I would like to say that Facebook is in the news again, but if we are honest, we should probably say that it never left.
This week the actual ownership of the Social Media giant was challenged in court by Paul D. Ceglia, who claims to have financed the original Facebook site for $1000.
In the complaint filed in New York, Mr. Ceglia essentially states that he paid Mr. Zuckerberg $1000 in 2003 to build a website named “TheFacebook”.
The sketchy details alleged that the current owner of “Facebook”, Mr. Zuckerberg, agreed to give Mr.Ceglia 50 percent ownership in the website named “TheFacebook, with an additional one percent of the company for every day that passes beyond January 1, 2004, where the agreed upon website remained unfinished.
The “TheFacebook” site in question was completed on February 4, 2004; this timeframe would give Mr. Ceglia approximately 84% ownership in return for his patience if we adhere to the letter of the supposed agreement.
Will they adhere to that agreement, and what could this mean to Facebook?
The cash that Facebook generates from its advertising pursuits and other forms of revenue have now exceeded the high cost to run the required servers and the many other expenses that are required to keep Facebook up and running, so it is essentially profitable, or “in the black”.
There are many “one-time costs”, as in the $50 million dollar purchase of Friendfeed that continue to chip away at that profitability. However, investors like Digital Sky Technologies, and their $200 million dollar investment, help to offset these purchases for the future, as well as helping to make possible the public offering of Facebook, rumored to be on the horizon.
Even with investments like this, Facebook is always looking to create new income streams from virtual goods to customized advertisement.
They probably should look into items like these, considering that Facebook has reached the $500 million dollar company level.
Consider that Facebook’s total user base sits at around 300 million and its sign up rate is roughly 806,000 users per day. This rate of growth has also incurred a $100 million in debt financing directly related to server costs.
If the new income streams take hold, these statistics show a viable way to make a lot of money; 50% of Facebook active users log on to Facebook in any given day.
The average Facebook user has 130 friends and is connected to 60 pages, groups and events, and creates approximately 70 pieces of content each month.
More than 25 billion pieces of content (web links, news stories, blog posts, notes, photo albums, etc.) shared each month, and more than 150 million people engage with Facebook on external websites in this same time period.
There are more than 100 million active users currently accessing Facebook through their mobile devices and those who use Facebook on their mobile devices are twice more active on Facebook than non-mobile users.
So to Mr. Ceglia, this could mean a great deal of both money and possible big headaches, if he were to win his lawsuit.
I wouldn’t look for a “under new ownership” sign just yet however, as some have stated that New York’s Statute of limitations could put a quick end to this exercise.
Judge Thomas Brown, who is hearing the case in the New York court, however, has issued a temporary restraining order restricting any transfer of assets by Facebook.
This measure probably has more to do with procedure than actual merit in the lawsuit; considering that Mr.Zuckerberg created Facebook, and a new company, Facebook, Inc. which is different that “Thefacebook” as the lawsuit names.
To the average person, “thefacebook” and “facebook” is a trivial detail, but to those of us in this industry, even one letter out of place can mean the difference between traffic to your site or traffic to your competitor.
I will be interesting to see how this develops, but I would imagine Mr.Zuckerberg’s Facebook will remain as is when all is said and done.
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