google search referrals mostly). In February 2011 Google started making some ground-breaking changes to its search algorithm (the Panda, EMDm Page Layout and Penguin updates) and this has seen some parts of Demand Media suffer. Some of its brands lost huge numbers of daily readers. eHow.com lost 53.46% of its business and eHow.co.uk lost 72.30% (source: Google ‘Panda’ update downgrades UK tech sites – and Microsoft’s Ciao – 13 April 2011).

Yandex – IPO $1.3 billion – May 2011

Yandex is the Russian search engine and Internet media giant. See Yandex IPO at $25 a Share – The Russian Search Engine. It listed $1.3 billion of stock on the NASDAQ in May 2011 and started trading at $25. It finished trading at $38.84, however, it has since fallen to $21.50.

Part of Yandex’s strong early performance was attributed to a huge demand for tech stocks in general. Yandex is a huge company with a diverse offering and still a strong contender for the long-term. It is looking to expand in Europe and may start to provide more English language services. However, it is currently an IPO loser.

LinkedIn – IPO valued company at $3 billion – May 2011

LinkedIn.com proposed an IPO that valued it at $3 billion. It started trading on 19th May 2011 at $45 and closed at $94.25, more than doubling in value on the first day. Today it is trading at $69.81 which still represents a very healthy growth on its initial offer.

LinkedIn is still developing its revenue model. It has a huge number of professionals listed on its database, it is the business networking equivalent of Facebook. Like Facebook it is building its own advertising platform so that its users can drive more business to their profiles and websites through contextually driven and targeted advertising campaigns.

Overall LinkedIn is still a winner, although it has started to struggle in recent weeks as investors start to question the durability and reliability of its revenue model.

See www.google.com/finance?q=linkedin for the latest prices.

Groupon NASDAQ: GRPN IPO $700 million – November 2011

Second to Google is Groupon which had its IPO this year (see Groupon IPO Raises $700 million). Groupon shares started trading at $20 and reached $29 on their first day of trading. However, share price has fallen in recent weeks to $19 after reaching a high of $31.14.

Groupon IPO: a rocky ride, but steady now. One to watch!

Future Tech Stock IPOs

The big news is that Mark Zuckerburg is gearing up for a Facebook IPO. Currently the company is valued at $100 billion, making it the largest tech stock IPO ever, if it goes ahead and floats.

Other tech stocks looking to float include Zynga. Zynga is a social games maker with many of its games popular on Facebook. It really is a case that much of Zynga’s success is driven by Facebook. Zynga is the company behind popular social games such as Farmville, Mafia Wars and CityVille. It also has Zynga Poker, branded as the World’s largest free-to-play online poker game, which can be played on smartphones and Google+ in addition to Facebook.

Technology stocks are looking strong again at the moment. While traditional retail suffers the Internet continues to look strong – maybe the two are more closely connected that first assumed. Can the Internet be slowly eroding to dominance of the traditional high street brands? Amazon.com destroyed all but a few high street book stores. Talking of Amazon, that was one of the first big tech stock successes. It started trading at $13 on 15th May, 1997, valuing the company at $300 million. Today it is trading at $196.98, another huge success.

Groupon IPO Raises $700 million (GBP437m)

Groupon logo behind a screen, green, people in foregroundYet another huge tech stock IPO was launched today. Groupon, the website business that provides coupons, money off vouchers and other offers, floated on the NASDAQ today.

Shares were thought to start trading at between $16 and $18 a share but actually floated at $20.00 each. By 12.46pm EDT shares had reached $29 on the NASDAQ, an increase of 45%. This values Groupon at around $12.7 billion which means that it is the second largest Internet business at the time of its initial public offering. In April 2010 Groupon was valued at $1.35 billion (reported by Forbes).

When Google floated in 2004 their initial valuation was $23.1 billion. Yandex, who floated in May, were valued at $8 billion on floatation.

So far Groupon have only released 5% of its shares (35 million) which puts its shares in high demand. However, some analysts such as Rob Romero from Connective Capital Management believe that Groupon is over-priced at the moment (as reported in Reuters). However, tech stocks are still considered to be excellent choices for their potential for growth and many fund managers are in need of fresh tech stocks to balance their portfolios.

Chief Executive Officer Andrew Mason and Chairman Eric Lefkofsky rang the opening bell on the Nasdaq today and were seen celebrating in Times Square afterwards. Andrew Mason and Eric Lefkofsky invested $1 million initially in the business to develop the web platform and market and develop the business model.

What do Groupon do?

Groupon is the deals specialist. They are essentially a “deal-of-the-day website” which provides its customers with opportunities to get money off and discounts on a variety of products and services. They make their money through affiliate relationships with merchants and generally take a commission on all sales.

It is free to sign up to Groupon so users (the clients) receive daily emails regarding discounts on products that they have declared an interest in. Really it is like having a personal shopper who looks for bargains and then tells you about them. In 2010 Forbes reported that Groupon had 13 million members.

