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Zuckerberg on Top of the World?

February 07, 2012 | About:
Intelligent Speculator

Intelligent Speculator

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Last year, I made a prediction that Mark Zuckerberg would eventually become the world’s richest man, or at least come very close to it. The past week has been heaven for those who like me have been greatly anticipating the upcoming Facebook IPO. As Facebook finally filed for its IPO, Zuckerberg confirmed what many including myself firmly believed: that he plans on leading Facebook to the very top. Zuckerberg, who is yet to turn 30, will likely officially become the 9th richest man in the world once Facebook goes public. Believe me, I will be discussing the Facebook IPO and what I think about buying the shares (most already know my opinion) but today I simply wanted to talk about Mark Zuckerberg.

The guy has been able to build one of the most important companies in the world from his dorm in Harvard and looks as determined as ever to take Facebook to the top.

It’s Not About The Money

You might think that no one becomes this rich without being driven by money, by its power and by the though of passing by Bill Gates and Warren Buffett in the top rankings. I think it’s becoming more clear every day that Zuckerberg was not about the money.

Sure, you could say that it’s easy for him now. He announced he would be making $1 per year, exactly the same as Steve Jobs who seemed to mentor the Facebook founder in the later years of his life and actually said he had a lot of respect for the guy that wouldn’t sell out unlike others he had accused of doing so (Bill Gates would be the main guy). So clearly, Zuckerberg is not motivated by money these days. He also pushed off his IPO much longer than most would have and has signed the giving pledge, promising to give away at least half of his fortune.

It Never Was In Fact

Sure, you might say that it’s easy to forgo getting a salary of a few million dollars when you’re worth billions. I don’t think ,any would have been to resist selling their stakes in the earlier years. Imagine yourself being offered millions, then tens of millions and even hundreds of millions while you are still barely able to afford your own place. Props to Zuckerberg for resisting. Just take a look at founders of other companies such as Google. By the time those companies turned public, the founders barely had a few % of the company. Zuckerberg has almost 30%!!! If you saw the “Social Network” movie, you might think that he was able to accomplish that through dishonest tactics. Some parts are unclear of course but I think that overall, what he was able to do is impressive.

Facebook’s Direction

One of the big critics that Facebook faces when being compared with Google is that revenues are much lower than Google at the same stage and revenue growth as well. That is more than fair. I will discuss my opinion on why that is soon but the basic story is that Facebook still to this day probably does not spend much time on revenues and monetization. A few years from now, I expect many more companies like Zynga () to build a business model centered around Facebook.

I also think one recent move by Zuckerberg, the hire of Sheryl Sandberg, says a lot about him. This woman is exceptional, well liked and a strong leader. That is one more proof that Zuck is after improving his product, not acting in his self-interest. Many leaders would hesitate to put such a high profile leader next to them.

Clearly Not Perfect

It has been well discussed that Zuckerberg and Facebook had many privacy issues, especially in the earlier times of the company. Even recently, changes were done to the company that created a stir among users. There was also that now famous “meltdown” when Zuck was interviewed about privacy concerns at Facebook. But I don’t think anyone would argue that he has gotten much better at his position and at dealing with the media, users, etc. He’s not perfect, but I would argue that he is the perfect leader for Facebook as it moves towards its IPO.

Do you think Facebook is in a good position?

Rating: 2.4/5 (17 votes)

Comments

batbeer2
Batbeer2 premium member - 2 years ago
Do you think Facebook is in a good position?

Some facts:

Ben Graham: Do not buy IPOs

Phil Fisher: Do not buy IPOs

Batbeer2: I seek out stocks both Graham and Fisher would consider suitable for investment.

Steve Jobs: said he had a lot of respect for the guy that wouldn’t sell out unlike others he had accused of doing so (Bill Gates would be the main guy).

Steve Jobs: Sold 99.999% of his Apple shares in 1985. He retained precisely one share.

Gates: Did not sell out at the IPO of Microsoft in 1986. It was the managent of the company that had been granted options and wanted better liquidity.

Zuckerberg: Is sitting on millions of options he got at 6 cts in 2005. Who is he going to sell them to ?
batbeer2
Batbeer2 premium member - 2 years ago
One more thing....

If you were offered $ 100B; you get to keep the difference if you put either Facebook, Cisco, Macdonalds, Intel or Disney out of business.... which one would you take on ?
softdude2000
Softdude2000 - 2 years ago
I think facebook is like a trend. It may fade away but I dont think you can take down facebook with 100B whenever we want. I dont know if facebook has durability, may be not, but cannot take down at will. I think Cisco is the candidate to take on.
batbeer2
Batbeer2 premium member - 2 years ago
@ Softdude2000

Ehm.....

Cisco is sitting on $36 billion of short-term investments. With $ 100B you could be giving away switches and routers. Cisco could too. $ 100B => $ 60 B and we are back to square one.

I could spend $ 5 billion building a nice website and offer 900m facebook users $50 bucks if they convince 5 friends to switch to my site. Facebook would be toast in weeks.... no cash. It would cost me significantly less than $ 40B
Sivaram
Sivaram - 2 years ago


BATBEER2: "I could spend $ 5 billion building a nice website and offer 900m facebook users $50 bucks if they convince 5 friends to switch to my site. Facebook would be toast in weeks.... no cash. It would cost me significantly less than $ 40B"

Slightly different industries but I remember Microsoft giving away--not sure, something like $1 to $5--for users to search on Bing and purchase items through Bing, instead of Google, and it hardly had any impact. Microsoft was giving money to the end user too; whereas you are giving it to some intermediary.

Do you think people will simply want to take away their photos, contacts, messages, etc, they have built up over the years to your no-name site? Do you think people will trust your site with their personal, private, info versus Facebook, which has gained reputation?

In any case, I like your bankrupt-for-$100billion approach but the difficulty with Facebook is that, on top of the items I alluded to above, it doesn't make much money presently. This sounds bad but it also means that, counter-intuitively, it keeps competitors at bay. Some investors would be unwilling to spend, say, $50 billion, on a business that earns only $1 billion in profit. Yes, the future looks bright but, nevertheless, the present looks kind of weak.

It's kind of like how Netflix, an online video streaming business, has good future prospects, but the fact that it earns very little now, means that some competitors wouldn't enter the business. It's kind of ironic how it works; I'll bet when the business is more profitable and the early incumbents are even more entrenched, then investors will pile on.
DocMoney
DocMoney - 2 years ago
I think FB can eventually succumb to a cooler, nimbler, hipper and more aware rival, as myspace did to FB, but FB right now has google-like mind share and is more addictive than google.

But I don't care. I will not invest in FB on general principle. Just because I hate the fact that some young punk can be rich beyond anyone's wildest dreams from putting up a website, the code for which he probably stole:)

Although there is a lesson here for all of us. The fastest way go wealth is not in investing, it's in starting a company and taking it public.
batbeer2
Batbeer2 premium member - 2 years ago
>> Do you think people will simply want to take away their photos, contacts, messages, etc, they have built up over the years to your no-name site? Do you think people will trust your site with their personal, private, info versus Facebook, which has gained reputation?

Yes.

Well, they'll probably not take the stuff down. Just leave.

The people I know that spend time on FB do so because their friends are there. They want to know what's going on today. They don't think of FB as an archive for pics. Hotmail, Gmail and to an extent Snapfish for online storage....yes. Facebook.... no.

The point was, that there are some $ 100B companies out there with competitive advantages that, to me, seem superior to Facebook's.

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