How Facebook Really Sta...

Now that Facebook is preparing the biggest tech IPO in history, it is possible to compare its financials and potential market value to Google’s when it went public. At first glance, all of Facebook’s numbers look bigger. Its pre-IPO revenues of $3.7 billion in 2011 are more than two and a half times larger than Google’s 2003 revenues of $1.5 billion (Google’s IPO was in 2004). Facebook’s $1 billion in profits is ten times larger than Google’s pre-IPO profits of $106 million. And its expected market cap of between $85 billion and $100 billion will dwarf Google’s IPO market cap of $23 billion. Facebook, no doubt, will be emphasizing these differences. But in many ways it is a false comparison. Facebook is going public after 8 years as a private company. Google went public much earlier in its development, after 5 full years. So, yes, Facebook at Year 8 is much bigger than Google was at Year 5 of its trajectory. A better way to see how the two companies stack up is to compare their revenues and profits at the same points in their histories. In 2008, Facebook’s fifth year of existence, its revenues were only $272 million, and it lost $56 million. If you chart Facebook’s revenues for the past five years and compare them to Google’s for the five-year period preceding its IPO (see below), a truer picture emerges of each company’s size at similar points in time. You need to compare Facebook as a 5-year-old to Google as a 5-year-old. Matching both companies year-for-year, its is clear that Google grew faster and was always substantially bigger no matter what year you look at. Year 8 for Google was 2006, when its revenues were $10.6 billion and its profits were $3.5 billion. As an 8-year-old, Google’s profits were almost as large as Facebook’s revenues as an 8-year-old. (Google was incorporated in September, 1998, so I am using 1999 as Year 1 for the purposes of this analysis. Facebook started in January, 2004, which I am counting as it’s first full year). But which company grew faster? It turns out that the 5-year compound annual growth rate for each one’s revenues during these comparable periods (2002-2006 for Google, and 2007-2011 for Facebook) was almost exactly the same: 89 percent a year (Facebook grew a smidgen faster at 89.22 percent a year versus 88.96 percent for Google, but Google started with almost twice the revenue and thus ended up much larger five years later). Facebook’s growth is astounding, but it is important to keep it in perspective. In many ways, it is still trying to catch up to Google’s past.

Analyst: All These Conc...

So, there’s been some hubbub around Electronic Arts over the last few days, as the company ramps up for the release of its third quarter earnings on February 1st. Yesterday, EA’s stock closed at $17.54 per share, which, in context, meant that the gaming goliath’s stock was down 30 percent since hitting its 52-week high in early November. This drop was mostly due to the collective shock relating to the news concerning its recently released title, Star Wars: The Old Republic , which now has a ridiculous price tag attached to it — as Wall Street is estimating the cost to be between $150 and $200 million. EA’s studio responsible for creating the much-touted online game, BioWare, spent some six-odd years developing Star Wars, and obviously there are concerns over whether or not the game will be able to satisfy the geeky desires and high expectations of both Star Wars fans and the avid World of Warcraft-playing, MMO gaming fans — especially as they’ll need to sell millions. Not always an easy audience to satisfy, but an eager and quick-to-spend audience if the game meets expectations — as the LA Times points out . (Though Trion has been having some serious success in this arena — see our post from yesterday .) Some are saying that it could be the most expensive online game in history, and at $60 a pop, obviously there are those concerned that the deficit will be too great. However, analysts at Macquerie Equities Research today said that they believe initial sales of Star Wars will still be relatively good, and are still on track to hit their target of 1.5 million. It also helps that the costs were already absorbed into EAs financials. Macquerie said that how the stock will perform will be largely affected by Star Wars’ sales, but if sales get close to their projection of 1.5 million, the firm expects the stock to make a bounce-back. While some are saying that, because EA hasn’t announced sales numbers yet, the likelihood is that sales have been not-so-good. Instead, EA has only said that it’s in a “quiet period” and will not be commenting as a result. Fair enough. Others have said that the analysis of the game’s server loads show that there isn’t as much activity, but Macquerie would like to remind those people that it’s not easy to make accurate estimates of the numbers of users based on server loads — especially without knowledge of how they’re allocating server loads. Glitches and mechanical problems have also been mentioned as influencing poor sales and low excitement, but, again, Macquerie defends EA, saying that, while this could affect the long-term outlook for the game, these kinds of problems are expected at initial release, and may not have as big of an affect as some might believe. Thus, Macquerie isn’t having any of this nay-saying, and is expecting EA’s stock to outperform — and be on the rise. The game will need about 500,000 subscribers to get close to even, and, of course, the other side is that, they could be way ahead of the ball, and if they were to get several million, well than what one analyst called “the single largest bet” of the EA CEO’s career might just turn out to be an enormous, money-raining win. What do you think?

Nearly 40% Of Facebook ...

