Zuckerberg Falls From Tech’s Wealthiest as Facebook Falters


Facebook Inc. (FB) co-founder Mark Zuckerberg is no longer among the world’s 10 richest technology billionaires.

The 28-year-old’s fortune dropped by $423 million yesterday as shares of the world’s largest social media company fell 4 percent to $20.04 in New York, a record low. Zuckerberg is now worth $10.2 billion. He is about $400 million behind James Goodnight, the co-founder of Cary, North Carolina-based software maker SAS Institute Inc., who now ranks as technology’s 10th- richest person, according to the Bloomberg Billionaires Index.

Mark Zuckerberg, chief executive officer and founder of Facebook Inc. Photographer: David Paul Morris/Bloomberg

“From an emotional standpoint, he might care,” said Ron Florance, managing director of investment strategy for Wells Fargo Private Bank, in a telephone interview from Winston-Salem, North Carolina. “He’s much more worried about maintaining Facebook’s market share in the social media space than the day- to-day valuation swings of his company stock. He’s not worried about going broke.”

Facebook shares have fallen 47 percent from their initial public offering price of $38. The Menlo Park, California-based company last week reported earnings that showed slowing revenue growth.

Larry Yu, a company spokesman, didn’t respond to a phone call requesting comment.

Country Club

Zuckerberg’s fortune is based on his ownership of 503.6 million shares of Facebook, including 60 million options that have an exercise price of 6 cents a share. He also has about $150 million in cash and other liquid assets.

Goodnight, 69, co-founded SAS in 1976, and is worth $10.6 billion. The company is the world’s largest closely held software maker and generated revenue of $2.7 billion in 2011, up 12 percent in a year.

SAS is valued at $15.8 billion, according to data compiled by Bloomberg. The valuation is based on the average enterprise value-to-earnings before interest, tax, depreciation and amortization multiple of five publicly traded peers. A premium has been applied, based on recent transactions in the software industry.

Goodnight, who holds two-thirds of SAS, also co-owns the Prestonwood Country Club in Cary, North Carolina, and has collected dividend payments over more than three decades.

Microsoft Corp. (MSFT) co-founder Bill Gates is the richest technology billionaire in the world with a net worth of $61.6 billion, according to the index.

By Peter Newcomb and David de Jong Bloomberg

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Underage and on Facebook


Facebook is mulling over letting children below the age of 13 join its network, but with so many signed up already, what difference would it make?

FACEBOOK’S minimum age should be 21. This argument mooted by CNN blogger John D. Sutter will no doubt get the support of many parents who worry about safety and privacy issues on the social media network. That is, those parents who have not secretly signed up, or helped to sign up, their children on Facebook.

Facebook (FB) already has an age limit 13 years old but the reality is that many “underaged” children already have their own profiles on the site, parents’ consent notwithstanding.

In fact, it is estimated that some 7.5 million children below the age of 13 are currently on FB, out of its total 900 million plus users worldwide.

This shows that the minimum age requirement on FB is just a number. Facebook does little, if anything, to enforce it, and one can simply lie about their birth date to circumvent the rule.

So why the charade?

As suggested by the Wall Street Journal, which first broke the news of the social media giant’s plans to open up to tweens and even younger kids, Facebook was feeling the heat from the American authorities in relation to the Children’s Online Privacy Protection Act (COPPA).

The Act stipulates that online services catering to children below 13 would need to obtain the consent of their parents before collecting data from them. COPPA also requires that parents be given the ability to review, revise and delete their children’s data.

Hence, with the number of pre-teen children registering on the site growing by day, Facebook knows it can no longer turn a blind eye to its minefield. Coming clean is perhaps its only option in defending itself from any potential legal action.

As it acknowledged in a statement: “Enforcing age restriction on the Internet is a difficult issue, especially when many reports have shown that parents want their children to access online content and services.”

Facebook founder Mark Zuckerberg himself had earlier said he would like to see kids under 13 use FB “more honestly and in compliance with the law”.

“My philosophy is that for education you need to start at a really, really young age… Because of the restrictions, we haven’t even begun this learning process… If they’re lifted then we’d start to learn what works. We’d take a lot of precautions to make sure that they (younger kids) are safe…,” he was quoted.

The conspiracy theorists of course say freeing the shackles is one way for Facebook to recoup its losses after a disappointing debut at the share market. Widening its user base will certainly broaden its revenue-raising opportunities, especially in the mobile apps and ad sector, and add to its market value.

