Observations from the Facebook S1

Posted on February 4, 2012 by Gaurav Tewari

1. A new standard for user engagement. DAU to MAU ratio of 57% in December 2011, which amazingly is actually higher than the already high 54% in December 2010.  This makes Zynga’s engagement look weak!

  • 845 million MAUs as of December 31, 2011, an increase of 39% as compared to 608 million MAUs as of December 31, 2010.
  • 483 million daily active users (DAUs) on average in December 2011, an increase of 48% as compared to 327 million DAUs in December 2010.

2. Incredible user activity levels. Almost 6 likes or comments per Daily Active Unique. 117 connections on average per registered user.  Interestingly, this indicates that there is still room to grow connections by another 28% before the site hits the “more than 150 connections” or Dunbar’s Number, problem.

  • More than 100 billion friend connections on Facebook as of December 31, 2011.
  • Users generated an average of 2.7 billion Likes and Comments per day during the three months ended December 31, 2011.

3. Payments are the new revenue driver.  Last summer, Facebook started charging companies like Zynga 30 percent of each transaction — like purchasing a virtual good like a cow. (That’s a big reason why Zynga accounts for 12 percent of Facebook’s revenue, alhough that figure includes advertising as well).  So although payments started as a tiny sliver of Facebook’s overall revenue, now it’s up to about 17 percent of the total.  As companies sell other stuff on Facebook – virtual or not – this number is likely to grow.

  • According to market research reports, the worldwide revenue generated from the sale of virtual goods increased from $2 billion in 2007 to $7 billion in 2010, and is forecasted to increase to $15 billion by 2014.
  • Facebook currently requires Payments integration in games on Facebook, and we may seek to extend the use of Payments to other types of apps in the future.

Continue reading →

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The Real Facebook Effect

Posted on February 4, 2012 by Gaurav Tewari

Unless you have been under a rock the past few days, you heard about Facebook’s long anticipated S1 filing.  It’s hard to go anywhere in the Valley without hearing the buzz.  Readers of this blog will recall that I had written a post during Summer 2011 substantiating a $100B and perhaps even a $200B valuation for the company.   In retrospect my projected revenue and EBITDA numbers are surprisingly quite close to Facebook’s actual numbers from their IPO.

However, amidst all this buzz, you may have missed the “rising tide lifts all boats” effect as news of Facebook’s offering led to double digit increases in the valuations of Zynga (ZNGA) and LinkedIn (LNKD).

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Overheard in Silicon Valley…

Posted on January 30, 2012 by Gaurav Tewari

Overheard at the Four Seasons Palo Alto:

Entrepreneur 1: I’d like to get at least a 6x multiple.

Entrepreneur 2: Your public comps are trading at half that with comparable growth.  Why would someone invest in you if they can put money in a public company at a better price?

Entrepreneur 1: Bragging rights.

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CES 2012 – Some Pictures and Thoughts

Posted on January 28, 2012 by Gaurav Tewari

CES 2012 was allegedly the biggest CES show ever with over 150,000 attendees.  Vegas was crawling with deal makers and prolific networkers; a few hardworking operational types and booth girls were also visible.

Some big themes from this year’s CES:

1. The Measured Life:  A vast array of self-tracking devices designed to measure each and every aspect of our daily lives and create a dashboard of personal metrics.  From how many steps you walk in a given day to how many calories you ingested over lunch to much REM sleep you got last night.  These devices monitor activity, sleep, diet, and even mood to help make people healthier and more productive.

2.  The Connected Life:  We live in a hyper-connected world with information streaming at us from emails, social media feeds, SMS messages, phone calls, and tweets.  CES 2012 showcased the next generation of technologies and devices designed to keep us connected, informed and in-touch of this veritable firehose of information.  Smartphones, iPads, location-aware watches, Bluetooth headsets integrated into ski helmets, and ultra-portable laptops…and also virtual assistants that streamline information retrieval, artificial intelligence agents that prioritize information consumption, and digital avatars that allow us to be in multiple places at the same time.  I think the only thing that was missing was a direct neural interface that projects the next tweet directly onto a user’s retina and allows automatic thought-to-tweet translation transcription

3. The Entertained Life: As always, CES didn’t disappoint with the diversity and novelty of ways to waste time in the name of entertainment, recreation, gaming…whatever you want to call it. Rich video games, multi-player virtual worlds, online-to-offline rewards systems, 3D movies, and 4G connectivity…all to ensure that after we are done measuring our life and responding to tweets, we have time to recharge for the next day!

More pictures: Continue reading →

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5 Tips for Nailing the Full Partnership Pitch

Posted on June 28, 2011 by Gaurav Tewari

Mashable published my most recent post on the 5 essential elements of the “full partnership pitch” that CEOs and Entrepreneurs pitching to investment firms will hopefully find helpful. In it I talk about some of the tangible and intangible dynamics of these presentations and share some insights from the other side of the table.

You can read the full article here.   Please check it out and feel free to leave comments if you like.

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Yipit and the Daily Deals Sector

Posted on June 24, 2011 by Gaurav Tewari

I recently spoke with journalist Anne Sherber of DigiDay about Yipit and the company’s positioning within the Daily Deals space.  There are currently more than 500 daily deal sites in the US alone – ranging from heavyweights such as Groupon and LivingSocial to large companies that have added-on daily deals, such as Facebook Deals, Google, Travelzoo, OpenTable, Yelp, Yellow Pages, New York Times, KGB, Gilt etc.  Yipit is positioned as the ‘Kayak or Shopping.com of the daily deals space.’  You can read the full article here.

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RIM Management Misconstruing Appeal of iOS, Android

Posted on June 11, 2011 by Gaurav Tewari

Silicon Alley Insider published an interesting chart showing RIM’s historical revenue and gross profit growth.  Allegedly, RIM management looks at this chart and wonders why Wall Street has been punishing their stock.   The article states “They [RIM executives] look at what worked in the past, and think that’s what will work again. This is why we hear co-CEO Mike Lazaridis talk about BlackBerrys leading in security, battery life, and bandwidth efficiency.”

The logic reminded me of the decision criteria I faced when I bought my first cell phone circa 1997.  My first mobile phone was a clunky Motorola flip phone with a meager LCD display and the only thing you could do was make calls and send text messages (for what felt like a hefty price at the time).  It had a short battery life and, at best, erratic signal strength with multiple dropped calls. And, did I mention, it was expensive.  By contrast the landline provided to me, for free, by MIT had great voice quality, integrated voicemail, shortcodes to reach on-campus numbers, and you could even hook up the line to a cordless phone that gave you a couple hundred feet of signal mobility from the base station.  So why would I spend money on a clunky first generation cell phone on a meager student budget? Continue reading →

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