The Social

Facebook is changing the structure of its company stock to a dual-class system, a move that hints the company may be looking toward an initial public offering--even though it says it has no plans to do so yet.

Here's how it works. Existing Facebook shareholders currently have Class A stock. That'll be converted to Class B stock, which has 10 times the voting power of Class A. Should those shareholders sell their stock when Facebook goes public, they'll be converted back into Class A stock--otherwise, they'll stay the way they are.

The story was first reported by The Wall Street Journal, which added the detail that this stock structure change will give founder and CEO Mark Zuckerberg more power unless he opts to sell stock during an IPO. But while Zuckerberg and other executives have said that they eventually plan to take Facebook public, they continue to say that there are no concrete plans for it. Two years ago, Zuckerberg said that it was "years out."

"This revision to the stock structure should not be construed as a signal the company is planning to go public," a statement from Facebook read. "Facebook has no plans to go public at this time."

Was there an unexpected rush of Facebook employees looking to cash out their stock? Yes, says BusinessWeek's Sarah Lacy, who said that the $100 million buyback orchestrated by investor Digital Sky Technologies has been oversubscribed. Which means that a fair number of employees have been looking to cash out some stock even though it may be worth far more down the road when (and if) Facebook goes public. It's the sort of thing that would've left pre-IPO Googlers feeling awfully sheepish.

But what's more surprising, Lacy found, is that the high demand for Facebook cash-outs seems to run contrary to Silicon Valley's characteristic idealism.

"What has happened to the start-up work ethic in Silicon Valley?" she asked. "Time was, the region was teeming with believers--be it believers in a company or believers in the sometimes naive, lottery-ticket hope that options would make them billionaires. People who work at the most highly valued startup in Silicon Valley and rush to sell for a smaller valuation--just as an IPO is starting to look likely--aren't believers. They are mercenaries."

Not at all, I would argue.

Imagine, for a moment or two, that you are a character whom we will call Joe Facebook. You are a software engineer, so it's pretty safe to say that you're a dude (apologies to all the women in computer science out there). You're in your mid-20s, and you've been working for Zuckerberg & co. for a few years now, ever since you graduated from Harvard or Stanford or some other big-name institution with a hefty price tag. You grew up in a small town in the Northeast or Midwest, which is why instead of living in Facebook's hometown of Palo Alto, you've opted to get a taste of the cosmopolitan by living in San Francisco and making the commute in this sweet little Prius you bought last year. Your girlfriend, who's been remarkably tolerant of all those late nights of coding, said something recently about how it's a buyer's market and she's getting sick of her roommates. Maybe you'd like to pay off some of those student loans and stop living like a bike messenger.

This, of course, is a stereotype. But employees cashing out some of their stock after working long hours and living in one of the most expensive cities in the country shouldn't be that shocking.

Facebook's salaries, people in the industry tell me, tend to be a little bit lower than those at many of their Valley counterparts. That's understandable: it's one of the hottest companies to work for, and could have a huge IPO down the line, which would mean that a lower salary now would ideally pay off big-time later. But some of those early employees were probably expecting Facebook to have gone public by now. In this kind of economic climate, there's going to be some hand-wringing.

Facebook's revenues are projected to be about $500 million this year with its current, advertising-based model. But it's just barely started to alpha-test its new "credits" payment system, a potential cash cow that was once rumored to be debuting a year ago.

The Web 2.0 bubble didn't pop suddenly like its late-'90s counterpart. Rather, it's still deflating. This week, it was made official that MySpace had acquired iLike, a social music start-up that had $17 million in venture funding pumped into it during the digital media VC heyday. But revenues didn't roll in as promised, and iLike's final sale price was reportedly just $20 million--news that called into question the profitability of an entire (big) niche of Web start-ups, ad-supported streaming music. Facebook is obviously far beyond that stage, but these reality checks can make a massive, Google-style IPO seem even further away.