Then there is the brand loyalty factor getting them young is the best way to get users hooked for the future, and guard against any possible defection to “cooler” social media networks to come.

Whatever the motive, the reality remains stark there is a high number of active FB tweens and they can no longer be ignored.

Choy: Many parents of children who are being bullied online feel they can’t do anything about it.

Time to Like

As he sees it, officially opening up to the under-13s can be a positive move, says CyberSecurity Malaysia chief executive officer Lt Col (R) Prof Datuk Husin Jazri.

“By officially allowing children to sign up, Facebook can keep tabs on how many Facebookers below 13 there are,” he opines.

In Malaysia, for instance, it is no secret that many tweens have their own FB accounts, with most having signed up either with the consent and help from their parents, siblings or close relatives; or by “cheating” Facebook, that is, changing their birth date to make the computer system accept them as above 13.

It is not clear how many Malaysian children are now online but with some 12.5 million Malaysian FB users recorded this year, it is safe to say that there are many.

In fact, global social media and digital analytics company Socialbakers estimated that some 2.2% of Malaysian Facebookers were aged 13 and below last August (around 248, 528). That is a rough estimate at best; with our below-18 population totalling up to 11.2 million (approximately 2.87 million children are in primary school), it is difficult to pinpoint how many FB minors are signed up on a fake age.

Malaysian Communications and Multimedia Commission (MCMC) chairman Datuk Mohamed Sharil Tarmizi agrees that removing the token age restriction is perhaps the most effective way to protect our children on Facebook.

This will create openness among the tweens and their parents, says Sharil.

“Children will not need to hide that they have FB accounts any more and would be encouraged to share their online experiences with their parents. If they do not bypass the protection measures (as kids nowadays are very IT savvy), the children should get the age appropriate online protection they need against the adult world’ of Facebook,” he adds.

However, both agree that this will only be effective if Facebook fulfils its commitment to introduce a new suite of tools for parents to keep their children safe when they register a FB account and interact on the social networking site.

Sharil, who is also vice-chairman of the International Telecommunications Union (ITU) Council Working Group on Child Online Protection (COP), a specialised organ of the United Nations based in Geneva, Switzerland, reminds parents that children are minors first and foremost.

“Children under 13 are typically in the primary school group and need extra supervision, guidance and care,” he stresses.

Husin proposes that specific accounts for those below 13 be created with suitable contents and safeguards to enable parents and guardians to continually provide assistance as well as monitor the online activities of these young Facebookers.

Sharil: ‘Children need guidance and supervision. Online tools and technologies can never replace the care and guidance that parents can give’

“Facebook for those below 13 should be categorised as a special account, different from the adult Facebook accounts. They should introduce some kind of system to ensure that the children obtain parental consent before they get accepted to sign up, and whenever a child requests for or accepts a new Facebook friend, parents should be alerted,” he adds.

Dangerous playground

Still, as many parents would be deigned to admit, no matter how vigilant you are, it is still a big bad Web out there.

“Parents can only guide and monitor their children, they cannot really change the environment,” says a father-of-three who only wants to be known as Arshavin.

You will still need the help of the policy makers and service providers, among others, to make the Internet, and specifically Facebook, safe for children, he adds.

“No matter how well-trained or educated your children are, some places are just off limits, even if you go there with them.

“I read this one comment that I think captures it well will you let your elementary school child attend a college or adult party?’. You won’t, right?” he poses, warning that some parents might be lulled by a false sense of security for their children on Facebook if the new ruling is implemented.

Social media specialist Jasmin Choy agrees, highlighting cyber-bullying as one danger for young children on FB. The problem is intensified as many parents are not equipped to deal with it, she says.

“Many parents of children who are being bullied online feel they can’t do anything about it. Then there are those who just don’t know what is happening to their kids in cyberspace, or those who are not giving enough guidance to their kids and are becoming bullies online,” she says.

Opposing the social media network’s plans to open up their membership for children under 13, the mother of two relates a recent cyber-bullying case close to her heart.

“It happened to a friend’s child who is sensitive and fragile. She was already being subtly bullied online when the girls ganged up on her and made her feel like she was stupid. The problem was, the mother didn’t know what to do about it. If she intervened, the daughter would be very embarrassed. On the other hand, if the mum didn’t intervene, these girls would go on bullying her daughter.”

