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JPMorgan Chase & Co
Goldman Sachs Group Inc/The
Facebook Inc. (FB) will play up its prospects for expanding in mobile advertising when it begins pitching its initial public offering to investors in New York, Boston and Silicon Valley next week.
“Mobile is a key area of growth for Facebook,” Chief Operating Officer Sheryl Sandberg said in a video posted yesterday to accompany the investor road show. The shares are scheduled to start trading on the Nasdaq Stock Market under the symbol FB on May 18, according to data compiled by Bloomberg.
Executives are meeting with the social-networking service’s lead underwriters at Morgan Stanley (MS), JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS) today in New York to go over talking points ahead of the IPO, according to two people with knowledge of the matter. JPMorgan pasted a Facebook sign flanked by two of the website’s signature thumbs-up icons on the front of its Park Avenue headquarters to welcome the management team.
Facebook intends to raise as much as $11.8 billion in the IPO that would value it as high as $96 billion. Founded in 2004, the company makes most of its sales from online advertising for businesses that want to reach a user base of more than 900 million. It began this year to sell marketing messages tailored for mobile devices, part of a push to keep it from losing business to competitors including Twitter Inc. and Google Inc. (GOOG)
“They’re really going to have to prove that they can start to monetize these 900 million users, not just in a desktop environment, but more importantly in a mobile environment, which is even more questionable,” Eric Jackson, president and founder of investment firm Ironfire Capital LLC, said on Bloomberg Television’s “InsideTrack.”
Facebook executives highlighted other ways they’re trying to help advertisers reach users in the road show video. These include so-called Sponsored Stories, marketing messages woven into the status updates and other information on people’s profile pages.
“Sponsored Stories enable businesses to increase the reach and distribution of stories about their brand,” Sandberg said. “Today only a small fraction of our impressions are sponsored stories, which gives us lots of room to grow.”
The Menlo Park, California-based company had 488 million users who logged onto Facebook via mobile devices as of the end of March, according to its IPO filing. (FB)
The video presentation includes pitches from Facebook Chief Executive Officer Mark Zuckerberg as well as David Ebersman, the company’s chief financial officer. Facebook plans to hold meetings with investors on May 7 in New York, May 8 in Boston and May 11 in Palo Alto, California, according to a road show schedule.
The company is in “heavy investment stage,” Ebersman said in the video. Stepped-up spending may have an impact on margins, he suggested. The company’s operating margin slipped to about 36 percent in the first quarter from as high as about 60 percent in the fourth quarter of 2010, according to data compiled by Bloomberg. Last month, Facebook announced that it was acquiring mobile-photo service Instagram for $1 billion, the company’s largest purchase.
“While we aspire for Facebook to be a high margin business over the long run, we won’t hesitate to make additional incremental investments needed to drive user engagement,” Ebersman said. “Mobile is a good example of this investment approach.”
To contact the reporter on this story: Brian Womack in San Francisco at firstname.lastname@example.org
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