Then there are services like Sharespost, an exchange for private stock trades. The fact that these sites are drumming up interest is testament to the current uneasiness of many dot-com employees, especially young ones trying to establish some stability, and more particularly those who might not be privy to the big-picture plans getting painted in the executive boardroom. Given the dreary market for M&As and IPOs right now, their supposed personal wealth might as well be in Monopoly money.

And working at a tech start-up, with its casual dress code, oddball hours (think college-style all-nighters fueled by Red Bull and pizza), and young workforce, can seem like a limbo of adolescence--even if the old dot-com stereotypes of Foosball tables and free beer are kept to a minimum. As short-sighted and greedy as it may seem, swapping in some of that Facebook stock now (not anywhere near all of it, mind you) is an upward move for the quarter-life-crisis crowd. It's a down-payment on that cute Victorian in Noe Valley, the last of those student loans, the extra cash to start building up an investment portfolio while stock prices are low. It's growing up, Silicon Valley-style. Even in the bright and happy Candyland of innovation (literally), cash is still king.

Mercenaries? Hardly. More like average 20-somethings.

eBay wants to spin off telephony service Skype into a separate publicly traded company, but something's standing in the way: Skype's founders are threatening to take back some of the technology amid a licensing dispute.

The auction giant's solution, according to a Bloomberg report on Thursday: build a new one.

This was revealed in a 10-Q regulatory filing with the Securities and Exchange Commission; eBay is not commenting beyond the filing. You can decide whether "Frankenskype" or "Skypenstein" is a better name for the hypothetical creation.

Here's what has happened: Skype's founders have established a company called Joltid Ltd., which still owns the rights to some of Skype's technology. Joltid has made the accusation that eBay doesn't have the right to do everything it wants with all of Skype's code as a result; eBay is suing Joltid to get that technology back. (Is this like the Silicon Valley equivalent of body-snatching?) But the catch is that the trial isn't scheduled until next June, which could put a big roadblock in the way of eBay's plans for a Skype IPO.

So that's why eBay is working on a total rebuild of Skype's software.

There is, however, this little issue. "The new software will be expensive and might not work," Bloomberg's article summarized. "The company said it might have to shut down Skype if the dispute with the founders isn't resolved."

eBay purchased Skype in 2005 for $2.6 billion, but it hasn't proven to be the best fit for the company. Rumors circulated that it was looking to sell Skype, possibly to Google, but then opted to take the company public instead.

Download Skype for Windows | Mac | iPhone | Windows Mobile from CNET Download.com.

Seriously, how much is Facebook worth? It's been an enigma in tech gossip for years now, as the social-networking company grows bigger and bigger and yet remains privately held. And some of Facebook's most rapid growth has taken place in the midst of a stormy economic climate that could batter any company's balance sheet. So here's a rundown of what tech blogs, news outlets, investors, and Valley gadflies have said thus far about just how much Facebook is worth.

Are all these numbers accurate? In a word, no. Some of them were rumors (albeit decently strong ones, as we've omitted some of the more ridiculous ones), and others refer to Facebook's preferred-stock valuation, which as we learned during its legal tiff with onetime rival ConnectU, that isn't necessarily anywhere close to the company's paper valuation.

One thing that's interesting: Take a look at the trajectory. Facebook's perceived valuation keeps climbing and climbing and climbing right up to its $240 million investment by Microsoft. Then, once the hype dies down (and the market starts to sputter) it tanks. It's not until, perhaps not coincidentally, the departure of chief financial officer Gideon Yu and the stronger likelihood of a new investment round that Facebook's valuation starts to climb again.

What's next? Digital Sky Technologies' investment in Facebook assumed a preferred-stock valuation of $10 billion, and employee stock trades have started at about a $6.5 billion valuation. It's not yet clear how much more the company's worth will fluctuate before, at long last, founder and CEO Mark Zuckerberg and his team decide to take it public. That is, of course, assuming that actually happens.