Another red flag for children, she warns, is online porn and sexual predators.

“Many parents have no idea how much porn is being served up to the kids online. They think they have some idea but are often shocked when they discover how accessible porn is to their six- to13-year-olds.”

As Choy highlights, one only needs to go to some of the game apps on FB to receive porn advertisements.

“Many pop up even on innocent-looking Facebook games. Besides, curious kids are going to share images and if there’s FB and Twitter they will see it,” she says, advising parents to “prepare” their children by educating them about the birds and the bees at an early age.

“We can’t be prudish about it. They are going to see it anyway, so why not explain to them before trouble brews.”

The main danger she foresees, however, is the breach of privacy.

“Think about all the times we chatted with a young kid on FB. We must have at least mentioned the child’s name, asked them how their day was… things like that. We tend to forget the dangers when we are having fun online. Bad people can easily glean information from the chats the adults have with young kids on FB posts,” she says.

Choy also strongly believes that pre-teens are particularly vulnerable because most do not have the maturity to handle problems related to FB or be aware of the dangers.

“Even if they are aware of the dangers, they can’t often see the danger in front of them. Even adults don’t react fast enough to FB risks, what more children of that age,” she says.

Along with the threat of paedophiles, there is also worry that young children will be subjected to unscrupulous advertisers and marketers on Facebook, or have their personal data sold to advertisers.

Not surprisingly, Zuckerberg has already been lobbied by a coalition of consumer, privacy and child advocacy groups to keep children’s data confidential and the site ad-free for the below-13s in the United States.

For bank officer Aslina, addiction is her big worry.

“Just like adults, kids tend to spend way too much time on Facebook and can get addicted to it. Instead of studying or socialising with friends and playing games or sports, they will be logged on FB.”

And, cautions teacher Mary K, parents might not be able to withstand another pressure should FB open its doors to pre-teens peer pressure.

“Now they will be pressured to join because all their friends are on it. It will be a difficult time for parents, “ she says.

Arshavin agrees.

“I asked my 16-year-old daughter why she is on FB, and she said it was to watch what her friends are up to. But when I asked her to log off, she just whined about what she would be missing,” he says.

Calling FB a “different beast altogether”, Choy who is a proponent of the Internet as a study tool vows to keep her children away from it as long as she can.

“I really believe all young kids should have access to the Internet. My six-year-old can Google search for any information related to his hobbies or studies at any time with the tablet. YouTube has given him access to various documentaries he can watch and learn from. And why not? Technology and the Internet have made learning exciting. It has allowed my children to think out of the box. I just don’t think they should have an FB account at an early age,” she says.

If parents do decide to let the child open a FB account, she adds, they would need to constantly talk to them about the hazards and teach them good cyber habits.

“Explain over and over again why they should not reveal sensitive information like their names, location of the moment and place of residence. And check, check, check their FB settings,” she stresses.

And constantly but silently read their children’s postings to check for trouble, she adds.

This is something Alina does diligently with her two pre-teen children who are registered on FB.

“In the beginning, I was worried that I was making the wrong decision to let them get their own profiles on FB. But I read up on it and made sure that I know what is in store for them. Then I went through all the safety and security features available on FB with them before we registered.”

Most importantly, she adds, she always reminds them to be as cautious online as they would be in the real world.

Sharil agrees children should be taught as early as possible that rules and regulations exist online just as they do offline, and that there are dangerous areas online just as there are dangerous areas or things in the real world.

It is parents’ responsibility to cultivate security awareness in their children and educate them on safe Internet usage, says Husin.

“Parents must be alert of any unusual activities of their children on the Net and take the appropriate action to rectify if their child gets caught in any undesirable activities online.”

Sharil, however, reiterates that parents are the best judge of whether their child is ready for Facebook themselves.

“It all goes back to the basic skills of parenting and instilling good moral values in their children. Children need guidance and supervision. Only parents can do this effectively. Teachers, NGOs and the broader community can help but they can never replace the parent,” he notes.

Crucially, parents are at the frontlines of their children’s defence, says Sharil.

“Parents should continue to monitor their children’s online activities while encouraging appropriate online behaviour. They should not totally depend on Facebook’s parenting’ facilities. Online tools and technologies can never replace the care and guidance that parents can give.”

