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Dropbox finally publicly filed for an IPO on Friday, revealing it lost $112 million on $1.1 billion in revenue in 2017. The company will need to convince public investors to view it differently than its competitors if it wants to match its private valuation. Valuing it similarly to Box, its closest public company competitor that trades at about six times 2017 revenue, would give Dropbox a valuation well short of the $10 billion it fetched on private markets. But the good news is Dropbox is growing faster–31% last year–and generating much more cash, with free cash flow of $305 million in 2017. If the company grows revenue by 25% in 2018, it could arguably justify a valuation of more than $8 billion using public market comparisons of subscription software companies. Justifying a price much higher than that will require greater growth, or convincing public investors that its ability to throw off cash deserves a premium.
As we expected, the company plans to issue low-voting shares in a public offering, with founders and early investors holding supervoting stock that carry more votes. But surprisingly, the company has also given itself flexibility to issue non-voting stock in the future. It has established, but not yet issued, non-voting Class C shares, and the board reserved some earlier this month for employee compensation. The issuance of non-voting shares by Snap and Google has sparked complaints from some investors. –Alfred
While much of the bot activity on the Internet is harmless, an Akamai report found that malicious bot activity is on the rise. While attackers continue to use bots for distributed denial of service attacks, where they might take a website down by flooding it with traffic, Akamai said they are increasingly also using them to steal credentials, with 43% of 17 billion login attempts tracked in the last quarter deemed to be malicious. What is potentially more interesting going forward is what Akamai predicted hackers would do with that stolen login info: not only stealing data, but also computing resources to mine cryptocurrency. —Sarah
Rovio shares plunged 50% Thursday after the maker of “Angry Birds” missed revenue expectations in the fourth quarter and forecast surprisingly low revenue and earnings for 2018. (The stock didn’t move much more on Friday, closing up 1% on Finland’s main stock exchange.) The company warned that revenue will be flat or lower this year, between 260 million and 300 million euros compared with 297 million euros in 2017, even as user acquisition spending rises. Mobile gaming is hits-driven and the latest numbers don’t provide much confidence that Rovio can answer longstanding questions about its ability to grow beyond its main franchise. Its market capitalization is now less than $500 million, down from a roughly $1 billion valuation in its September IPO. Before its public offering, it was in acquisition talks last year that could have valued it at as much as $3 billion, The Information reported at the time. –Alfred
The Facebook squeeze on publisher content goes on. This story cites some data showing that the amount spent on distributing branded content on Facebook jumped up in the last year. While that increase is partly due to the increase in branded content overall, this story suggests that most is due to publishers paying out more to get better distribution. The economics of branded content were always brittle—publishers were basically running an arbitrage on Facebook by charging brands to create articles and videos and then paying platforms less than the creation cost to distribute it. The key here was getting users to voluntarily share branded posts. But if Facebook is cutting down on publisher content of all kinds then the margins are cut down. Branded content has long been a tough business model; this could make it impossible. –Tom