Facebook’s Finance Chief Is Leaving

By Brad Stone
Facebook

Update | 8:43 p.m. Revising post and headline to reflect that Facebook’s statement said Gideon Yu was leaving; the company did not announce that it had dismissed him. Adding further background and details.

Responding to what it says is the swarm of conjecture about its financial situation — and perhaps positioning itself for an initial public offering — Facebook released some information about its financial status on Tuesday. It also announced that its chief financial officer, Gideon Yu, was leaving the company.

Both Mr. Yu and a Facebook spokesman, Larry Yu (no relation), declined to provide details on the reasons for the departure. But the spokesman said the company would look for a replacement who had experience running a public company. It is worth noting that Gideon Yu had that experience as the treasurer of Yahoo, before he went to YouTube and helped sell it to Google.

Mr. Yu raised Facebook’s last round of financing in 2007, which included an investment from Microsoft valuing the company at $15 billion. But he had trouble raising more money at an equivalent valuation — money the company needs to cover escalating technology costs. Facebook has also been trying to build an advertising business in a tough economy.

“Gideon has played an important role in helping us achieve our financial success, building a strong finance team and establishing the core financial operations of our company,” a Facebook spokeswoman, Brandee Barker, said in a statement. “We are grateful to Gideon for his contributions to Facebook and what we are trying to accomplish.”

Regarding its financial state, Facebook said that in the quarter ending Tuesday, it beat its own internal projections and is on track to increase revenue by 70 percent this year.

It also said it had just completed its fifth straight quarter of profitability in terms of Ebitda (earnings before interest, taxes, depreciation and amortization) and is on track to be cash-flow positive by 2010.

The spokesman said the company did not need to raise more cash to get to profitability but would entertain the idea at the right valuation. “It’s all going to be a function of valuation and a valuation we are happy with,” he said. “It doesn’t mean a $15 billion valuation for preferred stock” — the deal Microsoft struck in 2007 — “but certainly we have a certain bar that we need to hit when it comes to our own belief on what we think our company is worth.”

Larry Yu said Facebook was considering an initial offering, given its tremendous growth rate, but that it had no immediate plans to file to go public.

Comments are no longer being accepted.

Mahesh Gupta March 31, 2009 · 3:47 pm

I am not sure about public offering of a social networking site like facebook.For a small period it will be like honeymoon but how a social networking site is going to promise a higer growth in every quarter……surely this is not a real product based company who can set goal for each quarter.

CHRIS HAUSER March 31, 2009 · 3:50 pm

where there’s smoke there’s……..facebook?

Donald March 31, 2009 · 4:17 pm

Facebook and others of the ilk will only diminish in value as time passes. They have no real value other as a passing fad!

Glen March 31, 2009 · 4:25 pm

I think someone should twitter this.

Joe March 31, 2009 · 4:25 pm

As anyone in their teens or 20’s will tell you, Facebook is a part of the daily routine. It is as socially central as anything else in life. Additionally, it has maintained an aura of youth and stayed away from seeming to be for profit. Selling advertising in an environment like that can be, and I except is, highly effective and gives a great ROI. This puts Facebook in a great position to give good targeted advertising.

181 March 31, 2009 · 4:34 pm

this is what greed gets you.

Bob Z March 31, 2009 · 4:37 pm

Maybe Gideon Yu left because he didn’t want to be CFO of a public social networking company. He probably doesn’t need the money that badly.

bob March 31, 2009 · 4:38 pm

I will believe numbers from facebook when I see audited ones. If things are going so well why do they 100mm to lease more servers?

Raghav Himatsingka March 31, 2009 · 4:42 pm

Responding to Mahesh Gupta,

“I am not sure about public offering of a social networking site like facebook. … surely this is not a real product based company who can set goal for each quarter.”

This is exactly what people said about Microsoft when they wanted to charge for something intangible like software or Google, when they wanted funding to charge for what, words!? I think it’s too early to underestimate the power of a social utility like Facebook. It’s definitely the next big money making machine.

