Facebook’s filing on February 1st to go public unveiled a substantial amount of data regarding the company’s revenue, customer growth, use of proceeds and insight from the famed Mr. Zuckerberg, among other nuggets of previously confidential information. Overall, the message is that businesses will increase spending on social media, which will greatly benefit companies offering services in the space. This has been validated – at least in the short-term – by high valuations for social network-related stocks, such as Ren Ren (NASDAQ: RENN), Que Pasa (AMEX: QPSA), LinkedIn (NASDAQ: LNKD) and FriendFinder (NASDAQ: FFN), and others, such as Pandora (NYSE: P) and Groupon (NASDAQ: GRPN), that have gained from the rise of social networks as well.
One particularly interesting group of businesses are companies that have built their business on the Facebook platform. The main ones are Zynga (NASDAQ: ZNGA), Vringo (AMEX: VRNG) and SNAP Interactive (OTC: STVI.OB). A brief description of each of these companies and their importance to Facebook is shown below, followed by an analysis of how the valuation and volume of these companies has been impacted in the month since the release of Facebook’s S-1.
Zynga Inc. (NASDAQ: ZNGA): Zynga offers online social gaming such as poker games, word games and board games. In 2011, Zynga generated approximately $400 million, or 12%, of Facebook’s revenue.
Vringo, Inc. (NASDAQ: ZNGA): Vringo’s products include an app called FaceTones that displays photos of your Facebook friends when they call your mobile phone. The app has been downloaded close to 1 million times in the six months since it was introduced and is expected to provide the bulk of Vringo’s revenue this year.
SNAP Interactive (OTC: STVI.OB): SNAP provides online dating apps for social networking Web sites and mobile platforms, and has been installed by over 54 million users.
The following chart tracks the stock price for the aforementioned companies.
The table below shows further detail of stock price performance surrounding the registration.
Moreover, the table below displays the trade volume for the companies in discussion subsequent to Facebook’s registration filing.
In summary, the fate of the Facebook ecosystem – ranging from gaming giant Zynga and upstart Vringo to SNAP and the makers of an estimated seven million software apps integrated with the social network – is tied to the success of Facebook. Needless to say, the IPO will be clearly watched. While, public companies closely tied directly to the success of Facebook are already reaping benefits from its registration – it will be even more intriguing to see how the actual IPO will affect not only those companies, but also the plethora of businesses that operate or touch Facebook’s stratosphere. Only time will tell if the surging valuation of related stocks will continue, whether an anticipated spending spree of acquisitions will be executed and if seeding a new generation of startups will be the result.
- Frank Cordek, Associate