According to new data from Benedict Evans for Enders Analysis , the number of monthly active users of Facebook’s mobile apps recently passed the 300 million mark. This is primarily due to heavy use of the iOS and Android apps, but it also takes into account apps that run on BlackBerry, Symbian, Windows Phone, iPad and feature phones. That number equates to roughly 40% of Facebook’s currently disclosed 800 million  active users. What’s interesting is that Facebook announced in September that over 350 million active users access Facebook through their mobile devices – a number that includes mobile web users as well as users of its mobile apps. Explains Evans, you can track the number of app users by going to the Facebook Page for each app then adding them up. (Alternately, one could use a service like AppData  to do something similar). At the time that Facebook announced 350 million mobile users, there were 250 million mobile app users, he says. That means that over the past few months, Facebook has seen another 50 million+ become active app users. Impressive. Evans’ findings also back up TechCrunch writer Josh Constine’s earlier report that Android has finally surpassed iPhone in terms of daily active users. But on a weekly and monthly basis, iPhone and iPod Touch are still coming out ahead. In fact, in terms of monthly active users, over 100 million are using iPhone/iPods, says Evans. (The iPad is broken out separately). BlackBerry devices and feature phones are still somewhat holding their own, while Symbian and the practically insignificant contributions from Windows Phone trail the number of iPad users whether you’re looking at daily, weekly or monthly active user counts. One thing we don’t know – and can’t know, unless Facebook itself reported it – is how many users only access Facebook on their mobile phone, never visiting the desktop site. Evans estimates that number is high, but it’s impossible to tell using currently published data.

Y Combinator Vs TechSta...

[Here's a look at how startups backed by Y Combinator or TechStars compare in terms of funding, based on the data available in CrunchBase . The guest post below is written by Edmar Ferreira, a data scientist and founder of a data analysis startup called EverWrite . He writes about making data work on makeandthink.com .] Y Combinator and TechStars are two of the first seed-stage venture funds, and they’ve each had some successful companies. But how can we analyze how they’re doing so far? One way is acquisitions, but there’s not always complete information about who sold or for how much (and anyway, most of them haven’t sold yet). Another metric would be valuations — are companies becoming more valuable over time? — but we also don’t have good access to that. What we can do is look at the amount of money raised by the companies that participated in these programs. This is not a perfect metric of success, but it’s an interesting enough signal because most of these companies need funding during their early stages as they build their products and find markets. If they are making enough progress, investors will put in more money. Here’s a closer look, using data from CrunchBase. Note that both programs have been operating for rougly the same span of time — Y Combinator in 2005 and TechStars in 2006. Total Companies Y Combinator is growing the size of its classes almost every year. There are two times more companies at it than at TechStars companies, based on the dataset. Quantity does not necessarily reflect in the quality of the portfolios, so let’s keep digging. Y Combinator: 135 TechStars: 72 Total Raised By Companies Raising a lot of money is not my definition of success, but it’s a good indication of the health of a startup in a lot of cases. Y Combinator companies as a whole raised ten times more money than TechStars companies, according to the data. Part of the reason for this great distance are the massive rounds raised by DropBox and AirBnB. Those companies distort the data, yes, but that’s quite relevant: seed-stage investors want the huge hits. Y Combinator: $627 million TechStars: $61 million Total Rounds Raised But in terms of how more typical startups do, the ability to raise rounds of funding shows they’re both doing about the same. While Y Combinator has more total rounds raised, but it also has more startups. Y Combinator: 231 TechStars: 131 Money Raised After Seed Funding To look at how the average company does, though, we need another metric. So, we computed the median amount raised by companies in the subsequent round after the acceleration process. Half the Y Combinator companies raised more than $800,000 in the next round and half raised less. Half of TechStars raised more than $500,000, half less. In other words, Y Combinator companies appear to be valued more highly than TechStars by early-stage investors. Before you read too much into that, remember that other factors can impact this metric, too — the types of companies funded by each accelerator, the proliferation of deal-hungry angels near the program, etc…. YCombinator: $ 800,000 TechStars: $ 500,000 Conclusion Y Combinator beat TechStars in many of these metrics, but none of these numbers translate to which (if either) is the best fit for your startup. That’s for you and them to figure out. If you can think of other analysis and other data that we can use, please let us know. Of course, in at least one important metric, TechStars has a huge advantage:

Microsoft Ends Another ...

