IS FACEBOOK WORTH $100 BILLION?

Facebook, only launched in February 2004, is preparing to list on the stock market. This social media service has more than 800 million users world-wide, many of whom log in everyday.

And it is starting to make a profit! Facebook makes more money than Google did back when the search engine company listed on the stock market.

Lots of people love Facebook – to keep track of friends and improve communication in society – and it is considered to be one of the catalysts for the ‘Arab Spring’.

But some worry about  a company that sells advertising using personal information -photographs, facts, connections that the users themselves upload!

And Google is fighting back with its own social network, Google+, the fast growth of which, 90 million users and counting, is part of the reason that Facebook usage is slightly down in the US. Is this beginning of the end of stratospheric growth for Zuckerberg’s baby?

Will Facebook be the next Google, Apple or Microsoft? Or will it go the way of Bebo, Yahoo and Myspace?

Do you use Facebook?

Is it worth $100 billion?

17 Comments »

  1. 1

    Yes,I use Facebook。Every day。Can’t explain the attraction but I must log on every day to check out who in my circle of influence has said what。

    Is it worth 100 billion?It is worth whatever the marketplace says it is worth。Google has almost 30 billion in revenue each year, 99% of it from online ads. Facebook is poised to approximate that. If so, the 100 billion evaluation may be low.

  2. 2

    I, too, use FB daily. I use it for entertainment, news, sports, weather, and chat. It’s a very handy little tool. It would be really nice if Zuckerberg would LEAVE IT THE HELL ALONE!!!

    I loathe Timeline — the latest little “feature.”

    No, it’s not worth a hundred billion to me. In fact, according to a news report I read yesterday, most Canadians aren’t going to be able to buy stock in it.

    As for Google Plus…I use that, too. But I don’t like it as much as I like the original FB.

  3. 3
    Jim Says:

    At one time Zuckerberg would not allow one to cancel out after having become a member of facebook. I wasn’t fussy about becoming captive, and so it still stands. One must admire him for his accomplishment. He should get the stock sale over with and take his bundle and run. Google and Microsoft or especially a newcomer can duplicate Zuckerberg’s modus operandi at very little cost. What then?

  4. 4
    Heidi Gulatee Says:

    I also use facebook every day to keep up with friends and family. I started the account because my son went on holidays and put his pictures on facebook.
    I only have about 16 friends and all of them I know personally. I refuse to have friends I do not know. Although facebook always tries to get me to make more friends. I do not write a lot of statuses myself but I mainly read what my friends put on and I comment on their stuff, watch u tubes clips and especially I listen to classical clips that some musician friends put on facebook. The connection with friends that I otherwise would have little contact with enriches my life.
    I also get often asked to play games but so far I use no apps because I think that all the info becomes even more public than on the actual site. Although I do not know if this makes much difference.
    Neil are you and Cathe
    rine back from Your cruise?

  5. 5

    I have a nom du plume for Facebook, so people can’t find me-if I want to talk to someone, I initiate the invite. I just prefer having a sense of anonymity. It seems to me that people broadcast far too much of their personal lives to virtual strangers.
    I think that Face Book is well valued, and I wouldn’t hesitate to invest in their stock…I’m really curious about the opening price.

  6. 6

    Neil says above “Will Facebook be the next Google, Apple or Microsoft? Or will it go the way of Bebo, Yahoo and Myspace?”

    What is (was) Bebo?

  7. 7

    How do you translate one billion in profits to 100 times that in market suckerhood ? Plus,folks are starting to wonder how effective on-line advertising is .

    It`s really nice that you guys use it all the time,but you don`t have to pay per use. as for ` it`s worth what people say it`s worth`, that`s exactly what every crash is about. Dot com,sub-prime mortgages, the lot of them.

  8. 8

    philsfancy asks (rhetorically perhaps):

    How do you translate one billion in profits to 100 times that in market suckerhood ?

    Oh, the mysteries of the marketplace!

    I would assume, philsfancy, that the “market” is factoring in future values. It is well known that FB is not taking advantage of all the possibilities in advertising/revenues that is currently open to them. They are still in a wait-and-see mode, much like Google did in its beginning years (I don’t think they had one cent of revenue for several years, waiting to see how they were going to best exploit their commanding position in the search world). Certainly, one billion on $100 billion is only a 1% return and its revenue and not profit…but I assume investors are looking for that one billion to increase manyfold during the next few years (Google currently gets almost $30 billion in revenue of which much is net profit).

