Inside Facebook
Inside Facebook |
- Platform update: ads, passwords, access tokens, more
- Facebook’s 99%: Later employees may pay almost double the tax rate that early employees will
- Last Chance for Early Registration to Inside Social Apps – Feb 8 & 9
- Facebook lets Open Graph apps publish to past points on Timeline
- Zynga, page tools, birthdays, more on this week’s top 20 growing Facebook apps by MAU
| Platform update: ads, passwords, access tokens, more Posted: 06 Feb 2012 04:54 PM PST As Facebook continues to review and approve new Open Graph actions, the social network announced a number of changes affecting developers working on the platform.
Action specs – The Ads API now allows developers to create Featured Stories (previously called "Sponsored Stories") using action specs rather than by ad creative type. This will make it easier for developers to adapt to new story types when they are launched (i.e., promoting stories about users listening to a song or earning a high score rather than simply "using an app" or "playing a game"). The old Sponsored Stories creative types will be deprecated as of May 1. The company provided more detail in a blog post here. Test user passwords - Facebook added the option to set a test user's password now from the Developer App to make it easier for developers to test their mobile apps. Developers can change the password of a test users from the "roles" section of the Developer App. Access tokens – Facebook reminded developers not to share access tokens between applications to ensure the security of those tokens. Game Developer Conference – The company will host Facebook Developer Day at the Game Developer Conference in San Francisco on March 5. Conference attendees can learn more about developing social games on the platform through tutorials and discussions. More details are available here. Page insights deprecation – Facebook will completely remove the old page insights from the API on Feb. 15. New auth dialog – All apps will be able to use the improved authorization dialog on Feb. 15. Developers who haven't fully configured the new dialog can disable the setting from the Developer App until the end of the month. All apps will be required to use the new dialog starting March 1. Historical actions - Facebook has taken Open Graph action backdating out of beta. Developers can now make posts to previous dates on users’ Timelines. We covered the change in more depth here. For more breaking changes and information about bugs, see Facebook’s Developer Blog. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Facebook’s 99%: Later employees may pay almost double the tax rate that early employees will Posted: 06 Feb 2012 12:21 PM PST Even Facebook isn’t immune to the “Warren Buffett” problem. The widely-respected billionaire investor has famously said that he pays a lower rate on his taxable income than his secretary. The picture may not look that different at Facebook, once all the taxes are accounted for in the company’s widely-anticipated initial public offering. Most Facebook employees who joined the company after 2007 will see almost half of their stakes in the company disappear through taxes following the IPO. That’s about twice the tax rate their much richer co-workers, who joined the company earlier, may end up paying on their holdings in Facebook. While The New York Times and The Financial Times both ran stories over the weekend pointing out that chief executive Mark Zuckerberg will pay between $1.5 and $2 billion in taxes, they’re missing a more interesting story. Zuckerberg will be paying taxes on $5 billion in gains from exercising options. He won’t be paying taxes on his current 28.2% stake in the company until he sells his shares — if he ever does. When he sells, he will pay taxes at something closer to the long-term capital gains rate (likely in the 20 to 25 percent range when you add in state and other miscellaneous taxes for Social Security and Medicare). Add the fact that he’s cutting his annual salary to $1 next year, and that means virtually all of his income should fall under the capital gains rate going forward. The story is different for most of Facebook’s 3,200 employees. They will see 45 percent of their stakes in the company withheld to pay taxes six months after the IPO, according to the filing. That’s because most later employees have restricted stock units, not actual shares that they’ve held for more than a year. Those restricted stock units will convert into shares six months after the IPO. At that time, the value of these shares will be taxed at the ordinary income rate — not the much lower long-term capital gains rate. That’s even if they were earned three or four years ago. The relevant part of Facebook’s filing is excerpted below if you want to read it yourself. We’ve also confirmed this interpretation with multiple attorneys, sources who arrange private sales of Facebook shares and founders or executives who have considered adopting RSUs as well. This is the Silicon Valley version of the Warren Buffett problem — a debate about tax fairness that is embroiling the 2012 presidential race. “You have employees who have contributed to a company's success in a similar way. Yet some are taxed on their reward at 15 percent while others are taxed at 35 percent. It is unfair,” said John B. Duncan, who was a corporate attorney for Google after serving as general counsel for Slide. He has structured restricted stock agreements for two companies and is working on a third. “It’s not necessarily restricted stock units, but it’s still the symptom of an unbalanced tax system.” Duncan adds that Facebook actually gets more of a tax deduction the more its employees earn under ordinary income. But the company gets no such deduction for what its employees take home under capital gains taxes. “Most Silicon Valley companies have no taxable income so they don't care, but these late-stage companies may realize a significant benefit off of the pain suffered by their late employees,” Duncan said. On top of that, if Facebook isn’t careful about how it dumps all of these employee shares on the market to cover taxes six months after the IPO, the stock might decline and the company