The Road Show Not Taken

Two RoadsCameras lined the steps to the Sheraton in midtown Manhattan, eager to get a glimpse of the headliner at a packed house for the show about to unfold. A new Broadway star? A young lion of Hollywood? Nope. Mark Zuckerberg, the CEO of Facebook arriving to take part in the road show for his company’s initial public offering, wearing, of course, a black hoodie.

With all that demand, you’d think that there would be plenty of IPOs these days. Not so. In fact, we’re struggling through a multi-year drought brought on by tougher regulations and the global financial crisis.

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In an October, 2011 report, the IPO Task Force makes several recommendations to the Department of the Treasury on “Rebuilding he IPO On-Ramp” many of which are directed at opening up the availability of IPO road shows.

Consulting a SEC expert friend of mine, I was surprised to learn that interested retail investor aren’t excluded per se from road shows; companies just tend to concentrate their attentions on fund managers whose job it is to buy offerings of new stock. But in these days of inexpensive bandwidth, and low-cost video production, why not open high-demand shows like Facebook’s to the public by webcasting them?

To Facebook’s credit, they have taken a big step in this direction with their online road show, something that is now permitted under new SEC rules:

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You can’t call it a webcast, since it’s a canned presentation. Here are my takeaways from the 30-minute video:

  • Facebook sees a point when social overtakes search, so watch out Google.
  • Great Money Quote from the ice cream guys: “Having people talk about Ben & Jerry’s is a key part of our strategy.”
  • People are spending more time online, but online’s share of spend is underrepresented.
  • Reach: Facebook has a daily audience reach that is double that of American Idol’s finale.
  • Relevance: Facebook says that it can match businesses with people who will buy their products with 90% accuracy, more 2x the average of traditional media.
  • Engagement: Facebook helps advertisers establish an ongoing connection with a customer versus a traditional ad, which is one time and one way  
  • Social context: People trust personal recommendations more than any other type of purchase influence. What Facebook is doing is word of mouth at scale. Facebook also says that message recall is more than 40% greater with social ads versus traditional.
  • Margins have ranged between 34 and 53% over the past few years, which they believe is remarkable since the company considers this period as one of heavy investment.

There’s obviously some great meat here, but there is not much Facebook’s legendary Achilles’ heel: mobile. People are increasingly accessing Facebook via a mobile device

Not much on the mobile issue, other than that the company says that it plans to invest heavily in mobile. I would also like more on Facebook payments, which is currently experiencing robust growth powered by online game purchases of virtual goods.

Of course, the big thing that’s missing is Q&A.  Who’s up for a Facebook-hosted town hall with Mark & Sheryl? It might drive the lawyers crazy, but it would certainly be the road show not taken.