The combined equity of Facebook, Twitter, LinkedIn, GroupOn, Pandora Media and Zynga Game Network is estimated at more that $90 billion. This valuation has more than tripled in just a year and is continuing to grow virally causing many to question the real value of such firms and the possibility of creating "Internet Bubble 2.0" i.e. a bust.
Wealth managers need to realize the significant opportunity that being wired into this IPO network could potentially mean to their assets under management and business development plans. Early investors are cashing out and others are in process of determining their exit strategy. While all of these issues are not expected to hold their value, some will certainly continue to dominate while other platforms will be swallowed up by others and reformatted into newfangled combination platforms where personal/business/social really can be co-mingled. These new business platforms are being imagined and programmed by some of tomorrow's most wealthy and influential tech teams across all of these platforms. Smart wealth managers will see the opportunity here for new client acquisition and learn about each of these platforms and why so many millionaires will have wealth events around the eventual IPO's.
Let's take a brief look at each of these platforms and their differentiators.
In January 2012, Facebook raised another $1.5 billion of investment that boosted its valuation to an estimated $50 billion. There are an estimated 800 million users on Facebook's platform. Trading in private markets has been active in Facebook shares suggesting that some early investors might be cashing out early from their investments. Revenue has been estimated at around $1.97 billion in 2010.
In December 2011, Twitter reported raising $200 million which valued the company at $3.7 billion. While still not profitable, it is thought that 2010 revenue was around $45 million as reported in the Wall Street Journal.
It has been reported that Zynga, the maker of social games primarily on the Facebook platform, is raising $250 million to bring the valuation of the firm to around $7 billion and $9 billion. It has been estimated to have made $400 million in 2011 on sales of $850 million.
Private markets had been privately trading shares of LinkedIn ahead of its IPO. This firm has been valued at around $3 billion. LinkedIn's revenue for last year is estimated at $161 million. They had predicted in their filings that they would be profitable as of 2011. As of this writing, that information was not yet available.
Pandora and Groupon are a couple of the other platforms which have created many millionaires in their wake. Like some of the others, Facebook is not rushing to the IPO arena. Mark Zuckerberg is worried about losing key employees to cash-outs while they are in the middle of product development. Also, Facebook doesn't need the cash inflow as a result of an IPO.
The employees at these firms see the IPO as something completely different. For Facebook, where it is estimated over 1,000 millionaires will be created, some employees are eager to quit and go on to travel, retire, fund their own start-ups and other ventures according to a recent Reuters survey.
These "money in motion" events combined with more baby-boomers transferring trillions of dollars in wealth to Gen-X and Gen-Y create huge opportunities for wealth managers, firms, private banks and others who understand how to reach this audience using this very same social media platforms that generated the wealth in some cases.
The demographic of the future average high net worth individual is changing rapidly; it is much lower than at any other period of time in history. New wealth holders are a new breed of visionary entrepreneurs. Wealth managers must make efforts to understand the new paradigm of values held by these new young wealth holders. They are young, wired, savvy consumers without the brand loyalty "issues" that their parents had. They will not hesitate in changing or adding advisors simply to smarten the pot or even create competition. Wealth managers today must engage existing clients inter-generationally and must have a smart client-facing side as well. Potential clients are even more tech-savvy than ever before. And this trend is expected to continue. The simple question wealth managers should ask themselves about social media platforms is "Why not?" instead of "Why?"
Social media is not a fad and technology is not going away. Those of your who are "Flintstones" in terms of knowledge, understanding and engagement on these new platforms should make efforts to become "Jetsons."