Ultimately, he adds, it is extremely important for parents and guardians to become good role models for their children when they are online.

By HARIATI AZIZAN sunday@thestar.com.my

Facebook comments, ads don’t sway most users: poll


In this photo illustration, a Facebook logo on a computer screen is seen through a magnifying glass held by a woman in Bern May 19, 2012. Picture taken May 19, 2012. REUTERS/Thomas Hodel

(Reuters) – Four out of five Facebook Inc users have never bought a product or service as a result of advertising or comments on the social network site, a Reuters/Ipsos poll shows, in the latest sign that much more needs to be done to turn its 900 million customer base into advertising dollars.

The online poll also found that 34 percent of Facebook users surveyed were spending less time on the website than six months ago, whereas only 20 percent were spending more.

The findings underscore investors’ worries about Facebook’s money-making abilities that have pushed the stock down 29 percent since its initial public offering last month, reducing its market value by $30 billion to roughly $74 billion.

About 44 percent of respondents said the botched market debut has made them less favorable toward Facebook, according to the survey conducted from May 31 to June 4. The poll included 1,032 Americans, 21 percent of whom had no Facebook account.

Facebook’s 900 million users make it among the most popular online destinations, challenging entrenched Internet players such as Google Inc and Yahoo Inc. But not everyone is convinced that the company has figured out how to translate that popularity into a business that can justify its lofty valuation.

Shares of Facebook closed Monday’s regular trading session down 3 percent at $26.90. Facebook did not have an immediate comment on the survey.

While the survey did not ask how other forms of advertising affected purchasing behavior, a February study by research firm eMarketer suggests that Facebook fared worse than email or direct-mail marketing in terms of influencing consumers’ purchasing decisions.

“It shows that Facebook has work to do in terms of making its advertising more effective and more relevant to people,” eMarketer analyst Debra Williamson said.

Those concerns were exacerbated last month when General Motors Co, the third largest advertiser in the United States, said it would stop paid-advertising on Facebook.

Measuring the effectiveness of advertising can be tricky, particularly for brand marketing in which the goal is to influence future purchases rather than generate immediate sales.

And the success of an ad campaign must be considered in relation to the product, said Steve Hasker, president of Global Media Products and Advertiser Solutions at Nielsen.

“If you are advertising Porsche motor cars and you can get 20 percent of people to make a purchase that’s an astonishingly high conversion rate,” said Hasker.

“If you are selling instant noodles, maybe it’s not,” he

WANING ENGAGEMENT

About two out of five people polled by Reuters and Ipsos Public Affairs said they used Facebook every day. Nearly half of the Facebook users polled spent about the same amount of time on the social network as six months ago.

The survey provides a look at the trends considered vital to Facebook’s future at a time when the company has faced a harsh reception on Wall Street.

Facebook’s $16 billion IPO, one the world’s largest, made the U.S. company founded by Mark Zuckerberg the first to debut on markets with a capitalization of more than $100 billion.

It’s coming out-party, which culminated years of breakneck growth for the social and business phenomenon, was marred by trading glitches on the Nasdaq exchange. A decision to call certain financial analysts ahead of the IPO and caution them about weakness in its business during the second quarter has triggered several lawsuits against Facebook and its underwriters.

Forty-six percent of survey respondents said the Facebook IPO had made them less favorable towards investing in the stock market in general.

While Facebook generated $3.7 billion in revenue last year, mostly from ads on its website, sales growth is slowing.

Consumers’ increasing use of smartphones to access Facebook has been a drag on the company’s revenue. It offers only limited advertising on the mobile version of its site, and analysts say the company has yet to figure out the ideal way to make money from mobile users.

Facebook competes for online ads with Google, the world’s No. 1 Web search engine, which generated roughly $38 billion in revenue last year. Google’s search ads, which appear alongside the company’s search results, are considered among the most effective means of marketing.

The most frequent Facebook users are aged 18 to 34, according to the Reuters/Ipsos survey, with 60 percent of that group being daily users. Among people aged 55 years and above, 29 percent said they were daily users.

Of the 34 percent spending less time on the social network, their chief reason was that the site was “boring,” “not relevant” or “not useful,” while privacy concerns ranked third.

The survey has a “credibility interval” of plus or minus 3.5 percentage points.

