the valuation of the decade: bia/kelsey's modeling and strategic … · 2012-05-02 · •...
TRANSCRIPT
The Valuation of the Decade:
BIA/Kelsey's Modeling and Strategic Analysis
of Facebook's Financial Performance
Welcome to today’s webinar – which includes a special preview of the
report “$100B Valuation: Can Facebook Support It… and How”
For Audio: You may listen through your speakers or dial in:
Toll: +1 (951) 266-6125 | Access Code: 154-647-269
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© 2012 BIA/Kelsey. All Rights Reserved.
On Today’s Webinar
Jed Williams Analyst and PD
Social Local Media
Matt Booth Chief Strategy Officer and PD
Interactive Local Media
Jeanne Dattilo Manager
Media Valuations
Peter Vogel Cofounder
Plink
Niel Robertson CEO
Trada
Victoria Ransom CEO
Wildfire
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© 2012 BIA/Kelsey. All Rights Reserved.
Today’s Webinar Agenda
Audience
Q&A
1
2
3
4
5
Lightning Round
with CEOs
BIA/Kelsey
Financial
Modeling
BIA/Kelsey
Strategic
Analysis
CEOs’ Insights
& Vision for
Facebook’s
Growth
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© 2012 BIA/Kelsey. All Rights Reserved.
Lightning Round
Peter Vogel Cofounder
Plink
Niel Robertson CEO
Trada
Victoria Ransom CEO
Wildfire
"What is the most
compelling aspect
of the Facebook
IPO that you think
will have a
significant market
impact?"
?
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© 2012 BIA/Kelsey. All Rights Reserved.
Financial Analysis of Facebook’s Growth
Financial Modeling
Jeanne Dattilo Manager
Media Valuations
2
6
© 2012 BIA/Kelsey. All Rights Reserved.
Valuation Disclaimer
• Our analysis is not a valuation of Facebook.
• We extrapolated the growth in Facebook’s revenues & EBITDA
based on 2007 – 2011 performance.
• This allows us to assess the plausibility of a $100B market
valuation and analyze what Facebook can do strategically to
achieve this.
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© 2012 BIA/Kelsey. All Rights Reserved.
Valuation Methodology
• Traditional valuation methodology – Discounted Cash Flow
(DCF) analysis.
• Examine historical revenues, expenses and cash flow.
• Estimate future revenues, expenses and cash flow over a 7-8
year period.
• Calculate a perpetuity value for cash flows beyond 7-8 years.
• Discount all cash flows to present value using a discount rate.
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© 2012 BIA/Kelsey. All Rights Reserved.
Facebook's Historical & Projected
Financial Performance in (000,000)'s
2019
2007
$153
Revs
$262
Expenses
($109)
EBITDA
-71.0%
Margin
EBITDA - earnings before interest, taxes, depreciation, and amortization
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© 2012 BIA/Kelsey. All Rights Reserved.
Facebook's Historical & Projected
Financial Performance in (000,000)'s
2007
2019
56.0%
Margin
2011
$153
Revs
$262
Exp
($109)
EBITDA
-71.2%
Margin
$3,711 Revs
$1,632 Expenses
$2,079
EBITDA
56.0%
Margin
EBITDA - earnings before interest, taxes, depreciation, and amortization
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© 2012 BIA/Kelsey. All Rights Reserved.
Facebook's Historical & Projected
Financial Performance in (000,000)'s
2007
2019
$153
Revs
$262
Exp
($109)
EBITDA
-71.2%
Margin
$3,711
Revs
$1,632
Exp
$2,079
EBITDA
56.0%
Margin
2011
$37,691
Revs
$16,584 Expenses
$21,107
EBITDA
56.0%
Margin
EBITDA - earnings before interest, taxes, depreciation, and amortization
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© 2012 BIA/Kelsey. All Rights Reserved.
Facebook Valuation Drivers & Result
• Assumed Discount Rate = 8.8%
• DCF Result = $99.7B
• $99.7B Business Enterprise Value = $103.3B Equity Value
• $103.3B Equity Value
2.5B Shares = $41.10 per share
DCF - Discounted Cash Flow
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© 2012 BIA/Kelsey. All Rights Reserved.
