Facebook finds footing a year after IPO flop
The Nasdaq display in Times Square on May 18, 2012, when Facebook's stock went public.(Photo: Spencer Platt, Getty Images)
SAN JOSE — A year ago, Facebook was being blamed for eviscerating the tech IPO market.
This year, it could help resuscitate it.
Some stock watchers suggest Facebook's recent reversal of fortune reflects a rejuvenated tech market, and the company would have fared much better had it gone public this year.
"It's both Facebook performing well, and (a stronger) tech (market) helping any high-profile tech stock," says Bill Tai, a general partner at Charles River Ventures.
FACEBOOK FUTURE: Stock struggles to shake off malaise[1]
"What happened last year is ancient history," says John Fitzgibbon, founder of market researcher IPOScoop.com. "Facebook was a spectacular pop and flop. Market conditions were bad then."
But Facebook's strides in mobile advertising and healthier financial standing since underscore an improved tech sector, Fitzgibbon says.
"This market is stronger than people realize, with some promising IPOs," Fitzgibbon says. "Apple's stock drop is masking the true strength of (the tech-heavy) Nasdaq composite."
Two business-software companies are expected to go public Friday: Marketo, which makes marketing software, and data-visualization company Tableau Software, which recently raised its price range to $28 to $30 per share, from $23 to $26.
There could be more, with strong rumblings of potential IPOs over the next year from consumer tech players such as Twitter, Square, Dropbox and Box, among others.
Last year, the ripple of Facebook's flop extended to the market, with an absence of consumer-related Web offerings late last year and early this year.
Since Facebook stumbled out of the IPO gate, however, it has rebounded nicely.
Despite the rap against Internet companies as being money-losing story stocks, Facebook has been profitable the past two quarters.
The company recently reported $1.5 billion in revenue for its first quarter, which is 38% higher than it was in the same quarter a year ago. Facebook's net income of $219 million in the first quarter was a 6.8% improvement over the same period a year ago. That's above the 5% earnings growth being reported by Standard & Poor's 500 companies in the first quarter, says S&P Capital IQ.
At the same time, 751 million of Facebook's 1.11 billion monthly active users accessed the site on mobile devices. That's up 54% from the same time a year ago.
Facebook declined to comment on this story.
But a source close to the company, requesting anonymity because they are not authorized to speak on behalf of Facebook, says mobile has dramatically changed the social network's financial picture.
About 30% of the company's $1.25 billion in first-quarter ad revenue came from mobile ads. A year ago, not a penny of its $872 million in quarterly ads was mobile.
Still, earnings growth of 6.8% is a far cry from the skyrocketing profitability investors were thinking the company could produce when it went public in May 2012.
"Facebook has done a good job with monetization and has made impressive strides in mobile," says Morgan Flager, a partner at venture-capital firm Silverton Partners. "The tricky part is to continue to show improved monetization to meet Wall Street's increasingly high expectations (and) not alienate your existing user base by making Facebook too commercial."
Facebook remains one of only a small group of companies that can "instantly and directly" market a new product to more than 1 billion people, says James Foster, CEO of computer-security start-up Riskive.