By Alexei Oreskovic SAN FRANCISCO  Newscribe : get free news in real time

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Facebook share price drops to $28, shaves $40bn off


Facebook shares fall below $30 as US authorities begin investigation into IPO

Shares continue to slump on Wall Street as lawsuits against founder Mark Zuckerberg allege company misled investors

Facebook

Electronic screens show the price of Facebook shares after they began trading in New York earlier this month. Photograph: Richard Drew/AP

Facebook’s shares dipped below $30 Tuesday as the company’s shares hit new lows and continued to struggle in the wake of its massive initial public offering (IPO).

Even as US stock markets bounced back from falls last week, Facebook’s shares slumped 9.62% to end the day at $28.84 – almost $10 below the $38 price set at their IPO earlier this month. Stock markets in the US, which had been closed on Monday for Memorial Day, ended up for the day.

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28.84  -3.07 / -9.62%
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The share slide means Facebook is now valued at $61.98bn, a sharp fall from the $104bn it was valued at when the company went public on 18 May.

The IPO has proved a disaster for Facebook and its bankers. US authorities are investigating allegations that the company gave critical information to some investors and not others. Shareholders have launched class action lawsuits against founder Mark Zuckerberg, the company and its bankers, including lead bank Morgan Stanley.

Walter Zimmermann, senior technical analyst at United-ICAP, said there was plenty of evidence that the stock could fall further. He said the share sale had represented “a mania of historic proportions”.

“This was an IPO that was going to save California and uplift the western world. It was so overhyped and overvalued that it could only fall,” he said.

Some traders pointed to technical reasons for the stock’s continuing woes. Trading in Facebook options – contracts that allow investors to make bets on the direction of a company’s shares – started Tuesday. Traders can now also “short” Facebook shares, betting that the price will fall.

Sam Hamadeh, founder of analyst PrivCo, said most of the options were “bearish” meaning traders were betting on price falls and that popular contracts were putting Facebook’s share price in the mid $20s for June and July. PrivCo estimated Facebook’s shares were worth $25 ahead of the IPO.

“The shares would have probably fallen anyway but this probably sped the process up a little bit,” he said.

Zimmerman said discussions of technical issues missed a wider point. He said Facebook had sold so many shares – 96m – that there was little appetite from investors who had not bought shares. “Who is left to buy?” he said.

News that the company is considering building its own mobile device, an area where it has struggled to make money, seems to have been shrugged off by investors.

Last week law firm Robbins Geller launched a class action lawsuit on behalf of Facebook investors against the company and its bankers. Massachusetts’ secretary of commonwealth William Galvin has sent a subpoena to Morgan Stanley demanding more details of what the bank and Facebook executives told select investors ahead of the IPO.

By Dominic Rushe in New York  guardian.co.uk

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The Facebook Illusion


THERE were two grand illusions about the American economy in the first decade of the 21st century. One was the idea that housing prices were no longer tethered to normal economic trends, and instead would just keep going up and up. The second was the idea that in the age of Web 2.0, we were well on our way to figuring out how to make lots and lots of money on the Internet.

Josh Haner/The New York Times Ross Doutha

The first idea collapsed along with housing prices and the stock market in 2007 and 2008. But the Web 2.0 illusion survived long enough to cost credulous investors a small fortune last week, in Facebook’s disaster of an initial public offering.

I will confess to taking a certain amount of dyspeptic pleasure from Facebook’s hard landing, which had Bloomberg Businessweek declaring the I.P.O. “the biggest flop of the decade” after five days of trading. Of all the major hubs of Internet-era excitement, Mark Zuckerberg’s social networking site has always struck me as one of the most noxious, dependent for its success on the darker aspects of online life: the zeal for constant self-fashioning and self-promotion, the pursuit of virtual forms of “community” and “friendship” that bear only a passing resemblance to the genuine article, and the relentless diminution of the private sphere in the quest for advertising dollars.

But even readers who love Facebook, or at least cannot imagine life without it, should see its stock market failure as a sign of the commercial limits of the Internet.

As The New Yorker’s John Cassidy pointed out in one of the more perceptive prelaunch pieces, the problem is not that Facebook doesn’t make money. It’s that it doesn’t make that much money, and doesn’t have an obvious way to make that much more of it, because (like so many online concerns) it hasn’t figured out how to effectively monetize its million upon millions of users. The result is a company that’s successful, certainly, but whose balance sheet is much less impressive than its ubiquitous online presence would suggest.

