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Facebook: The price is right at $38

Thursday, May 17, 2012 - 02:41

May 17 - Facebook has priced at $38 a share but now the next chapter begins for the top social network, and the pressure will be on to turn users into revenue. Bobbi Rebell reports.

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PLEASE NOTE: THIS EDIT CONTAINS 4:3 MATERIAL Facebook shares priced at $38- the high end of the range, the biggest Internet IPO in history. Stern Agee Analyst Arvind Bhatia has a one-year price target of $46. SOUNDBITE: ARVIND BHATIA, SENIOR RESEARCH ANALYST, STERNE AGEE (ENGLISH) SAYING: "Given the demand that we've seen in the last couple of weeks for this stock you know it doesn't take a genius to say the stock would likely pop you know at the open. Again, I think short term action of the stock will be driven more by emotion; demand, supply, economic, not enough shares going public" REPORTER BRIDGE: BOBBI REBELL, REUTERS REPORTER (ENGLISH) SAYING: Now begins the next chapter of Facebook. CEO Mark Zuckerberg may talk a lot about focusing on the users - but his new partners, the shareholders- are in it for the money. And money is already an issue-because growth has already become an issue. Revenue was down 6 percent in the first quarter from the fourth- the first quarter on quarter drop since at least 2010. Advertising made up the majority of the company's close to $4 billion in revenue last year- but with a high profile advertiser like GM pulling out- and industry questions about the true impact of Facebook ads- there needs to be more. And there will be according to Columbia Business School's Katherine Phillips: SOUNDBITE: KATHERINE PHILLIPS, MANAGEMENT PROFESSOR, COLUMBIA BUSINESS SCHOOL (ENGLISH) SAYING: "I wouldn't be surprised if at some point there starts to be some fees for some of the services that Facebook provides to some of its customers, because there are shareholders that have to be paid." Facebook also makes money by taking a 30 percent cut of revenue generated by Zynga via Facebook credits- but growth there is slowing. The social network still hasn't really figured out strategy to make money on its users who access it on smartphones, but when it does- that could add to the bottom line. On its website, Facebook needs to maximize the exposure of the ads that it does have, by leveraging its close to a billion users to do the heavy lifting. Buzzfeed.com Founder and CEO Jonah Peretti: SOUNDBITE: JONAH PERETTI, FOUNDER AND CEO OF BUZZFEED.COM, CO-FOUNDER HUFFINGTON POST, (ENGLISH) SAYING: "You're going to start to see content that get shared and passed along and advertising that gets shared and passed along where you're only the initial exposure is the jumping off point, and all the value gets created when people start sharing with each other." Analysts say Facebook has plenty of cash to buy potentially lucrative businesses - and that too could add cash flow. Its recent billion dollar deal with Instagram will close later this year. Bobbi Rebell, Reuters.

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Facebook: The price is right at $38

Thursday, May 17, 2012 - 02:41