In this episode of Acquired, hosts Ben Gilbert and David Rosenthal reflect on the Facebook IPO and its tumultuous aftermath, acknowledging their previous cavalier attitude towards the election cycle and the tech industry's role in America's divide. They highlight Facebook's challenges with mobile usage and monetization, which initially lacked a revenue model, and the consequential pressure to go public. Despite the IPO fiasco, which saw Facebook's stock plummet and legal troubles arise from revised earnings forecasts, the company's rapid pivot to mobile advertising became a success story. The hosts discuss the broader impact of the Facebook IPO on tech companies' approach to going public, noting a trend towards staying private longer and raising significant capital, which has implications for wealth inequality and investor accessibility. The episode also touches on the closure of Vine by Twitter and the possible sale of the service, and concludes with recommendations: the Internet History Podcast and the book "Connectography" by Parag Khanna.
"First, we apologize for our cavalier attitude towards this election cycle over the past couple episodes and our glossing over of the clearly very real problems and deep divide in America that it represented in the Skype episode."
This quote highlights Speaker A's realization of their previous oversight in addressing the political climate and its impact on the nation.
"Second, looking back on the episode, we think it actually presents a relevant parable for our country right now, and we hope some important lessons for the technology industry going forward."
Speaker B's quote underlines the episode's potential to offer insights into America's current situation and the tech industry's responsibilities.
"At the same time, Facebook's perseverance and their determination in overcoming what were massive existential challenges to their business model, as you'll hear about in this episode at incredible speed, we think can be an inspiration to us all right now on how to move forward when it doesn't look like that's super possible."
The quote from Speaker A emphasizes Facebook's determination as a source of motivation for overcoming adversity.
"Today's episode, we're trying something new. We're piloting a new idea, analyzing ipos in addition to our normal acquisition format."
This quote marks the beginning of a new thematic exploration for the podcast, shifting towards an analysis of IPOs.
"Mean both of us are very involved with early stage companies in different facets and in kind of typical customer validation customer development format. Be harsh, we'd love all your criticism."
The quote invites listeners to actively participate in the show's development by providing honest feedback.
"Our next sponsor for this episode is one of our favorite companies and longtime acquired partner Pilot for startups and growth companies of all kinds."
This quote introduces Pilot as a sponsor, highlighting its relevance to the startup community.
"But suffice to say that Facebook was founded in 2004 by Mark Zuckerberg, Eduardo Savarin, Andrew McCollum, the forgotten Facebook founder Dustin Moskovitz, and Chris Hughes."
The quote provides a brief background on Facebook's founding and its significance in tech history.
"In January 2011, Facebook separately did a rather infamous deal with Goldman Sachs that didn't go so well."
This quote refers to the problematic deal between Facebook and Goldman Sachs, which had regulatory repercussions.
"One of the risk factors is growth in use of Facebook through our mobile products, where we do not currently display ads as a substitute for use on personal computers, may negatively affect our revenue and financial results."
Speaker A's quote outlines a critical risk factor for Facebook's business model at the time of the IPO.
"But, yeah, it was not working."
The quote indicates the failure of Facebook's HTML5 app strategy, which was meant to be a flexible solution for both iOS and Android platforms.
"So one half of the huge gaping chest wound that Facebook had at this point was the app sucked, and then the other half was they had no monetization model, they made no money from mobile."
This quote summarizes the two major issues Facebook faced: a substandard mobile app and the absence of a mobile monetization model.
"They announced that they're acquiring Instagram... The entire rationale for the Instagram acquisition was around bolstering their story and their user base in mobile."
The quote explains the strategic importance of the Instagram acquisition in strengthening Facebook's mobile strategy during the IPO period.
"We believe that mobile usage of Facebook is critical to maintaining user growth and engagement over the long term."
This quote from the S-1 amendment highlights Facebook's recognition of the importance of mobile usage for its future growth.
"They were terrified that they were going to come in below expectations because they were behind on mobile and people were switching over to mobile faster than they could get products out the door and get monetization done."
The quote reveals the reason behind Facebook's decision to lower its revenue and earnings guidance, highlighting the urgency of addressing mobile challenges.
"Facebook has literally broken the Nasdaq... Nasdaq actually settles two lawsuits."
This quote describes the technical and legal issues that arose during Facebook's IPO, which had a significant impact on Nasdaq and the perception of the IPO.
"They spend the rest of the summer completely focused on mobile... mobile is our future."