This “huge reach, limited profitability” problem is characteristic of the digital economy as a whole. As the George Mason University economist Tyler Cowen wrote in his 2011 e-book, “The Great Stagnation,” the Internet is a wonder when it comes to generating “cheap fun.” But because “so many of its products are free,” and because so much of a typical Web company’s work is “performed more or less automatically by the software and the servers,” the online world is rather less impressive when it comes to generating job growth.

It’s telling, in this regard, that the companies most often cited as digital-era successes, Apple and Amazon, both have business models that are firmly rooted in the production and delivery of nonvirtual goods. Apple’s core competency is building better and more beautiful appliances; Amazon’s is delivering everything from appliances to DVDs to diapers more swiftly and cheaply to your door.

By contrast, the more purely digital a company’s product, the fewer jobs it tends to create and the fewer dollars it can earn per user — a reality that journalists have become all too familiar with these last 10 years, and that Facebook’s investors collided with last week. There are exceptions to this rule, but not all that many: even pornography, long one of the Internet’s biggest moneymakers, has become steadily less profitable as amateur sites and videos have proliferated and the “professionals” have lost their monopoly on smut.

The German philosopher Josef Pieper wrote a book in 1952 entitled “Leisure: The Basis of Culture.” Pieper would no doubt be underwhelmed by the kind of culture that flourishes online, but leisure is clearly the basis of the Internet. From the lowbrow to the highbrow, LOLcats to Wikipedia, vast amounts of Internet content are created by people with no expectation of remuneration. The “new economy,” in this sense, isn’t always even a commercial economy at all. Instead, as Slate’s Matthew Yglesias has suggested, it’s a kind of hobbyist’s paradise, one that’s subsidized by surpluses from the old economy it was supposed to gradually replace.

A glance at the Bureau of Labor Statistics’ most recent unemployment numbers bears this reality out. Despite nearly two decades of dot-com enthusiasm, the information sector is still quite small relative to other sectors of the economy; it currently has one of the nation’s higher unemployment rates; and it’s one of the few sectors where unemployment has actually risen over the last year.

None of this makes the Internet any less revolutionary. But it’s created a cultural revolution more than an economic one. Twitter is not the Ford Motor Company; Google is not General Electric. And except when he sells our eyeballs to advertisers for a pittance, we won’t all be working for Mark Zuckerberg someday.- IHT

Facebook Inc (NASDAQ

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Facebook, Zuckerberg & banks sued over IPO


The lawsuit charges the defendants with failing to disclose “a severe and pronounced reduction” in forecasts for Facebook‘s revenue growth in the run-up to Friday’s IPO.

The lawsuit names Mark Zuckerberg, Facebook’s founder, as a defendant, as well as top Silicon Valley investors Peter Thiel and Marc Andreessen. Photograph: AFP/Getty Images

Facebook, Morgan Stanley and some of the biggest names in Silicon Valley are being pursued over the social network’s disastrous share sale by the law firm that won a $7bn settlement for Enron’s shareholders.

Robbins Geller is co-ordinating a class action lawsuit alleging that Facebook and its bankers misled investors about the true state of their business while informing a handful of privileged clients about the company’s true prospects.

The lawsuit, filed in New York, names Mark Zuckerberg, Facebook’s founder, as a defendant, as well as top Silicon Valley investors Peter Thiel and Marc Andreessen, and Goldman Sachs, JP Morgan and Barclays Capital.

Facebook shareholders have sued the social network, CEO Mark Zuckerberg, and a number of banks, alleging that crucial information was concealed ahead of Facebook’s IPO.

The lawsuit, filed in the U.S. District Court in Manhattan this morning, charges the defendants with failing to disclose in the critical days leading up to Friday’s initial public offering “a severe and pronounced reduction” in forecasts for Facebook’s revenue growth, as users more and more access Facebook through mobile devices, according to Reuters, which cited a law firm for the plaintiffs. (The case is Brian Roffe Profit Sharing Plan v. Facebook, 12-04081.)

Earlier this month, Facebook updated its filings with the Securities and Exchange Commission to say that the shift to smartphones and other mobile gadgets is cutting into the prices it can set for advertisers, which would in turn hurt the company’s revenue. In March, the social network had 488 million monthly average unique users of its mobile products, out of a total of just over 900 million registered users.