Facebook has named former Genentech executive David Ebersman to the office of chief financial officer. He replaces Gideon Yu, whose departure was announced at the end of March.

"We received a lot of interest in the CFO position and had the opportunity to meet with many impressive candidates," said Facebook CEO Mark Zuckerberg. "We quickly recognized that David was the right person for Facebook. He was Genentech's CFO while revenue tripled, and his success in scaling the finance organization of a fast growing company will be important to Facebook."

David Ebersman earned a bachelor's degree from Brown University in 1991, according a university Web page.

(Credit: Brown University)

Ebersman served as chief financial officer at the San Francisco-area biotechnology company Genentech from 2006 through April 2009 after moving up the ranks in the company for about a decade. The company was sold to Swiss pharmaceuticals giant Hoffmann-LaRoche in March, shortly before Ebersman stepped down.

He will officially start at Facebook in September.

Gideon Yu's departure from Facebook came amid rumors that he had failed to secure enough venture capital to keep the advertising-based company pushing forward toward profitability, something that Facebook repeatedly denied. The company said its search for a new CFO would focus primarily on "someone with public company experience." Ebersman wasn't at Genentech when it went public in 1980, but certainly did have experience running the financial operations of a public company--as well as its sale to a bigger corporation.

Two months after Yu departed Facebook, the social-networking company announced that it had received an additional infusion of venture capital, to the tune of $200 million, from Russian investment company Digital Sky Technologies.

This post was updated at 12:01 p.m. PDT.

It's been a big week for Mark Zuckerberg.

First of all, the young Facebook founder and CEO finally turned 25. That was last Thursday. But more importantly for the tech rumor mill, he's had to deal with a fresh flurry of speculation: did the company really turn down a $200 million funding round at an $8 billion valuation? Has it raised $150 million specifically so that employees can cash out their stock?

Needless to say, in Zuckerberg's interview Tuesday at the Reuters Global Technology Summit, he didn't answer any of those questions concretely. His response to the notion of more capital was, in short, that Facebook doesn't need it but that doesn't mean they won't raise it.

"If there's an investment to be done on very good terms, we will consider it if for no other reason than to have more buffer if we want to do something in the future," Reuters quoted Zuckerberg as saying. "Some of the rumblings that people are reporting on, are just different conversations that have happened, but there's really nothing new to talk about there."

He did say that it'll be "a few years" before the company chooses to go public.

There have been rumors that Facebook will launch an ad network for the developers using Facebook Platform and Facebook Connect. Zuckerberg offered the company's version of a neither-confirm-nor-deny answer when asked about this, saying (per Reuters) that "it could be a pretty natural extension for us to do something with ads or a number of other things that we've considered." Somebody's been well trained in the vague language department.

Only 25 years old, and he's already mastered that complicated Jedi trick known as the non-answer. Impressive!

Could an initial public offering be on the way for the highly ambitious Glam Media? The Valley-based advertising and media company has hired a new chief financial officer, Stephen E. Recht, who was the CFO of photo-printing site Shutterfly when it went public in 2006.

Recht replaces Ernie Cicogna, a co-founder of Glam. Cicogna will remain with the company as executive vice president of Glam Partners and general manager of the Glam Publisher Network.

"(Glam) has perfected a unique media business model and established itself as the leader in vertical content networks online," Recht said in a release. "I'm looking forward to the opportunity to contribute to the company's continued upward trajectory."

That could mean a few things: on one hand, an initial public offering, but on the other hand, Glam could have recruited him simply because it needs to make more money. With an advertising recession looming and talk of dot-com doom spreading all over the Web, Glam could just be getting down to business. For obvious reasons, a financial crisis isn't the greatest time to go public; Glam is also rumored to have gone through a round of layoffs earlier this fall.