may have to sell more to cover the taxes. The filing says the company has reserved 378.8 million shares subject to outstanding restricted stock units, including ones that have yet to vest. Most of these later employees — including the 2,000 or so that were hired in the last two years — are the not multi-millionaire graffiti artists The New York Times likes to write about. If you look at Quora’s boards around late 2009 when the company had about 1,200 employees, you’ll see that Facebook was offering around 10 to 15,000 RSUs for entry-level engineering talent. That’s about $400,000 to $600,000 worth of stock at the $40 price Facebook shares went for in a private auction last week. Half of that still has to be vested and then half of what’s remaining will go toward taxes. The other thing to take into account is that there are big equity drop-offs between employees who join the company at different times — a standard practice to reward the earliest employees who take the most risk. So the number of restricted stock units Facebook offers has also declined over the past two years as secondary markets have priced in the value of the shares. Restricted stock units also behave differently in one other important way: they cannot be traded. So only early employees and investors who hold real shares have been able to participate in the secondary markets that have cropped up over the last few years. Facebook also instituted an insider trading policy in 2010 that banned current employees from selling shares. The rise of restricted stock units While nobody’s feeling sorry for Facebook employees, this is an issue that affects many late-stage or recently IPO-ed companies in the technology industry. There are thousands of employees who hold restricted stock units in companies like Groupon and Zynga. Restricted stock units became popular over the last few years as more Silicon Valley technology companies chose to delay their initial public offerings. To do that, they needed to get around a Great Depression-era Securities and Exchange Commission rule that was originally designed to protect people from making bad investments in privately-held companies they couldn’t get accurate information about. The 1934 act that established the SEC said that companies with more than 500 shareholders needed to start divulging details about their financial performance. But most late-stage companies don’t want to share such sensitive information if they remain private. So to keep the official shareholder count low while still allowing employees to enjoy upside, companies like Facebook began issuing restricted stock units. The downside is that they’re taxed like ordinary income. Weighing restricted stock units against options Facebook didn’t intentionally stick its later employees with these higher rates. One of the main reasons the company is even going for an IPO is to fulfill a pledge to employees, Zuckerberg said in his letter to shareholders. “We're going public for our employees and our investors,” he wrote in the company’s IPO filing. “We made a commitment to them when we gave them equity that we'd work hard to make it worth a lot and make it liquid, and this IPO is fulfilling our commitment.” Zuckerberg just wanted a way build a business for the long-term without the distraction of public ownership. The tax issue is a side effect. In fact, if Facebook had relied more on options instead of restricted stock units, a similarly regressive tax scenario might have emerged anyway. The downside of options is that employees have to spend money to exercise them. In theory, employees can do this whenever they want. But in practice, later employees often hold off because they can’t afford to exercise them right away. They also might not want to risk tens or hundreds of thousands of dollars until they’re sure the stock is worth a lot more during an event like an acquisition or an IPO. That can stick them with the higher tax bill if they haven’t held the shares long enough to qualify for the capital gains rate. Options have also fallen slightly out of favor over the last 10 years as accounting law tightened around how to value shares in privately-held companies. For companies with strong valuations, the strike price on options can end up being quite high, diminishing their upside to employees. Ultimately, it’s difficult to say whether Facebook’s employees would have done better financially if they were issued options or restricted stock units — all taxes considered. What this means is that it’s hard to avoid ending up with a regressive tax situation on equity-based compensation in late-stage companies. It would be hard to change it too, given the complicated tangle of laws around incentivized options, non-qualified stock options, stock grants and restricted stock units. Nobody would ever propose taxing founders more, either. They provide so much of the value that makes Silicon Valley tick. Facebook employees are lucky to have joined the one big winner of the last several years out of thousands of failed startups. And yet, they will probably end up paying a higher tax rate on their much smaller portions of equity than the company’s founders, early investors and early employees will. “You can’t possibly come up with a better example than Zuckerberg. It’s $28 billion and he will probably get the absolute best tax treatment out of anyone in his company,” said Antone Johnson, who was eHarmony’s vice president of legal affairs before starting his own law firm serving early-stage companies like Gogobot on their legal needs. After this most recent class of companies — Groupon, Zynga and Facebook — which all used RSUs, we’re starting to see some companies push back. Mobile payments company Square doesn’t plan to offer restricted stock units and instead will go with standard options, according to sources familiar with the matter. If other companies in the $1 billion valuation-club follow suit, we might see a resurgence of Silicon Valley’s once-favored form of compensation. Here’s the excerpt from Facebook’s filing (some of the bolding is mine):
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Last Chance for Early Registration to Inside Social Apps – Feb 8 & 9 Posted: 06 Feb 2012 11:00 AM PST
