What I Hope Zuckerberg Says in First Post-IPO Talk
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In the world of politics, the speeches by President Barack Obama and Gov. Mitt Romney were anxiously awaited before this year’s Democratic and Republican conventions. In the world of technology, next week’s interview with Facebook (NASDAQ: FB) CEO Mark Zuckerberg is shaping up to be one of the most highly anticipated events this year. For you Apple fans, I acknowledge the expected release of the new iPhone as being important, too.
However, for Facebook investors, Zuckerberg’s interview is something to look forward to. It may provide a glimpse into how the reclusive CEO, who seems oblivious to the company’s stock losing more than 50% of its valuation, plans to speed up revenue growth.
The interview is slated for Tuesday, and will be held during TechCrunch’s Disrupt Week conference.
Unfortunately, it is unlikely that Zuckerberg will say anything meaningful about the company’s plans to deal with its slowing revenue growth. Instead, I expect Zuckerberg to deflect such questions and focus on the few positives the company has going for it now.
Let’s start with the closing of the Instagram purchase on Thursday. The Federal Trade Commission gave the deal its final approval. Zuckerberg was the driver behind the inking of the deal in April, which preceded the IPO. It was worth $1 billion, including cash and stock. The value decreased, however, as the value of Facebook stock has decreased. During intraday trading on Thursday, Facebook’s stock was up from its fresh lows of $17.55. At the closing bell on Thursday, it was almost $19 a share. This price translates to the shares Instagram got from the deal amounting to just under $750 million.
I also expect Zuckerberg to continue to hype Sponsored Stories, which I see as its best approach to monetizing its mobile users to date. This advertising mechanism has drawn fire, even a lawsuit, because of user complaints that the feature violates their privacy.
Last month, a judge presiding over the lawsuit put the $20 million settlement on hold. This lawsuit brought to light the value of Facebook members, at least $100 million, and showed how much Sponsored Stories can add to Facebook’s bottom line.
Considering the difficulty of placing ads on mobile devices and getting users to click on them, Sponsored Stories are a very clever way for Facebook to basically sneak in ads on its users. The expectation that it could generate $1 million a day is icing on the cake.
The revenue generating product begins to work its magic when a Facebook subscriber hits the “like” button for a product or service.
Another possible advertising tool Facebook is reportedly working on also involves a button, and is called the “want” button. While it has been rumored to be coming from Facebook for months, last week Piper Jaffrey analyst Gene Munster discussed on CNBC that the button contributes to Facebook being a buy. I don’t know about that; it’s got a few more dollars to shed per share before I’d say buy. However, the creation of another way to help it convince companies to advertise through it is just one more thing that would not hurt.
Munster says investors haven’t appreciated the strides Facebook made in mobile. Piper Jaffray found that during the first month of Facebook’s implementation in mobile – $180 million run-rate as of June – it is already one of the biggest players in mobile advertising.
With that kind of support, it would behoove Zuckerberg to discuss how this feature could further help Facebook in getting a better idea of what people want to buy. Munster noted that it was similar to what Google (NASDAQ: GOOG) is doing with its search engine. The difference I see between Facebook and Google is that Google isn’t relying, nor does it have to rely, on mobile users to generate revenues.
Lastly, Zuckerberg should talk about the continuing unlocking of more than one billion of its shares. Adding this much to its float has many market players anxious about how much, not if, it will dilute the stock. The company essentially announced it would be buying back 101 million shares this week. Zuckerberg says he won't sell anymore shares for another year.
I do hope that Zuckerberg addresses the topics I've mentioned because they play such an important role in the company speeding up its revenue growth. Regardless of the questions Zuckerberg chooses to answer or deflect, I suspect it won’t be enough for investors who want him gone as the CEO of the company. Nor will it soothe investors still peeved about the overvaluation and subsequent loss of money.
TwillyD has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook and Google. Motley Fool newsletter services recommend Facebook and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.