This quote captures Facebook's strategic pivot towards mobile following the tumultuous IPO, emphasizing the company's commitment to addressing its mobile app shortcomings and monetization issues.
"And now the age of the native ad and advertising in the Facebook feed on mobile is born and kind of like a Phoenix rising from the ashes."
This quote highlights the pivotal moment when Facebook introduced native advertising on mobile, which was a significant turnaround point for the company, likened to a rebirth.
"Is a native Facebook ad. And when you're scrolling through that know, you scroll sort of, you stop at every story to pause and look at what it is. And for that brief moment, the advertiser has the opportunity to take over your entire captive attention in a way that they never could on desktop."
This quote explains the effectiveness of Facebook's native mobile ads, which engage users' full attention as they pause to look at each story in their feed, something that was not possible with traditional desktop advertising.
"It was great for the company. It forced them to know, step up and play with the big boys, play in big boy land and big girl land."
This quote suggests that despite the difficulties faced during the IPO, it ultimately had a positive impact on Facebook, forcing the company to mature and compete at a higher level.
"I really think that the most interesting part of that s one is where they identify risk to the business because truly they probably were working on some of the mobile advertising stuff beforehand. But it is a huge slap in the face and a huge wake up call to realize our business has an existential crisis on its hands."
This quote highlights the importance of the IPO process in making Facebook acutely aware of the risks to its business, particularly regarding mobile advertising, leading to significant strategic changes.
"It's so interesting. I think one of the lessons that Silicon Valley and the tech world seems to have absorbed from the Facebook IPO is don't go public. It's terrible."
This quote reflects the misconception in the tech industry that going public is inherently negative, a lesson that seems to have been learned from Facebook's challenging IPO experience.
"Statsig is a feature management and experimentation platform that helps product teams ship faster, automate a b testing, and see the impact every feature is having on the core business metrics."
This quote describes the services provided by Statsig, emphasizing the benefits of rapid shipping, automated testing, and measurable impact on business metrics for product teams.
"There's a few things sort of contributing to this trend. There's this notion that we've been talking about that companies want to go public later, but they are investment vehicles where large amounts of money can be deployed. So large amounts of money will be deployed."
This quote explains the shift in investment trends where companies delay going public, thus attracting large institutional investors to private markets.
"Since the development of the Internet, one thing has always been true, and that is more information will be more available to more people than previously existed."
The quote highlights the role of the internet in democratizing information access, which impacts investment strategies and opportunities.
"And there's sort of three things that a venture capitalist does, and I didn't make this up, but lots of people talk about this. But totally true principle capital. One, find companies great companies. Two, pick them. Decide if you're going to invest or not, if you think the company has high potential or not. But then three, win the deal if it's a competitive deal."
This quote outlines the three fundamental tasks of a venture capitalist, emphasizing the growing importance of winning deals in a competitive environment.
"Well, if that's the case and it's really all about just getting the best deal, then it should be more entrepreneur friendly and prices should go up and it should be much more commoditized to the point where. Exactly what's happened exactly, that investors effectively just get the minimum acceptable return that any of them are willing to deal with."
The quote discusses how the focus on winning deals impacts investment dynamics, potentially benefiting entrepreneurs and affecting investor returns.
"We want to assign this a grade based on the rubric of did it make this company a more lasting and enduring institution, have it a bigger competitive moat, make it a stronger, more viable, long lasting company."
This quote explains the criteria used to evaluate IPOs, focusing on the long-term strengthening of the company's position in the market.
"And I think had they not gone through that year and had this massive 20,000 megawatt spotlight shown on them, they wouldn't have moved so fast to plug the mobile hole."
The quote suggests that the scrutiny following Facebook's IPO was a catalyst for strategic changes that were crucial for the company's success in mobile advertising.
"So for know, tough to do. You never want to kill products that people love. But I'm rooting for Twitter to survive at all here. And so I think they need a lot more belt tightening to get there because it's not."
The quote reflects the challenges Twitter faces in maintaining its product offerings and the need for cost reductions to ensure its survival.
"And it turns out that is indeed the case. Was indeed the case. We were pointed in this direction by Nick Seaguyn, dear friend of Ben."
This quote confirms the strategic financial maneuver by Microsoft in using overseas capital for the Skype acquisition, highlighting the tax advantages of such deals.
"This is so good. If you like acquired, you will love the Internet History podcast, particularly the story part."
The quote recommends the Internet History Podcast as a valuable resource for listeners interested in the backstory of technological developments and companies.