15 billion dollar Facebook valuation
30 April 2008 in Blogging, General, Google, Mindscape, Windows | Comments enabled

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Boy am I sick and friggin’ tired of hearing about how Facebook is worth $15 billion dollars! A lot of the business blogs I keep up with keep throwing this figure around and it is becoming quite an annoyance.

I’ll say this just once: Microsoft’s “investment” in Facebook does not extrapolate to a $15b valuation because it included the international advertising rights.

To put this in perspective, Google paid $900m for the advertising rights to MySpace (the #1 social network that still absolutely spanks Facebook in terms of unique visitors despite being the ugliest site in the world).

Granted, the details of the deals between MySpace+Google and Facebook+Microsoft are rather different, but it helps establish my point that advertising is big business. Facebook certainly did not give away the advertising rights for free so you can be sure that part of the $240m was in consideration for gaining the international advertising rights – not just to buy a 1.6% stake.

To give an indication of how big of a business advertising is – Google paid more for the advertising rights to MySpace than News Corp paid to buy MySpace months earlier (details here).

Sure – it might be in Facebook’s interest to say the advertising deal was provided for free and that it really does stack up to just buying a cut of the pie however if that really was the case why not get the Microsoft investment and then make more money by selling the international advertising rights?

</rant>

So what do you think? All comments appreciated.

I’m sure some cheeky bugger will find this post in 5 years when Facebook actually is worth 15b and tell me I’m wrong :)

John-Daniel Trask


5 comments. Add your own comment.

Johnny-johnny says 30 April 2008 @ 15:24

At the end of the day something is only worth what someone else will pay for it. It’s true for Facebook and it’s true for houses.

I think the fundamental question is how much is each user of Facebook worth? $15b/$240m is $62.50 a user. I don’t think that’s unreasonable if you’re making an average profit of (say) $6.25 per user per year. Big focus on the if.

traskjd says 30 April 2008 @ 16:12

Hi Johnny-johnny,

Perhaps it would be reasonable however 6.25 per user a year would likely be a challenge. Google’s latest conference call included hints that they were having trouble monetizing social traffic.

If you looked at similar purchases (e.g. the MySpace deal again) you’d see a much lower $ per user calculation used (although it could be fundamentally incorrect and just a bloody good deal for Fox :) .

If they keep growing and they can remain sticky (generally Social Network users tend to be somewhat fickle as MySpace is now finding with some exodus to FB) then perhaps, with time, they would be worth 15b.

All my opinion of course :)

– JD

Umamiblog » Blog Archive » Social media is like a money making machine says 30 April 2008 @ 16:43

[...] JD has posted some good commentary on Facebook’s $15billion “valuation”. And as usual he couldn’t be more wrong for the most part I agree. [...]

Nic Wise says 1 May 2008 @ 00:24

I dont think FB is worth anywhere near that. It has a lot of eyeballs, but they are NOT looking at ads, and the nice, clean site design, which is a selling point, would be killed if they flooded it with ads.

I think google + FB would be a better fit. Text ads would be more pleasing to the eye :)

that said, I’m over FB – never use it anymore. Too annyoing with all the apps.

sam says 1 May 2008 @ 03:10

Over valuation is rife and in the end it is sad but true the money is in the booty.

Advertising has been the cash cow of media globally for a very long time, and those rivers of gold the papers and printing world held had to translate into cash somewhere else as print spend shifted. Just like energy changes and never disappears, so to with advertising and corps fight to have a part of the river. Be it digital or of ink.

Ads = money = success.

Just check out AOL or Yahoo! No longer info portals just ad serving networks on steroids

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