Jeff March 31, 2009 · 4:47 pm

I’m confused as to how Facebook makes money.

carlie March 31, 2009 · 4:52 pm

Facebook “jumped the shark” a while ago once moms and dads started signing up. It will burn out quickly, and the top brass knows it. They want to cash out now before the next big thing comes along this Summer.

Chris March 31, 2009 · 5:01 pm

“Fad” websites shouldn’t have IPOs… There’s no product and little future.

Eric March 31, 2009 · 5:12 pm

Business model? Is it any more promising than Twitter?

JPG March 31, 2009 · 5:18 pm

Facebook must strike quick as other social networks are quickly evolving and its darling status will likely be out of mode with 12 to 18 months.

Doug. March 31, 2009 · 5:20 pm

Sounds like smoke and mirrors to me. And you have to put into the hat to take out of the hat, and buying into Facebook just may get you burned

George March 31, 2009 · 5:24 pm

Mahesh, what you do not understand is what Facebook and pretty much all social networking sites make their money from. They do not offer a product to the users and they do not sell anything to the end user. Social networking sites are an advertising market. They gather people and allow them to categorize themselves meaning that you have very real data of what users like, what they are interested in and you can pretty much predict what they would be willing to buy. It’s a dream come true for advertisers because people are willingly doing for free what no company or researcher has been able to do … ever … Think of television. TV stations do make shows and such in order to attract viewers so that they can make you watch a commercial. Well with a social networking site it is about the same thing only you can do it with a smaller budget and a lot better because of all the data that you already have about the user. It’s personalized targeted advertising and advertising agencies are paying a lot of money for that. Because of this particular advantage Microsoft believed that Facebook is actually worth $15 billion. Of course, just like value of TV stations there is no way to know exactly how much they are worth and the problem with social networking sites is that they are too young for anyone to have enough date for a “safe” growth prediction. But they do have a huge potential meaning there’s an opportunity to become a millionaire over night ( literally ).

troyk March 31, 2009 · 5:37 pm

let the market decide …

paul schejtman March 31, 2009 · 5:52 pm

i think facebook realizes they are not growing anymore.
they have a few big quarters of growth left and the insiders want to dump the company while they can pretend its still a big opportunity.

JC March 31, 2009 · 6:09 pm

So when has socialism become capitalism again?

Tom in Raleigh March 31, 2009 · 6:13 pm

Wow, why sack the CFO? He’s not the one who ruined the interface and turned Facebook into twitter, albeit lamer and more annoying. There’s some interface designers and programmers who should get the sack–many people are abandoning Facebook because of the hash the company has made of it, and because they don’t care a whit what customers want.

Anon March 31, 2009 · 6:15 pm

George, Facebook has some of the worst advertising click-through rates in the industry. Advertising works for Google because when people search they are looking to buy something. People aren’t looking to buy anything when they visit Facebook.

You could make a case for brand advertising, but I’ve seen little evidence this has taken off. Besides, what company would want their brand associated with the god-knows-what UGC on Facebook?

Facebook has a ton of traffic, but they can’t monetize it. And sooner or later, that capricious social networking traffic will disappear to the next new fad.

Joe M March 31, 2009 · 6:17 pm

People will pay what the company is perceived to be worth. When this company goes public and hits the stock market I,m sure it will do well. All you haters out there who have never taken a chance and are negative about anything succeeding. should stick to your boring day jobs. Your the same jerks who said sell Google its overvalued at 85 dollars. Trading J&J is more your speed.

Allan J Krueger March 31, 2009 · 6:33 pm

Facebook has disintegrated into a childish mess – great idea for data mining and targeted advertising, gone wrong! PLONK!

NParry March 31, 2009 · 6:44 pm

Facebook is another unprofitable forum for inane and worthless comments spouted by lonely teens and adults. To invest in this piece of “capitalist junk” is to repeat the stupidity of the financial markets in 2008. Don’t we ever learn? It’s neither social nor marketing.

Kevin March 31, 2009 · 7:01 pm

At least facebook mobile still has the old format, before twitterbook.