Strategic Analysis of Facebook’s Growth
Adjacent Advertising Sectors
Transformative New Businesses
3 Strategic Analysis
a
b
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Facebook’s Advertising Possibilities
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© 2012 BIA/Kelsey. All Rights Reserved.
Facebook’s Advertising Possibilities
Mobile
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Facebook’s Advertising Possibilities
Mobile
Search
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© 2012 BIA/Kelsey. All Rights Reserved.
Facebook’s Advertising Possibilities
Mobile
Offers / Deals
Search
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© 2012 BIA/Kelsey. All Rights Reserved.
Facebook’s Advertising Possibilities
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© 2012 BIA/Kelsey. All Rights Reserved.
Facebook’s Growth Necessitates
New Business Expansion
To Support $100B Valuation:
Revenue Must Grow at 30% CAGR to $50B; EBITDA must hit $29B.
This Growth Outstrips the Entire U.S. Display
Market by 2015.
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© 2012 BIA/Kelsey. All Rights Reserved.
Transactions & Payments:
What Could Happen…
Audience (or installed base)
Ma
rk S
ize
Payments & Credits
Sign in with Facebook ID extends to “PayHere” with Facebook Credits
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© 2012 BIA/Kelsey. All Rights Reserved.
Revenues in $millions CBS 14,245
ABC/Disney 18,714
NBC 20,234
Netflix 3,205
Blockbuster 1,296
RedBox 1,562
59,255 (Total)
• Cable TV Network Revenue (from SNL Kagan – includes
Ad Rev and Affiliate License Fees) 52,100
• Broadcast TV (from Magna) 32,000
Content Distribution:
What Could Happen…
Content Distribution
& Syndication
Think of Facebook as a new type
of Content Distribution Network
Audience (or installed base)
Ma
rk S
ize
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© 2012 BIA/Kelsey. All Rights Reserved.
CEOs’ Insights & Vision for
Facebook’s Growth
3 CEOs’ Insights & Vision
for Facebook’s Growth
Jed Williams Analyst and PD
Social Local Media
22
© 2012 BIA/Kelsey. All Rights Reserved.
Facebook’s Future
Victoria Ransom
CEO, Wildfire
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© 2012 BIA/Kelsey. All Rights Reserved.
How Did Timeline Impact
Business Fan Pages?
Victoria Ransom CEO
Wildfire
• What happened to your Facebook business page around March 30th?
• Wildfire Timeline Impact Study - 67 Brands over 9 weeks
• Great news for engagement
• Visual content is the big winner
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© 2012 BIA/Kelsey. All Rights Reserved.
How Does Timeline Create a
Stickier Experience for Businesses?
Victoria Ransom CEO
Wildfire
• Sticky visual content >> engagement >> earned media = Word of Mouth
• 102% increase in custom app traffic (Recommend.ly Study)
• Timeline milestones highlight small businesses in an intimate way
25
© 2012 BIA/Kelsey. All Rights Reserved.
What Does This Mean for
Facebook’s Revenues?
Victoria Ransom CEO
Wildfire
• Facebook Offers
• Mobile Sponsored Stories
• Freemium Model in the Future?
26
© 2012 BIA/Kelsey. All Rights Reserved.
What Powerful Facebook
Marketing Tools May Be Next?
Victoria Ransom CEO
Wildfire
• Right fan acquisition tools
• Engagement optimization
• Offline impact analytics
• Peer reviews and ratings
27
© 2012 BIA/Kelsey. All Rights Reserved.
Facebook’s Future
Niel Robertson
CEO, Trada
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© 2012 BIA/Kelsey. All Rights Reserved.
Awareness Research Evaluation
Conversion
Interactions
Shares
Customer Service
Reviews Referrals
Awareness
Niel Robertson CEO
Trada
Traditional Marketing Funnel
29
© 2012 BIA/Kelsey. All Rights Reserved.
Facebook offers various
products for each stage.
Fans Contests Content
Conversion
Amplify
Niel Robertson CEO
Trada
The Facebook Funnel
30
© 2012 BIA/Kelsey. All Rights Reserved.
Effective fan
acquisition ads require:
Hyper-targeting and
experimentation
Targeted creative
Intelligent bid
strategies
Constant rotation
Niel Robertson CEO
Trada
Social Ads – The Challenge
31
© 2012 BIA/Kelsey. All Rights Reserved.