    Of course, banks are giving a lot less than 1% on their savings accounts now, right? So would you rather give your money to the banks…or take a chance with some FB stock?

    philsfancy further asks:

    Plus,folks are starting to wonder how effective on-line advertising is ..

    Then why do companies still give Google $30 billion annually in advertising revenue? I myself have used Google Adwords in the past to some limited success. But I assume others that are much larger entities than myself do so or they wouldn’t bother spending the money.

    Remember also that craigslist is “on-line advertising” as well. It’s well accepted
    that craigslist has displaced 10s of billions in otherwise spent dollars in classified advertisements in newspapers around the world. Indeed, many pundits suggest that craigslist and eBay are singularly responsible for the downfall of the newspaper industry in general.

    Do you seriously doubt craigslist’s effectiveness in online advertising?

  9. 9

    Tony;

    You can easily measure the effectiveness of a classified ad on craigslist,either people buy or they don`t. If TD bank places an ad for going further in debt via their easy loans,how do they measure that ?

    Regarding bank yields,US savings bonds,with almost no interest return,are still selling fine,thanks. People trust good old Uncle Sam,however dire his straits may be,more than the towers of gold based on feet of clay the market is offering now. People may be looking for a killing from facebook,but I`ll bet (!) the vast majority have no idea how that money will materialise.

  10. 10

    Hi Phil: “People may be looking for a killing from facebook,but I`ll bet (!) the vast majority have no idea how that money will materialise.”
    I don’t understand that statement. Please explain.

  11. 11

    Li`l Patti

    What I meant was this. If ,say,Coca Cola says that they plan to make a 10% increase on profits next year,without laying off people,we can assume that they plan to sell more Coke. If CNR is optimistic,we figure that they plan to carry more freight,or such.

    Facebook has to make its cash from advertising,only that. It`s great that so many people use it,but can the $1 billion in revenues really be ramped up to 100 times that,or in that order of magnitude ? How much effective advertising can they sell ? Is this just a case of herd mentality ?

    Remember what one of the Rockefellers said just before the Depression; ` When my shoeshine operator ( PC again ) starts giving tips about the stock market,it`s time to watch out.`,or words to that effect.

  12. 12

    I think philsfancy asks all the right questions。

    As much of a fan that I am of both Facebook and Google,one wonders how a 100 times price/earnings can be justified for a stock value。

    But one can just as easily make as much money knowing that a stock is OVERVALUED as they can when it is undervalued。That’s of course what “shorting” the market is all about。Whenever I see Google stock at around 800 dollars and I look to see what that translates as total market capitalization for Google in Yahoo! Finance one realizes that they will have to keep growing and making more and more money in the future to justify it, an almost impossible task.

    And that’s where shorting can come in. Shorting the market allows one to “sell” a stock or commodity first and then “buy” it back later (hopefully at a lower price at which point the difference between the buy and sell prices is profit). This is a reversal of how we normally perceive things in which we have to first buy something and then sell it.

  13. 13
    Jim Says:

    When one “shorts”, one could lose their bundle if the stock rises. If it rises too much your broker will ask you to make good on your shortfall. Also note that the stock you sold short, was really borrowed for you. If the borrowed stock is due for a dividend it becomes a problem,

  14. 14

    There have been many stocks over the years that have risen to dizzying heights.
    I recall Nortel @ $129. A friend of mine wanted to sell, but had a big income and the taxes on that earning would have been maximum. We know how that ended! So, the stock market is luck and timing and a lot of savvy.
    Thanks Phil: I think that Facebook can go all the way. They have people giving up their preferences/personal info. and advertisers who can buy into that target market. Advertising is a big money game. 🙂

  15. 15

    For l`il patti,and all those lining up to but into facebook;

    Be afwaid,be vewy afwaid

  16. 16

    Jim:

    One can use a derivative known as a “put option” without worrying about margin calls. The risk is limited to the amount you invest in the option and not a penny more.

    philsfancy:

    I think you’re getting your pop culture metaphors mixed up. “Be afraid, be very afraid” was the tag line for David Cronenberg’s excellent remake of “The Fly”; Elmer Fudd, to my knowledge, never uttered those words.

  17. 17
    Jim Says:

    Tony – The subject you introduced into this blog was “shorts” in which I interjected with a warning about being careful with them. We were not discussing puts and calls. BTW – Contrary to what you wrote that put options are risk free, not true, if the “put” company goes bankrupt (a-la-Enron) you will have lost everything. Meanwhile back at the ranch, in the old days the value of a company was usually based on the calculation that people like Zuckerberg would issue a block of stock which would be equivalent to what the company could earn in the next 7 years. In other words a 7 year payback


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