the valuation of the decade: bia/kelsey's modeling and strategic … · 2012-05-02 · •...

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

2

© 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

3


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

4


Lightning Round


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?"

?

5


Financial Analysis of Facebook’s Growth

Financial Modeling

Jeanne Dattilo Manager

Media Valuations

2

6


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.

7


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.

8


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

9




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


10




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


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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

12


Strategic Analysis of Facebook’s Growth

Adjacent Advertising Sectors

Transformative New Businesses

3 Strategic Analysis

a

b

13


Facebook’s Advertising Possibilities

14



Mobile

15



Mobile

Search

16



Mobile

Offers / Deals

Search

17



18


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.

19


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

20


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

21


CEOs’ Insights & Vision for

Facebook’s Growth

3 CEOs’ Insights & Vision

for Facebook’s Growth

Jed Williams Analyst and PD

Social Local Media

22


Facebook’s Future

Victoria Ransom

CEO, Wildfire

23


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

24


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


What Does This Mean for

Facebook’s Revenues?

Victoria Ransom CEO

Wildfire

• Facebook Offers

• Mobile Sponsored Stories

• Freemium Model in the Future?

26


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


Facebook’s Future

Niel Robertson

CEO, Trada

28


Awareness Research Evaluation

Conversion

Interactions

Shares

Customer Service

Reviews Referrals

Awareness

Niel Robertson CEO

Trada

Traditional Marketing Funnel

29


Facebook offers various

products for each stage.

Fans Contests Content

Conversion

Amplify

Niel Robertson CEO

Trada

The Facebook Funnel

30


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


Facebook’s Future

Peter Vogel

Cofounder, Plink

32


• 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?


Plink

33


• 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?


Plink

34


• 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?


Plink

35


BIA/Kelsey Offers

a Valuations

Report

MLM San

Francisco

b

c

Questions d

36


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


$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



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


MLM San Francisco

a c




We can help you.



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


Get $75 off the

“$100B Valuation:

Can Facebook

Support It… And

How” report with

promocode FBVAL

Questions?

a c




We can help you.



b

a

Have more conversations like this at

www.biakelsey.com/mlmsf

june 27 c

d

?

Questions and comments:

Jed Williams

[email protected]

Matt Booth

[email protected]

Jeanne Dattilo

[email protected]


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.

the valuation of the decade: bia/kelsey's modeling and strategic … · 2012-05-02 · •...

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