That said, Glam (and its colorful CEO, Samir Arora) is known for its audacity. The company first made its name as an ad network on fashion and celebrity gossip sites, before branching out into everything from eco-living to African-American lifestyle to the luxury market. It's raised an astonishing amount of venture capital, has stocked its executive ranks with veterans of both print publishing and Silicon Valley, and was at the center of a rumored billion-dollar buyout offer.

Depending on whom you talked to, that buyout offer was either a fake rumor started internally to drum up Glam's market value or a savvy pre-IPO move. And that's the bipolar perception of Glam in both the tech and advertising sectors: some think it's the future of the industry, whereas skeptics see it as a big, drawn-out case of pride before a fall.

But now it looks as if there's one ex-Shutterfly executive who's betting on the former.

On Monday we heard that Facebook was allowing current employees to sell a delineated portion of their common stock, something that the company confirmed on Tuesday.

Now, VentureBeat's Eric Eldon, who also originally reported the Facebook tidbit, says that LinkedIn employees are going to have the option of doing the same. The business social network, Eldon wrote, is allowing current employees to sell 20 percent of their equity in the company at a $500 million valuation. That's quite a bit lower than the billion-dollar valuation reportedly bestowed upon the company after its recent $53 million Series D funding round.

LinkedIn declined comment on the report.

For both companies, it's probably a response to the fact that these Silicon Valley high-flyers are still independently run, with neither willing to cave to a buyout but with the likelihood of an IPO still less than concrete. According to VentureBeat, banks aren't willing to take the companies public unless they pull in higher profits.

Facebook more or less acknowledged in its confirmation statement Tuesday that the plan is a way for employees to "sit tight" while the company works on the "growth over profits" mantra that COO Sheryl Sandberg encapsulated in a talk at the F8 Conference last month. "To provide employees with a financial cushion while we continue to build the company, Facebook has designed a one-time program to enable employees to realize some liquidity," the statement read.

This story has been updated with further commentary pertaining to Microsoft's strategic interest in Facebook.

The Wall Street Journal is reporting that Microsoft is in talks to acquire a stake of up to 5 percent of social-networking wunderkind Facebook.

Discussions over such an agreement with the Mark Zuckerberg-founded company are still preliminary, the story by Robert A. Guth, Kevin J. Delaney and Vauhini Vara notes, but if such a deal goes through, the much-hyped Facebook could be valued at up to $10 billion as it heads toward a long-rumored initial public offering. Both companies denied requests to comment to the Journal.

A stake of 5 percent in Facebook, the story continues, could be worth somewhere between $300 million to $500 million.

Earlier this month, word began to spread that Facebook was raising cash in a new investment round that could catapult its valuation into the $6 billion to $10 billion range that many analysts had been previously hesitant to believe. Microsoft was talked about as a potential investor at the time, and indeed, the Redmond, Wash.-based tech veteran is already intimately tied to Facebook through an advertising contract that won't expire until 2011. But Facebook is meanwhile working on a new ad strategy that reportedly relies on the extensive personal information that members entrust to the site.

The battle over social-media domination is heating up among the Web's biggest powerhouses. The Journal article noted that Google has also been talked up as a potential major investor in Facebook, but recent rumors have suggested that the Mountain View, Calif.-based company might be trying to outdo Facebook at its own game by taking advantage of its disparate Web tools and its in-house social-networking product, Orkut, which has failed to make a splash in most markets beyond Brazil and India.

In addition to further collaboration on advertising technology, Microsoft could also get a boost in its battle with Google, if Facebook were willing to integrate into its product more of Microsoft's Windows Live services, such as its Windows Live Messenger instant-messaging or Windows Live Mail e-mail programs.

Microsoft, Google, and Yahoo have all been talked about at one point or another as potential Facebook buyers. The Journal article writes this off for the time being, saying "Microsoft has considered trying to buy the company outright, but people familiar with the matter said it's unlikely at this time."

CNET News.com's Ina Fried contributed to this report.