Facebook IPO end of 2010?

More evidence of the timing of an IPO from a Bloomberg article discussing Facebook's increasing hiring:

Facebook Inc. plans to expand its staff by as much as 50 percent this year as it benefits from a surplus of engineers amid the recession, Chief Executive Officer Mark Zuckerberg said. “No one else has been hiring,” Zuckerberg, 25, said in an interview. “It’s been a great environment for us because the economy has helped out.”

Seemingly contradicting that is this comment, however:

Zuckerberg said he’s trying to keep a lid on costs, an effort to reach positive cash flow next year (my italics). In May, Facebook moved into a decades-old building in Palo Alto, California, that he calls “the bunker” -- with unfinished cement floors and fading stickers on the front door.

“The thing I want to remind people of is we’re way closer to the beginning than the end,” Zuckerberg said in the Aug. 20 interview. “A lot of times buildings can be a signal that you’ve made it. I would rather that our building feel much more like a very large garage.”

In today's market (or any market except the most bubbly), cashflow positive is a pre-requisite for an IPO of this size. In fact fully profitable may well be the yardstick if recession continues, but failing that, wearing a hairshirt building sets the right tone for the analysts and PR scribblers. What is most interesting is that they clearly believe they will very probably need to make an IPO to get the next major tranche of funding.

Anyway, revenues are expected to be $500m this year (I believe this may be possible, because Marc Andreesson has been on record about it). With a 50% increase in staff to c 1,500 that's an approximate staffing cost of c $150m (assuming fully loaded costs of c $100k per employee per annum) - say $200m with contractors etc, which is only 40% of revenues, low for this sort of business (the "wetware" is usually the bulk of costs in any non pure-video web outfit).

Apparently Zuckerberg has tried to stay close to cash positive since founding, but assuming a more than doubling of revenues to $500m requires only a 50% increase in staff will be an interesting one to watch (one cannot help but suspect the real staffing requirements will only be met post IPO and the current troops will be flogged like (option owning) mules . Keeping 'em happy will be key! ).

This makes the ostensible reason for the decision to buy Friendfeed a bit odd though - the entire annual bill for the new 500-odd people would be c $50m, about what Facebook paid for Friendfeed. I don't fully buy that it was "for the talent" - if you are going to buy another 500 people there is a good chance that the top 10% are as good as anything Friendfeed has, so one can only assume they believe it's acquisition was required to add to the IPO credibility story - maybe to shore up the "real time" story so it doesn't look like a yesterday's man compared to Twitter.

(This will be interesting to watch, making tech acquisitions work "in the knitting" is very hard, too often they wind up being slowly strangled by the acquirer's cultural arrogance )