4 ms·

Considering that Facebook has been "valued" at $15 billion, yes, 50 million users is a failure. That would mean that they'd have to justify why each and every u

by hobbs 19y ago

Considering that Facebook has been "valued" at $15 billion, yes, 50 million users is a failure. That would mean that they'd have to justify why each and every user is worth $300. A good percentage may be worth close to that much, but certainly not every one.

timr 19y ago
That's a failure of the investors, not the site.
- hobbs 19y ago
  Maybe so, maybe no. Depends on what sort of promises were sold to the investors. Even so, caveat emptor I guess.
  - timr 19y ago
    Yup. Even if Facebook told the VCs that Zuckerberg lays golden, candy-colored, web-two-point-oh eggs, it's still the VC's bet to lose.
mkull 19y ago
Not saying that 15Billion isn't ridiculous, but the formula is n't nearly as simple as value_per_user = valuation / num_users
- ghiotion 19y ago
  I hope this doesn't come out the wrong way, but why isn't it as simple as that? I'm sure the Enron accountants could come up with a better valuation model, but that doesn't necessarily make it so. It's a simplistic formula, but it seems reasonable enough to me.
  - sanj 19y ago
    Valuation is not the same thing as revenues per year. Or profit per year. an easy example: if facebook made 15B per year with 5B in profit, they could distribute dividends of the 5B each year to stockholders. In only 3 years, your original investment would be paid back and it would be all profit (to the investor) from that point on. Would you think that was a good deal? I would! So good that it'd get bid up on the open market way past 15B.
nextmoveone 19y ago
Well, technically if you want to use that model, then if each user spends $25 a month on products/services they find on facebook, then after a year(collectively) each user will have at least spent, $15 billion, which I think is worth...well... $15 billion.
- tlrobinson 19y ago
  Of course Facebook only gets a small cut of that, unless they start selling massive numbers of "gifts" or Facebook tshirts...
- hobbs 19y ago
  True, if TiVo or a cable company had 50 million subscribers, then yeah, it could be worth $15 billion. I don't see a $25/mo product from Facebook, though. Not to mention that we don't know what percentage of the 50 million are active, participating users.
yters 19y ago
Networks are worth more than the sum of their parts.
- aswanson 19y ago
  Not in every case. The quality of a network can decrease with added users if they subtract from the community.
xirium 19y ago
$15 billion / 50 million users = $300 per user. That's a bargain compared to GeoCities, which, I believe was purchased by Yahoo for $1100 per user.
- aston 19y ago
  Look at how well that went. For both companies.
pchristensen 19y ago
Well, let's look at it from an investment perspective. Growing tech stocks trade at 20-50x earnings, but an especially hot or new stock can trade at 100x (I'll use that for Facebook). So for a $15B valuation at 100 P/E, they'd have to make $150 million in profit per year or $3/user. I don't think they're there yet (I think revenues are in that ballpark, not profits), but it's not unreasonable. Of course 100x is an extremely high valuation multiple for a company based on fundamentals instead of speculation, so if they can't monetize, or if they stop growing, or if attrition goes up, then their multiple goes down and then they might have to make $6, $12, or $24 in profit/user/yr, which I'm pretty sure is unreasonable. Moral of the story: we're all guessing. If they can monetize, then every doubter is wrong. If they can't, then every doubter says "I told you so."

by hobbs 19y ago

timr 19y ago

That's a failure of the investors, not the site.

hobbs 19y ago
Maybe so, maybe no. Depends on what sort of promises were sold to the investors. Even so, caveat emptor I guess.
- timr 19y ago
  Yup. Even if Facebook told the VCs that Zuckerberg lays golden, candy-colored, web-two-point-oh eggs, it's still the VC's bet to lose.

mkull 19y ago

Not saying that 15Billion isn't ridiculous, but the formula is n't nearly as simple as value_per_user = valuation / num_users

ghiotion 19y ago
I hope this doesn't come out the wrong way, but why isn't it as simple as that? I'm sure the Enron accountants could come up with a better valuation model, but that doesn't necessarily make it so. It's a simplistic formula, but it seems reasonable enough to me.
- sanj 19y ago
  Valuation is not the same thing as revenues per year. Or profit per year. an easy example: if facebook made 15B per year with 5B in profit, they could distribute dividends of the 5B each year to stockholders. In only 3 years, your original investment would be paid back and it would be all profit (to the investor) from that point on. Would you think that was a good deal? I would! So good that it'd get bid up on the open market way past 15B.

nextmoveone 19y ago

Well, technically if you want to use that model, then if each user spends $25 a month on products/services they find on facebook, then after a year(collectively) each user will have at least spent, $15 billion, which I think is worth...well... $15 billion.

tlrobinson 19y ago
Of course Facebook only gets a small cut of that, unless they start selling massive numbers of "gifts" or Facebook tshirts...
hobbs 19y ago
True, if TiVo or a cable company had 50 million subscribers, then yeah, it could be worth $15 billion. I don't see a $25/mo product from Facebook, though. Not to mention that we don't know what percentage of the 50 million are active, participating users.

yters 19y ago

Networks are worth more than the sum of their parts.

aswanson 19y ago
Not in every case. The quality of a network can decrease with added users if they subtract from the community.

xirium 19y ago

$15 billion / 50 million users = $300 per user. That's a bargain compared to GeoCities, which, I believe was purchased by Yahoo for $1100 per user.

aston 19y ago
Look at how well that went. For both companies.

pchristensen 19y ago

Well, let's look at it from an investment perspective. Growing tech stocks trade at 20-50x earnings, but an especially hot or new stock can trade at 100x (I'll use that for Facebook). So for a $15B valuation at 100 P/E, they'd have to make $150 million in profit per year or $3/user. I don't think they're there yet (I think revenues are in that ballpark, not profits), but it's not unreasonable. Of course 100x is an extremely high valuation multiple for a company based on fundamentals instead of speculation, so if they can't monetize, or if they stop growing, or if attrition goes up, then their multiple goes down and then they might have to make $6, $12, or $24 in profit/user/yr, which I'm pretty sure is unreasonable. Moral of the story: we're all guessing. If they can monetize, then every doubter is wrong. If they can't, then every doubter says "I told you so."