Facebook’s Future
Peter Vogel
Cofounder, Plink
32
© 2012 BIA/Kelsey. All Rights Reserved.
• Facebook is slow (i.e - monetization of social gaming)
• Intentional delay until after IPO
• Facebook misjudged developer’s readiness to adopt 30%
‘tax’
• Consumers are not looking for another currency
• It is already huge – generated $550M revenue in 2011
• Much bigger strategy is already underway
Why Aren't Facebook Credits
Huge Yet?
Peter Vogel Cofounder
Plink
33
© 2012 BIA/Kelsey. All Rights Reserved.
• Facebook to make Credits more user-friendly:
• Discount Promotions, BOGOs
• Credit balance to be more prominently displayed
• Ways to spend more prominent: ‘Category’ listing?
• Re-introduce peer-to-peer Credit gifting
• Facebook to make Credits more developer-friendly:
• New pricing options shortly after IPO <30% tax
• Addition of subscription/rebilling feature
• Facebook to offer featured ‘Category’ listings for hot apps
• Facebook to offer advertising perks/premier placement to
name brand vendors
• Discounts for quarterly volume levels
So, How Should We Expect Credits
to Grow in 2012?
Peter Vogel Cofounder
Plink
34
© 2012 BIA/Kelsey. All Rights Reserved.
• Credits revenue to double every year for 5 years
• Majority of Open Graph will begin to accept credits
• Peer-to-peer exchange creates new market for virtual goods,
paying off debts to friends, co-gifting
• Facebook’s ‘Check-in Deals’ to become a major player in LBS
• Large wave of innovative companies will emerge offering
consumers brand new ways to earn and spend Credits
What Else Is on the
Horizon for Credits?
Peter Vogel Cofounder
Plink
35
© 2012 BIA/Kelsey. All Rights Reserved.
BIA/Kelsey Offers
a Valuations
Report
MLM San
Francisco
b
c
Questions d
36
© 2012 BIA/Kelsey. All Rights Reserved.
BIA/Kelsey Valuations
b
c
BIA/Kelsey, leading appraisal firm.
Completed over 4,000 engagements
with aggregate value exceeding
$90B. We can help you.
See all our expertise: www.biakelsey.com/valuations
Report
MLM San
Francisco a
Questions d
37
© 2012 BIA/Kelsey. All Rights Reserved.
$100B Valuation: Can Facebook
Support It... And How
a c
Get $75 off the
“$100B Valuation:
Can Facebook
Support It… And
How” report with
promocode FBVAL
BIA/Kelsey, leading appraisal firm.
Completed over 4,000 engagements
with aggregate value exceeding $90B.
We can help you.
See all our expertise:
www.biakelsey.com/valuations
c MLM San
Francisco a
Questions d b
38
© 2012 BIA/Kelsey. All Rights Reserved.
MLM San Francisco
a c
BIA/Kelsey, leading appraisal firm.
Completed over 4,000 engagements
with aggregate value exceeding $90B.
We can help you.
See all our expertise:
www.biakelsey.com/valuations
b
a
Questions d
Have more conversations like this at
www.biakelsey.com/mlmsf june 27 c
Get $75 off the
“$100B Valuation:
Can Facebook
Support It… And
How” report with
promocode FBVAL
39
© 2012 BIA/Kelsey. All Rights Reserved.
Get $75 off the
“$100B Valuation:
Can Facebook
Support It… And
How” report with
promocode FBVAL
Questions?
a c
BIA/Kelsey, leading appraisal firm.
Completed over 4,000 engagements
with aggregate value exceeding $90B.
We can help you.
See all our expertise:
www.biakelsey.com/valuations
b
a
Have more conversations like this at
www.biakelsey.com/mlmsf
june 27 c
d
?
Questions and comments:
Jed Williams
Matt Booth
Jeanne Dattilo
© 2012 BIA/Kelsey. All Rights Reserved.
This published material is for internal client use only. It may not be duplicated or distributed in any manner not permitted by contract. Any
unauthorized distribution could result in termination of the client relationship, fines and other civil or criminal penalties under federal law.
BIA/Kelsey disclaims all warranties regarding the accuracy of the information herein and similarly disclaims any liability for direct, indirect or
consequential damages that may result from the use or interpretation of this information.