Facebook Ousts Chief Financial Officer Gideon Yu

Posted by: Spencer Ante on March 31, 2009

Very surprising news out today in Silicon Valley. Facebook has let go of its chief financial officer Gideon Yu, reports the Wall Street Journal.

Facebook spokesman Larry Yu confirmed to BusinessWeek that CFO Yu will be leaving the company. Now the big question is, why?

The WSJ’s Jessica Vascellaro speculates in her story that the company needs to get a new CFO because it is thinking of going public sooner than expected. The search for a replacement, she writes, is “likely to renew speculation that Facebook, which has previously said it hopes to go public within the next few years, is stepping up plans to do so despite the rocky economy.”

But this is hard to believe, given the rough IPO market and the fact that Facebook is not yet profitable on GAAP basis. However, the company said at the same time it announced Yu’s departure that it has produced positive earnings before interest, taxes, depreciation and amortization, or EBITDA, for the past five quarters and expects to be cash-flow positive in 2010. Moreover, the fact that Facebook let go of CFO Yu without having a replacement suggests that this was an unexpected move.

Yu’s departure comes as he was in the process of trying to raise money for the fast-growing startup—one of his primary responsibilities as a CFO. Last week, I broke the news that Facebook was trying to raise as much as $100 million in debt financing to pay for its rising technology costs.

Facebook may have a hard time raising money for reasons that go beyond the credit crisis affecting so many U. S. companies. The company received a rich $15 billion valuation when Microsoft took a stake in the startup in October of 2007. It would be very difficult if not impossible to find an investor willing to give Facebook a similar valuation given the steep drop in equity markets over the last year.

“It makes it harder to raise money now,” says one Valley CEO of the $15 billion valuation. “The capital strategy is the responsibility of the CFO. At the end of the day there is no one else to point to.”

In the meantime, here is Facebook’s official statement:

“Facebook confirms that CFO Gideon Yu will be leaving the company. Gideon has played an important role in helping us achieve our financial success, building a strong finance team and establishing the core financial operations of our company. We are grateful to Gideon for his contributions to Facebook and what we are trying to accomplish. Despite the poor economic climate, we are pleased that our financial performance is strong and we are well positioned for the next stage of our growth. We have retained Spencer Stuart to lead our search for a new CFO and will be looking for someone with public company experience.”

Reader Comments

Mary

March 31, 2009 6:30 PM

Facebook is burning money too fast while lacking good revenue model. It's difficult if not impossible to raise money (a rare commodity these days)no matter how capable the CFO is.
Getting a new CFO won't solve the problem.
Getting a new CEO may solve the problem because the fundamental need to be fixed first.

Rohit Nallapeta

March 31, 2009 6:42 PM

I am a little flabbergasted by this statement of FB going public. Can somebody please explain how can somebody go public with nothing to offer, I mean in terms of real world monetization. Even a virtual goods business or paid app platform (ideas conjured by sheer randomness) makes some sense… but why go public when the only way you know to make money is sell stock of unknown value… seems like another financial scheme ;)

John

March 31, 2009 7:41 PM

Facebook will never even come close to being as profitable as a google or a similar company because 98% of facebooks users are either teens or are broke which makes them less desirable for an advertiser to advertise their products/services to.

On the other hand the teens will eventually get older, get jobs + credit card and the broke users will eventually find a job and move out of their parents house. So these users may become a huge goldmine.

MKadguy

March 31, 2009 9:17 PM

FB's audience is actually considerably older than what John thinks. Yes--there are a lot of teens. However, they have an extremely large 21+ audience, 35+ audience and growing 55+ audience.

In my opinion, they have a failing ad model--they can't think they'll be able to succeed unless they can have a fluid and quite large IAB-sized ad sales-based revenue stream.

That means dropping a minimum spend, decreasing CPMs and finding a way to automate the process for campaigns under $10K/month.

Tom Vellaringattu

March 31, 2009 9:27 PM

Facebook can be profitable if they open up some of their pages (blogs, walls, etc) where the data is not very private public so they can be spidered by google and other search engines. Then those pages can get better search engine positions and better ad monetization. With a close structure the value of the traffic to facebook pages will be dull and the revenue potential diminished.

Thomas

March 31, 2009 9:52 PM

I get the impression that John's probably not a Facebook user. There are many prominent people now on Facebook. A good number of my "friends" make over six figures a year. It's become a great networking tool. I've received more professional job offers from my Facebook profile, than from Linked-In! You're probably thinking of Myspace. In that case I agree. Anyone over 35 should definitely not have a Myspace page!

Osagie

April 12, 2009 3:32 PM

facebook really needs to get some kind of priority list first they want 2 move 2 newyork now they fire their CFO under severe financial crisis i mean they need a CSA (common sense analyst)cuz wit abad revenue model,10 offices world wide(on which they pay tax),poor ad system and some kind of microsoft monopoly I dont think they are headed any where for now except nowhere

sitco

April 16, 2009 5:25 PM

wow, I own a internet company, revenue is very small, nobody heard about me, but I am still profitable. facebook can make money, it need to first study the behaviour of it customers and then supply with than need and get pay for it.

jared

May 18, 2009 9:25 PM

Anyone have an idea where Gideon is headed? I mean, he didn't leave on bad terms, so he must be looking for a new spot that can use his talents.

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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