Facebook Plans to Replace Finance Chief Gideon Yu
Bloomberg, March 31, 2009
By Brian Womack

March 31 (Bloomberg) -- Facebook Inc., the world’s largest social-networking site, is replacing Chief Financial Officer Gideon Yu and said it wants a successor with experience running a public company.

Yu, 37, joined Facebook in 2007 from video-sharing site YouTube, a unit of Google Inc. Facebook has hired executive- search firm Spencer Stuart to look for a new finance chief, according to a statement from the Palo Alto, California-based company today.

Facebook, with more than 175 million users worldwide, is charting its future amid a slowing online-advertising market and drought of initial public offerings. Chief Executive Officer Mark Zuckerberg, a Harvard University dropout, has already hired managers with experience in running public companies, including former Google Inc. executive Sheryl Sandberg.

Revenue at Facebook will increase at least 70 percent this year, according to a person familiar with the matter. The company made money before interest, taxes, depreciation and amortization, or EBITDA, in the past five quarters, said the person, who declined to be identified because the information is private. Facebook expects to be cash-flow positive in 2010, the person said.

"Despite the poor economic climate, we are pleased that our financial performance is strong and we are well positioned for the next stage of our growth," Facebook said in the statement.

Brandee Barker, a spokeswoman for Facebook, declined to comment on the company’s financial performance.

Visitor Increase

U.S. visitors to Facebook increased 77 percent in February from a year earlier, according to research firm ComScore Inc. in Reston, Virginia.

Zuckerberg, 24, said in October that the company may consider an IPO "sometime in the future but not right now." In December, Facebook said Donald Graham, the CEO of Washington Post Co., would join its board. Sandberg, formerly vice president for global online sales at Google, joined as chief operating officer in March 2008.

"It does look like Facebook is positioning itself to try to ride the next wave, when the market’s going to take on IPOs," said Rob Enderle, an analyst with Enderle Group in San Jose, California. Facebook could seek an IPO in 2010, he said.

Investor Interest

There would be no shortage of investor interest, said Francis Gaskins, editor of IPO Desktop, a research service in Marina del Rey, California.

"There’s no doubt everyone in the world would look at it," Gaskins said. A Facebook IPO probably wouldn’t be as big as Google’s in 2004, Gaskins said.

There was just one initial public offering valued at more than $50 million in the U.S. in the first quarter, unchanged from the previous three months, according to Renaissance Capital’s IPOhome.com in Greenwich, Connecticut. There were 59 in the first quarter of 2007.

Investors would want to see some signs of profitability at Facebook, said Paul Bard, an analyst at Renaissance Capital.

"It needs to be close to profitability to be a slam dunk," Bard said. "It’s not automatic just because it’s Facebook."

Ad Slump

Facebook spokesman Larry Yu declined to comment on any compensation that Gideon Yu will receive as part of his departure.

Facebook faces a slowdown in advertising spending this year. EMarketer Inc., a New York-based research firm, this week slashed its outlook for the market’s growth in the U.S. to 4.5 percent for 2009, down from an earlier estimate of 8.9 percent.

Last month, researcher IDC predicted that online ad spending in the U.S. may decline this quarter for the first time since the dot-com bust.

Facebook’s value is a matter of dispute. The company put it at $3.7 billion during negotiations over a legal settlement, according to a transcript that was part of a court case over Facebook’s settlement with ConnectU Inc.

The figure contrasts with the $15 billion valuation assigned to Facebook when Microsoft Corp. purchased a 1.6 percent stake for $240 million in October 2007. Microsoft bought the stake as part of an agreement to sell ads on Facebook.

Facebook’s lawyers argued at the June hearing that the prices weren’t comparable because Microsoft received a different class of shares.