Editor’s note: This guest post was written by Dave Chase , the CEO of Avado.com , a patient relationship management company that was a TechCrunch Disrupt finalist . Previously he was a management consultant for Accenture’s healthcare practice and was the founder of Microsoft’s Health platform business. You can follow him on Twitter @chasedave . While Microsoft has been the most successful platform company in history, it periodically has flirted with vertical market-specific businesses with only mixed success. In virtually all cases, it ends up exiting the vertical business. At times, this has been with great financial success, like Expedia, for example. In other cases, not so much. The latest exit is in healthcare. Microsoft is folding its Health Solutions Group into a JV with GE ( see release here ). The overriding decision in each case was to ensure the core platform business wasn’t threatened. Given the dynamics in healthcare, the threat to Microsoft’s platform business in healthcare is greater than ever. The last major platform shift in healthcare was from host-based computing to client-server. When Microsoft entered healthcare, the market was clearly shifting to Unix-based client-server systems but it was able to redirect the shift towards Windows back-end systems. That platform dominance persists 15 years later. Today, there’s a similar story. This time, however, the shift is from client-server to the cloud and mobile OS’ such as iOS and Android. With Amazon and iOS being the default platforms at the moment, Microsoft needs to put all its focus towards redirecting that shift. By removing any real or perceived threat to their 3rd party ISV partners, Microsoft is in a better position to win platform decisions. At the same time as the platform shift is happening, there’s tremendous disruption within the healthcare ecosystem itself as I wrote about in the earlier series on disruption in healthcare (see links below). While there’s lots of consolidation taking place with traditional healthcare providers, there’s a huge cohort of disruptive innovators popping up all over (e.g., MedLion and One Medical Group have been profiled here earlier). Not a week goes by where I don’t hear from some executive at an insurance company or healthcare provider who is going to launch his or her own startup. Typically they are either becoming a new kind of provider or they are developing services to support new providers. For example, this week I heard from the regional President of a major insurance company frustrated with the pace of internal innovation. These individuals see tectonic shifts and healthcare incumbents making the same mistakes newspaper companies made 10+ years ago that they are paying for now. With Microsoft’s investment in the Health Solutions Group, they’ve paid little attention to the disruptive innovators which is another major opportunity that they are freed to pursue now. Microsoft has had parallel forays in healthcare. One has been Microsoft’s most successful vertical market platform business – i.e., being the underlying platform for the vast majority of HealthIT systems. The other healthcare business is doing vertical-market specific software in healthcare with their Microsoft Amalga and HealthVault projects. Amalga has had limited success and they already acknowledged that with their earlier sale of a component of Amalga. As John Moore of Chilmark Research pointed out in his analysis : While Microsoft tried to quell EHR vendor fears in the US that this HIS solution suite, later rebranded as Amalga HIS, would only be sold overseas and not it the US, most EHR partners chose to put some distance between themselves and Microsoft. Needless to say, this created far more challenges for Microsoft and its still budding healthcare sector initiatives and the company decided to discontinue further investment in Amalga HIS in July 2010, effectively putting it on the market. Third party ISV or customer fears have often been a driver for Microsoft exiting a vertical market product area. For example, one of the key reasons Rich Barton was able to successfully position Bill and Steve for Expedia to spin out of Microsoft was that Expedia was pissing off important travel customers. At the same time they were selling millions of dollars of software to the likes of American and United Airlines, Expedia was disrupting their business model. This caused those sales teams a great deal of angst, so it was cleaner to let Expedia spin out. Here’s a recap of some of Microsoft’s past vertical market exits: Expedia: Started as a business unit inside of Microsoft. It was spun out and sold to IAC and became a stand-alone public company. HomeAdvisor Technologies Inc. This was to be the next business to spin out of Microsoft after Expedia but missed the window before the dotcom bust. It not only had Microsoft’s backing but JP Morgan Chase and GMAC-RFC had put in $100 million. It had a few divisions. One consumer-facing that was a similar to Zillow and Realtor.com and two B2B divisions. The consumer facing part became MSN’s Real Estate channel while the CRM business folded into Microsoft’s CRM business while the mortgage platform business was sold off to Freddie Mac. Sidewalk was Microsoft’s local play that was sold to CitySearch. Ballmer was quoted years later regretting that move. As the International Herald Tribune reported, It seemed a wayward foray outside Microsoft’s software business at the time. “But Sidewalk was really aimed at what we now call local search,” Mr. Ballmer says. “Sidewalk is one we should not have gotten out of.” Softimage: This was software for the movie industry that powered films such as Jurassic Park and Titanic. It was sold wholesale after a handful of years Transpoint was a bill presentment and payment solution that was a JV with First Data and Citibank that was merged into CheckFree in a deal valued at $1B. I’m confident that the Health team focused on supporting 3rd party ISV at Microsoft is very happy about this announcement as it removes one of their toughest objections from developers. The remaining vertical-specific product is the Personal Health Record, HealthVault, which remains with Microsoft. This poses little concern for most Microsoft’s ISV partners so I suspect it will remain at Microsoft but go into stasis. For Microsoft shareholders, the exit from doing vertical-specific products in healthcare is further evidence that Microsoft is focusing on its biggest opportunities.