Tech Stock Markets

Earlier this year LinkedIn floated with an IPO valued at around $750 million. The tech stock analysts are still eagerly awaiting news from Twitter, Zynga and Facebook, all of which are expected to float in the not too distant future. The latest news from Facebook is that although Mark Zuckerberg is not in a rush to float there could be an IPO as soon as Autumn 2012.

Although Groupon saw a 45% increase today the rest of the stock market was in decline. LinkedIn was a noticable loser today with share price down by 7.43% at 1.07pm EDT. Overall the Nasdaq is down by 0.85% so far today.

As far as Groupon is concerned the big challenge is going to be when (or if?) Google launches its own service – Google Offers. This will be a coupon service similar in nature to Groupon. Google’s main strength is in providing contextual and personalised / interest based advertising for its users and its Adsense publishers. This means that it can reach a vast number of Internet users without actually requiring people to subscribe the service. If Google develop a service as good as Groupon then they could quickly steal a large market share. Shareholders should consider this carefully. See Google’s blog post More local deals, personalized to your interests to learn more about their service, Currently Google Offers is in “beta” and only available in the USA.

Google was developing Google Coupon Feeds which aimed to provide discounts within its search results pages, however, according to Google.com this was integrated into Google Places.

Get the lastest on Groupon from Google finance: www.google.com/finance?q=NASDAQ:GRPN

 

Newscorp Sells MySpace To Specific Media

MySpace has just changed hands. On the day Google announces the launch of its own social networking system (the only real threat to Facebook in the next 10 years), MySpace, once the favourite hang-out for teenagers, pop bands and bored students, was passed from one company to another in a transaction that will mostly go unnoticed.

MySpace was launched in 2003 and by 2006 it was the most popular social networking website. It held this position for 2 years until Facebook eventually picked up speed. Since then it is been sitting quietly in Facebook’s shadow.

If you want proof that MySpace is effectively dead at the moment, just look at Lily Allen’s profile. She used MySpace to great effect to promote herself. Her account was set up in November 2005 and was once one of the most popular celebrities on MySpace. Her music had almost 72 million plays on her homepage alone. But Lily has not signed in since 2010. Her Facebook page has 1,848,311 fans and is still active with regular updates. Lily does still has 410,369 friends on MySpace, not bad for someone who does not use it!

Newscorp bought MySpace and its parent company, Intermix, in 2005. It has apparently been trying to sell MySpace since around 2008 when it started losing out to Facebook. After reaching a peak of 76 million monthly users MySpace started losing over a million customers a month, all of them going to Facebook.

One of the biggest problems that MySpace had (sorry, has) is that users could design their own pages. This meant that many pages simply looked awful. When so many poorly designed pages, which are also covered in adverts, are in the public domain people are bound to be put off. In comparison Facebook is like a clean canvas. To learn more about the rise and fall of MySpace read the excellent article over at Business Week: The Rise and Inglorious Fall of Myspace.

Who Owns MySpace?

Specific Media is primarily an online advertising network. It was formed in 1999 by the Vanderhook brothers (Tim, Chris and Russell Vanderhook) from California, and originally operated under the name Advertisement Banners.

In 2007 they purchased the UK digital media company AdViva. Specific Media focus on demographic, behavioral, contextual, and geographic ad targeting. They are an innovative business and certainly not afraid to experiment in new areas of online advertising. A few days ago they reported on their improvements in online video for advertising.

Specific Media has been seen as a viable target for Google for a while and their acquisition today could be a signal that they do not plan to sell out any time soon. They are growing their own business and expanding into social networking.

Facebook has its own lucrative advertising network, Google has its famous Adwords system, and soon MySpace will have full access to the Specific Media network, should they decide to take that route.

The last month has been very exciting for tech stocks. We have had LinkedIn and Yandex flotations, Groupon IPO, Google moving into social media and now a possible revival MySpace in the hands of Specific Media.

Next year everyone is expecting the Facebook IPO too. Now that will be interesting.

TomTom Shares Struggle As SmartPhones Take Over The GPS Market

TomTom shares have fallen by a staggering 27% today, down by EUR1.32 to EUR3.57.

TomTom is the Netherlands-based manufacturer that specialises in GPS services for the automotive industry and operates the most well respected car navigation devices on the market. However, TomTom is suffering from the rapid rise of competition in the form of smartphones.

Many Smartphones now come equipped with GPS and mapping services built in. The rise in Google Android phones, which come with GPS and Google Maps as standard, has meant that many people feel that there is no need to purchase an additional navigation system.

Although the competitor products currently are not of the same standard as TomTom they are improving all the time.

Nike + SportWatch GPS

TomTom has been developing non-automotive ideas and in April 2011 they launched the Nike+ Sportwatch GPS in partnership with Nike. This watch is ideal for runners, hikers and cyclists and is TomTom’s first steps towards developing more products for the ever growing health and fitness market.

However, the news today of falling demand for its car navigation solutions could leave TomTom in a very bad state of affairs while they are developing new products and reaching out to new markets.