Facebook may have missed revenue projections by $500 million

According to new analysis, the report suggesting Facebook’s revenue doubled to $1.6 billion for the first half of 2011 is actually bad news.

Earlier this week, we learned that Facebook reportedly doubled its revenue to $1.6 billion for the first half of 2011. Was this really the good news it was made out to be? PrivCo, an analyst firm for privately-held companies, doesn’t think so. In fact, the group says Facebook missed its own forecasts by about 25 percent, or nearly $500 million.

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In December 2010, Facebook announced that it had raised $1.5 billion at a valuation of approximately $50 billion, but that it had no immediate plans for the funds and would simply continue to build and expand its operations. The transaction consisted of two parts: in January 2011, Goldman Sachs completed an oversubscribed offering to its non-US clients in a fund that invested $1 billion in Facebook Class A common stock, while in December 2010, Digital Sky Technologies, The Goldman Sachs Group, and funds managed by Goldman Sachs, invested $500 million in Facebook Class A common stock at the same valuation.

PrivCo CEO Sam Hamadeh tells me that the devil is in the details. In the prospectus for the Goldman Sachs placement to its private clients, Facebook had projected first half year sales in 2011 of more than $2 billion and full year revenue of $4 billion. Furthermore, these numbers were based solely on ad revenue.

Hamadeh admits he never saw a copy of the prospectus, but he says he spoke to multiple people who did and could verify the numbers. In fact, he believes that the yearly revenue number was actually estimated to be higher $4.7 billion if you add what the company expected to make from Facebook Credits (sales of virtual goods and other content from Facebook apps and games), for which Facebook takes a 30 percent. Either way, this isn’t good news for Facebook.

“When it sold stock via Goldman Sachs to investors in January at a $50 billion valuation, it provided internal ‘conservative projections’ in investment documents circulated of ‘over $4 billion in revenue for 2011,’” Hamadeh told me. “At revenue of under $1.6 billion for the 1st half of 2011 (actually close to $1.5 according to our sources), revenue will barely exceed $3.2 billion for 2011. Facebook has seriously missed its own revenue forecasts of nearly $2 billion for 1st half 2011 by nearly $500 million, or 25 percent. (If this were a public company such as Google just announcing such results, its stock would be dropping dramatically today, perhaps by a third overnight.)”

“Connect the dots and Facebook’s undergoing a loss of momentum, possibly even a decline (it’s happened before to MySpace, and before that to Friendster), and there’s a disconnect between underlying fundamentals and media hype,” Hamadeh added. “Facebook’s ‘$100 billion IPO’ and ‘being bigger than Google’ etc. is not a given, to say the least.”

Facebook’s valuation has been all over the place in the months following the investment at $50 billion. Some look at the growth and see great prospects. Others see a dip in the last few months and think Facebook is doomed. The truth is we can only make predictions on the little data we have. Facebook is going public next year, possibly as soon as Q1 2012. This will open up the financial data floodgates, and then we’ll finally be able to figure out how far the social networking giant will be able to go.

Measuring the success of Ed Tech: Not all about test scores

Sometimes, technology gets thrown at struggling schools as a panacea for a variety of ills with predictably bad results. How should we be measuring those results, though, in the schools that are doing it right?

The New York Times ran a feature on Saturday called “In Classroom of Future, Stagnant Scores”. The article is part of a series called “Grading the Digital School” and asked some tough questions about whether technology in schools can actually improve student achievement. Most significantly, it pointed to the lack of hard data around the quantifiable success of investing in technology-rich schools. While we have a responsibility to ensure that technology is adding value in schools, I’m inclined to believe that the lack of supporting data is the result of poor measures rather than poor results.

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As noted in the article,

Since 2005, scores in reading and math have stagnated in Kyrene [the Arizona school district featured as an example of a technology-rich environment], even as statewide scores have risen.

To be sure, test scores can go up or down for many reasons. But to many education experts, something is not adding up — here and across the country. In a nutshell: schools are spending billions on technology, even as they cut budgets and lay off teachers, with little proof that this approach is improving basic learning.

Let me start by saying that I’ve seen too many technology implementations in schools that add no real educational value, but take a nice dent out of taxpayer wallets. There are plenty of ways to go about making a school “technology-rich” that actually take away from the real business of learning. When rollouts are half-hearted, teachers and parents don’t completely embrace the approach, students and teachers lack accountability, and teachers aren’t provided with the right training and coaching, then schools end up buying a lot of expensive toys. eSchool News recently highlighted schools in New Mexico that are saddled with hefty repair bills and failing, aging, abused computers from their 1:1 efforts.

I am not in the give-everyone-computers-and-watch-them-succeed camp.

However, I wouldn’t be in the business of Ed Tech if I didn’t think that the potential existed for kids to learn in new, engaging ways that prepared them for real-world challenges and managed to better differentiate instruction so that every student could be better served in our public schools. What’s happening in a district like Kyrene where everything seems to be happening the way educational technologists believe it should? Kyrene has solid community investment, good teacher buy-in, and progressive techniques. Why aren’t standardized test scores following?

On counterpoint in the article sounded fairly familiar:

Karen Cator, director of the office of educational technology in the United States Department of Education, said standardized test scores were an inadequate measure of the value of technology in schools. Ms. Cator, a former executive at Apple Computer, said that better measurement tools were needed but, in the meantime, schools knew what students needed.

It would be nice to think that schools know what kids need, but we also need to find ways to measure the more intangible skills that students acquire using technology in relevant and (I believe) powerful ways. We see technology breaking down barriers to collaboration, improving writing and criticism, providing software that differentiates instruction and gives real-time feedback to teachers on student strengths and weaknesses, and allowing teachers to guide students through rich and varied resources. Standardized tests, all too often, measure students’ abilities to take tests.

Some of the best standardized tests get at students’ critical reasoning skills and their ability to tease out abstract concepts from real-world problems. Even these, though, may not be aligned with the way students are learning, particularly in more constructivist settings where technology enables a different kind of creativity. And even in states with tests widely acknowledged as “good”, most students will see short-term bumps when schools teach to the test.

Real learning, the sort that many hope will happen in technology-rich environments, is rare when curricula are closely aligned with test materials. Don’t get me wrong – Alignment is the name of the game and tests should assess what students are learning. Too frequently, though, schools tweak and rework their curricula based on minute analyses of yearly test items. Those schools that delve deeply into subjects may find their scores for the year distinctly lacking, even if their students are richer for the deep dive. Imagine, for example, a school-wide, year-long focus on statistics and data analysis, where students use spreadsheets, scientific probes, online surveys and other tools to really explore the world around them. Invariably, scores relating to measurement, statistics, expository writing, and reporting will improve overall. However, there won’t be time that year to teach 27 other standards in English and math, no matter how many important skills and concepts students take with them.

The tests will also not measure the ability of students to manage projects independently or search the web for research materials, both of which would have been key outcomes of the project-oriented learning I described above.

Yes, we need better tests. And we need data about the real value of tech in the classroom. But more than that, we need research into pedagogy that supports the use of tech in the classroom. We need students to focus on developing portfolios rather than racking up test scores. We need students to know how to tackle a project when they encounter one (and not just Google “statistics” but really manage resources and develop and implement a plan). And we need teachers to not just have a day of professional development before school starts on how to have kids use Google Docs; they need ongoing coaching from experts in the field to ensure that all of these technology investments are adding real value, even if the tests left over from NCLB don’t have the chops to assess that value.