Zuckerberg Made Instagram Deal Alone 307
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by
samzenpus
from the going-solo dept.
from the going-solo dept.
benfrog writes "According to the Wall Street Journal, Facebook's Board of Directors was all but out of the picture when Mark Zuckerberg struck the $1 billion deal to purchase Instagram, the yet-profitless photo-sharing service. From the article: 'It was a remarkably speedy three-day path to a deal for Facebook—a young company taking pains to portray itself as blue-chip ahead of its initial public offering of stock in a few weeks that could value it at up to $100 billion. Companies generally prefer to bring in ranks of lawyers and bankers to scrutinize a deal before proceeding, a process that can eat up days or weeks. Mr. Zuckerberg ditched all that. By the time Facebook's board was brought in, the deal was all but done. The board, according to one person familiar with the matter, 'Was told, not consulted.'"
Profitless? (Score:5, Interesting)
>> Instagram, the yet-profitless photo-sharing service
Make that revenue-less!
Their whole pitch on making money is presented here in its entirety:
". There will be opportunities for consumers to buy extra add-ons like special filters, etc. "
So, folks, that's it - special filters, etc. Magical words.
Re:and this is how... (Score:5, Interesting)
Market bubbles happen when something takes on an unreasonable value and continues to grow, people see that it grows and jump on, causing further growth, until there aren't enough new entrants to sustain the expected and required growth. Sometimes the subject of the transaction is something of actual value (property, raw materials), other times it's something of only representative value (Flowers [wikipedia.org], dotcom companies). A few investors can help the bubble grow, but they certainly aren't the cause. If anyone can be blamed, it's those who sensationalize and provide positive news coverage to bubbles, causing more people to join who might not have done so otherwise.
I saw signs of the housing bubble in 2002 when houses that I felt weren't worthy started crossing the $150,000 mark in this market. When we got married in 2007 we chose not to buy another house, thank goodness. We instead did so in 2010-2011 after the market crashed and got a short-sale for about half of what was owed on it. Our only real lament is not selling the old house when prices seemed ridiculous and renting for a couple of years. We could have tripled our square footage and had no loan if we had done so.
As for the dotcom bubble, that happened because a lot of people who didn't understand technology thought that those who claimed to had something of value, and thousands of companies that had no real product got money poured at them by greedy people who expected to be the next Bill Gates. Fast forward to now, and Zuckerberg is already a rich man, and his company is strong at the moment, so his acquisition isn't really the same thing.
Re:and this is how... (Score:5, Interesting)
Not having a loan also means having the option of having more disposable income when raising children, or being able to have a work arrangement more compatible with personally raising kids. It also means that if one is absolutely fed up of one's job, one has the choice of leaving when one doesn't have to worry about where to live.
Our current loan is financed at 3.75%. We're well aware of the benefits of having a very inexpensive loan. But, even if we had the cash to invest or to pay a chunk of the loan off with, we'd seek to "recast" the mortgage to have both the lion's share paid and to have ridiculously low monthly payments, instead of investing, because owning a home is a sure thing, while investing certainly is not. If anything, we could buy third property and rent that property out too, like we did our old home, and make even more money. But, we're not worried about that, and since we're not terribly greedy people, we're not looking for every possible avenue to make money.
Zuckerberg won't like it when Facebook is Public (Score:4, Interesting)
Once Facebook goes public, Zuckerberg is going to be in for a RUDE awakening. He won't be able to treat it like his little piggybank, he will have to consult the board (his bosses after it goes public) for anything he does and the board can fire him.
The vast majority of tech companies that have gone public in the last 15 years have ended up firing the founding CEO after a period of mismanagement shortly after the companies go Public. The exceptions to this rule are rare and I doubt Zuckerberg is going to be one of them. This is the type of stuff they do and after the company is public and the founders ownership is GREATLY diluted they end up getting fired by the board of directors. Usually it's from not seeking maximum shareholder value, but in other cases it's for outright in ability to grow the company.
Personally, I don't think Zuckerberg is going to survive more than 5 years as CEO of the public Facebook. But the VC's and investment banks will have gotten their pound of flesh and moved on.
Re:I'm confused (Score:5, Interesting)
Since Facebook (like Google) is an advertising company, this makes a lot of sense.
Re:and this is how... (Score:5, Interesting)
I think GP was making a joke. "so on and so forth" is kind of an indicator.