The plaintiffs charge that the changes to the forecast by several underwriters of the IPO were only “selectively disclosed” to a small group of preferred investors and not to the investment community at large. “The value of Facebook common stock has declined substantially and plaintiffs and the class have sustained damages as a result,” the complaint says, per the Reuters report.

Facebook’s stock opened Friday priced at $38 and, aside from a slight uptick right at the start, has been trading lower since then. It closed at $31 last night. In early trading today, shares are up better than three percent to around $32.

A report from well-known Wall Street watcher Henry Blodget, citing an unnamed source, posits that a Facebook executive was responsible for telling institutional investors, but not smaller investors, about the reduction in revenue estimates.

Speaking on CBS This Morning today, Blodget described the sequence of events regarding the estimates and the failure to fully share material information. “The fact that it was only distributed verbally to a handful of institutions as opposed to all investors is a problem,” he said.

This isn’t the only lawsuit related to Facebook’s IPO. A Maryland investor, for instance, is suing the Nasdaq stock exchange over glitches in how it handled the offering.

We’re reaching out to Facebook for comment and will update this story when we hear back.

Jonathan E. Skillings

by Jonathan E. Skillings

Facebook, banks sued over pre-IPO analyst calls

 In this photo illustration, a Facebook logo on a computer screen is seen through glasses held by a woman in Bern May 19, 2012. Picture taken May 19, 2012. REUTERS/Thomas Hodel

Wed May 23, 2012 11:02am EDT

(Reuters) – Facebook Inc and banks including Morgan Stanley were sued by the social networking leader’s shareholders, who claimed the defendants hid Facebook’s weakened growth forecasts ahead of its $16 billion initial public offering.

The defendants, who also include Facebook Chief Executive Officer Mark Zuckerberg, were accused of concealing from investors during the IPO marketing process “a severe and pronounced reduction” in revenue growth forecasts, resulting from increased use of its app or website through mobile devices. Facebook went public last week.

The lawsuit was filed in U.S. District Court in Manhattan on Wednesday, according to a law firm for the plaintiffs. A day earlier, a similar lawsuit by a different investor was filed in a California state court, according to a law firm involved in that case.

In the New York case, shareholders said research analysts at several underwriters had lowered their business forecasts for Facebook during the IPO process, but that these changes were “selectively disclosed by defendants to certain preferred investors” rather than to the public generally.

“The value of Facebook common stock has declined substantially and plaintiffs and the class have sustained damages as a result,” the complaint said.

Representatives of Facebook and Morgan Stanley did not immediately respond to requests for comment.

Facebook shares fell 18.4 percent from their $38 IPO price in the first three days of trading, reducing the value of stock sold in the IPO by more than $2.9 billion.

(Reporting by Dan Levine in San Francisco and Jonathan Stempel in New York; Editing by Gerald E. McCormick and Lisa Von Ahn)

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Facebook Seeks Political Ad Dollars


Political advertisers are going to flock to FB this year

There’s certainly money in politics, and Facebook knows it. The company, now under pressure to to justify its enormous $104 billion IPO, is trying to hire someone to maximize political advertising sales during the 2012 election season in the U.S.

“The Client Partner will establish and strengthen key relationships with national political campaigns and organizations with a focus on driving revenue, platform adoption, advertiser education, and advertiser satisfaction,” the posting on Facebook’s website says.

How much money is in politics for Facebook? That’s hard to say. But with the rise of the Super PAC, campaign spending on advertising will likely reach record-breaking levels this year. A growing percentage of that is moving online, in part because fewer people are watching live TV than during previous election years, according to the global ad agency WPP. The Hill reports that the Obama campaign alone is on track to spend $35 million on total online advertising this year, up from $16 million in 2008.

Unlike other advertisers that have questioned the value of Facebook this week, both the Romney and Obama presidential campaigns are likely to appreciate Facebook’s importance. It had 40 million U.S. users in 2008 compared with 160 million today—almost the entire American voting public, according to The Guardian.

So, yes, we’ll be seeing a lot more politics in and next to our News Feeds over the next few months, targeted based on our activity and our friends’ activity on the network. Whether the lifting of corporate spending limits on political campaigns, a result of a Supreme Court decision in 2010, will actually be a meaningful boost Facebook’s bottom line this year is unknown. The company’s total advertising revenue worldwide was about $3 billion in 2011.

Jessica Leber  Newscribe : get free news in real time

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