This morning Facebook announced that it had accepted a $200 million investment at a $10 billion valuation from Russian investment group Digital Sky Technologies. Over the last few weeks there have been reports of the company turning down investments at lower valuations, and debate over if the investors would get a coveted Facebook board seat (DST did not). Facebook is holding a teleconference to talk about the new investment. Below are our notes.
Mark Zuckerberg:
Despite a pretty tough economic environment, our revenue is up and growth continues. Removing barriers to communication across the web.
Advertising products performing strongly. Now have tens of thousands of advertisers. On track to create a nice self sustaining business. Lots of firms have approached us. DST approached us with an investment background demonstrating advanced background in the power of social networks. Getting this money gives us a cash cushion. Not going to talk about how it’s going to be used, but nice to have the flexibility.
Yuri Milner (DST Chief Executive):
Giving some background on DST. Largest internet investor in Russian and European markets. One of largest groups involved in exclusively internet companies. Organized as a holding company, not a fund. Since 2005, have raised and invested over $1 billion. Investment in Facebook underscores belief that social networks change the way people communicate. We’re convinced Facebook has potential to be one of the most valuable internet companies globally.
Q: How does this affect Facebook’s approach with regard to an IPO.
Zuckerberg: We want to take money that will help us realize the long term vision of the company. For lots of startups the IPO is the end goal. That’s not the case for us, it’s a milestone along the way. It’s not something we see happening on the immediate horizon.
Q: About Facebook valuation with common stock.
Zuckerberg: Nothing to report there at this time, we’ve structured a few different transactions. Over the next few months (over the summer) we’ll have more to announce.
Question about the Microsoft valuation
Zuckerberg: It’s important to note that the Microsoft deal was part of a larger partnership with the company. That was a strategic partnership with a lot of different components. That was a year and a half ago when the market was at its peak. This is only taking the form of an investment right now with DST, we’re hoping it can work into other things over time.
Q: How are you going to monetize international audience?
Zuckerberg: I want to let Yuri speak about this, because of his experience with other social networks.
Milner: Advertising and micropayments generated by users themselves. (seems to imply that Facebook will be doing payments soon, which has been long rumored)
Zuckerberg: The different models are advertising, a number of things we’ve experimented with. The bottom line with the other social networks abroad is that they’re doing well, each with a different model.
Q: Idea about projected advertising revenues going forward? What do you see your role as?
Zuckerberg: As a private company we don’t share revenue numbers. I can tell you what we’ve shared so far. A couple of months ago everyone outside the company was underestimating our performance. We expect our rev growth to be greater than 70% year over year. We know that with our current rate of growth we’ll be cash flow positive some time in 2010. This relationship is purely cash buffer.
Milner: *joke about joining management of Facebook* Says that he has his own business to run.
Q: Can you talk about why Facebook is not interested in larger brand ads?
Zuckerberg; We’re actually very interested in it. We’ve got a dedicated team, building out international offices.
Sandberg: We’re working with the largest brands around the world. Our ads are specially designed for the Facebook environment, so they look and behave differently.
Q: Quick question about the preference shares you’re issuing to DST. How similar are these to the ones Microsoft got in 2007?
Zuckerberg; We’re not going to discuss the preference structure of the stock. I’m going to duck that one.
Q: I was wondering if the $10 billion valuation includes any debt, and if the company carries any debt at all.
Zuckerberg: This is an equity investment. There is some information that has been public about debt from equipment, but this is equity.
Q: To be clear on this valuation. The $10 billion doesn’t refer to common stock. So how should we think of the valuation of Facebook itself.
Zuckerberg: That’s really up to you. As a private company there’s not really a market for the shares. One of the reasons we haven’t been as focused on that. The common stock valuation would be different from this.
Q: How many other suitors did you have? Did you line them up and pick from the highest bidder?
Zuckerberg: There were multiple discussions, we were comfortable with DST, felt like I really learned a lot from my conversations with Yuri.
Q: Is this the largest foreign investment in Facebook?
Zuckerberg: There has been other information that has been available, but the size of those things haven’t been public.
Q: There was buzz about Facebook working on a video chat feature, does this investment give you a little breathing room to focus on that kind of feature.
Zuckerberg: We’re testing that currently. Don’t think the investment has much bearing on that.