Inside Social Apps 2012 is coming this Wednesday and Thursday to San Francisco! Pre-registration passes are $599 through tomorrow, and will be $799 at the door. Join us as we host the industry’s leading developers for two days of panels, discussions, and networking around the social and mobile app ecosystem. How do developers in the industry view today’s top challenges in social and mobile apps and games? Which platforms will see the most growth in 2012, and what are the key opportunities ahead? We’ve recently finalized our event agenda that looks at this industry’s biggest questions from the perspectives of those who are shaping it every day. View the full agenda here. Better yet, save your spot and register now. Who's Speaking? We're excited to present the following 44 confirmed speakers at Inside Social Apps 2012:
Registration Previous Inside Social Apps conferences have sold out in advance of event day, so we strongly encourage you to register now. Pre-registration passes are $599 until February 7, and will be $799 at the door. Register Now
About Inside Social Apps Inside Social Apps 2012 will explore new opportunities, as well as emerging risks, in the development, distribution and monetization of social and mobile applications. Inside Social Apps 2012 will span February 8 – 9, and will bring together the world’s leading social and mobile developers and investors for critical discussion and analysis. Social applications first made their splash in the US in 2007, and have now evolved into a global media ecosystem. Today’s social and mobile apps comprise a profitable multi-billion dollar industry, characterized by vibrant investment activity and newly emerging opportunities on mobile platforms. Inside Social Apps is Inside Network’s content-focused conference series that investigates the latest trends and challenges for social and mobile applications and the companies that bring them to market. Past Inside Social Apps events have seen sold out before conference day, so we strongly encourage you to register early. Registration Pre-registration passes are $599 through tomorrow, and will be $799 at the door. If you’re doing business in social and mobile apps, we strongly encourage you to register now. From all of us at Inside Network, we look forward to seeing you this week!
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Facebook lets Open Graph apps publish to past points on Timeline Posted: 06 Feb 2012 10:12 AM PST Open Graph apps can now post to past points on users' Timelines, according to a post on the Facebook Developer Blog. The feature, previously in beta, enables a new wave of applications that let users fill in their profiles. For instance, users can use Wipolo to indicate that they went on a trip in June 2004 and have that activity display at the right date on Timeline. Urbanspoon users can check into restaurants after the fact and have the action automatically show up in the appropriate spot. Apps that help users chronicle their past like this are a key way to enhance Timeline and could be a big opportunity for marketers and developers to engage consumers in new ways.
Facebook added a new section on its developer site focused on publishing past actions. It encourages developers to provide transparency about how past actions will be posted and give users control over the functions. Posting past actions will generate a notification indicating that a past action has been posted to a user’s Timeline. There are still some trade-offs associated with using Open Graph. Images, for example, cannot be shared as large as they can with the Photos API. (We covered these issues in more depth here.) But overall, Facebook has smartly added more resources for those working with Open Graph to promote past-tense sharing. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Zynga, page tools, birthdays, more on this week’s top 20 growing Facebook apps by MAU Posted: 06 Feb 2012 08:57 AM PST
Zynga's Hidden Chronicles grew by 7.2 million monthly active users this week, topping our list of apps growing by MAU. Page applications comprised most of the rest of the list, with birthday apps and a few Open Graph integrations continuing to grow. Titles on our list gained the most MAU of any apps on the platform, growing from between 800,000 and 7.2 million MAU, based on AppData, our data tracking service covering traffic growth for apps on Facebook. Top Gainers This Week
Page tools grew from 5.8 million MAU with Static HTML: iframe tabs. Other page apps grew significantly as well. Static Iframe Tab grew by 2.7 million MAU, Static HTML… [Second Tab] by 1.8 million MAU, Tab Builder: Gift by 1.7 million MAU, Static IFRAME Tab : ThumbsUp Icon by 1.5 million MAU and Welcome tab app for Pages with TradableBits by 1.4 million MAU. Other apps for tabs, HTML, iFrame and an app to invite friends to pages grew by 1 million to 900,000 MAU. A pair of musician page apps, BandPage by RootMusic and BandRx made the list. Two birthday apps grew significantly: MyCalendar – Birthdays by 3.2 million MAU and MiCalendario – Cumpleaños by 2.2 million MAU. These apps request users to invite all their Facebook friends before being able to complete a customized birthday calendar. Mejores Amigos, which grew by 800,000 MAU, had a similar integration.
There were also some Open Graph apps that saw some good growth. Document service Scribd, Yahoo's app and professional networking app BranchOut began asking users to invite their school and professional Facebook friends to use the app. All data in this post comes from our traffic tracking service, AppData. Stay tuned for our look at the top weekly gainers by daily active users on Wednesday, and the top emerging apps on Friday. |
Actions that are set more than three days in the past will not show in Ticker or News Feed. This will allow users to fill in several aspects of their Timelines at once without overtaking their friends’ feeds. Past actions will populate the monthly and yearly app aggregations as predefined by the developer.
| You are subscribed to email updates from Inside Facebook To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google Inc., 20 West Kinzie, Chicago IL USA 60610 | |