Bingo! I meant that as half sarcastic and half serious. My understanding is that "some people" took some theoretical concepts and applied them to overly optimistic data. (Amongst all the other problems, and simplified terribly.) This isn't a nerds/business people thing...if you use data that thinks real estate can only go up then how is it ever going to tell you real estate otherwise?
Re:What will do to Facebook's future IPO? (Score:2, Interesting)
How does Zuckerberg own only 28% of the stock but have 57% of the voting rights? Are there really that many non-voting shareholders?
Since Google's IPO, dual class ownership structures have become very popular in the tech sector. Google didn't invent the concept; it has been common for a long time in media companies, especially news organizations, where it was felt that it would be detrimental if the shareholders at large could wield their power to exercise editorial control. In Google's case, the concern of the founders was partly that shareholders might attempt to exercise editorial control over search results, for example to inflate the position of sites belonging to advertisers, and partly that shareholders might force a myopic focus on quarterly profitability that drives so many publicly-traded companies. So Google structured its stock into two classes, A and B. Class A shares have the same ownership interest as class B shares, but every class A share has 10 votes, while each class B has only one.
In the case of Facebook, the editorial control issue isn't really there, because of the nature of what Facebook does. But concern about giving control to people who might care more about the short term than the long is certainly possible. So Facebook, and many other tech companies, go for dual class ownership structures that allow lots of people to invest and reap financial rewards from the company's success, but give a voting majority to a small group.
Incidentally, Google's founders have realized that as the company issues more class B shares it gradually dilute their control, even with the 10:1 vote ratio. Hence the recent announcement of a plan to create a third class, C, of shares that have no voting rights at all. The plan (if approved by the SEC) will do a 2:1 stock split, effectively, by paying a "dividend" of one class C share to the holder of each class A or B share. So the number of shares outstanding will double, but half will be non-voting. Google can then start giving class C shares to employees, and, if they need to raise money, can issue a new batch of class C shares for sale on the open market without diluting the founders' control. Theoretically, this might allow the founders to sell half of their stock (all their C shares) without losing any control, so they are required to sell an A or B share for every C they sell, meaning they have to stay invested if they want to stay in control.
I expect that lots of young tech companies will follow Google's lead in this, too. Expect Zuckerberg to retain control through the IPO and for many years afterward.
Re:and this is how... (Score:5, Interesting)
There are very few people who have any real wealth besides what's on paper. Even those in illegal economies like drug dealers have their money stored as paper. Not many have their wealth in tangible goods, and many who have tangible goods have luxury items like diamonds.
Take away all of the paper and all of the records instantly and I'd guess that 99.9999% of the population would be within spitting distance of each other, wealth-wise. Ironically, farmers would probably be the best off, if they have equipment for production and land.
Re:Standing in awe (Score:4, Interesting)
Facebook is already one of the best software developers in the world.
1. They "compile" PHP into C++ and then into assembly
2. Each update to their software requires propagation of a 1.5GB binary blob
3. ( 2 ) was causing so much trouble that they implemented an internal Bit Torrent system by which the servers pull the blob.
4. Still, several per cent of servers fail to load the new software image on each deployment and have to be manually updated.
5. The ( unitary ) release manager has a karma rating system by which to punish developers who make mistakes. This can be "corrected" by bribing him with liquor and cake.
You still think they are one of the best?
Re:and this is how... (Score:5, Interesting)
Ten years ago, people were deploying exactly the same technologies on the back end (VM instances that were live migrated, spawned and destroyed on demand, and - where needed - fault tolerant using redundant images kept in sync on separate instances). Back then, it was called grid computing, not cloud computing. Twenty years earlier, almost the same thing was called a mainframe, or a mainframe cluster if you wanted your cloud to encompass multiple sites.
The only real change with the cloud is that now we're doing the same things but with cheap commodity hardware and cheap commodity software. For example, fault tolerance is now part of the standard Xen distribution, but if you wanted to roll it out a decade ago you needed to pay a company like Marathon a lot of money for their hypervisor. If you wanted to roll it out two decades ago, you bought a very expensive VMS system from DEC / Digital (later HP). Now, you can have two (or more) instances of the same VM running on separate sub-$1000 computers, and if one computer dies then people using it don't notice. Total cost of deployment is a couple of thousand dollars of equipment and a couple of hours of time.
It's the same thing with a lot of other technologies: it's not that they're especially novel, it's that now you can do something everywhere you want to, where previously you could only afford to do it everywhere you absolutely needed to.