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Their growth rate can't be expected to continue. They have to have peaked, just given how many people are really using the Internet (excluding China, natch).

Their growth rate can't be expected to continue. They have to have peaked, just given how many people are really using the Internet (excluding China, natch). They've likely saturated the US, which is by far the most valuable advertising market. Any further growth will suffer from diminishing returns. Facebook's financials are nice, but I'd really like to see their usage and growth statistics, broken down by country. I don't think they can count on growth for much longer; they're going to have to monetize better. They're trying to do that by developing facebook as a platform, but the future in that regard is far from certain. Google's P/E is ridiculous, but they have solid profits from ads and they're expanding hugely in mobile. Google's growth can be expected to continue, at least for the foreseeable future. I don't think we can say the same of Facebook with any degree of certainty.

yequalsx 16y ago
Their growth rate in new users can't be expected to continue but their growth rate in revenue might be justified. Clearly Goldman thinks their plan for revenue is quite good and they expect Facebook's revenue to greatly increase while maintaining a sufficient profit margin. I expect we've only seen the beginning of their revenue growth.
- redthrowaway 16y ago
  I don't think Goldman's investment can necessarily be taken as a sign of their confidence in facebook's financials, or its future ability to justify its $50B valuation. Rather, it should be taken as a sign of Goldman's confidence in their own ability to profit from the deal, both from the private $1.5B sale of stock, as well as its favoured position come facebook's inevitable IPO.
  - danenania 16y ago
    Exactly. Look no further than subprime if you doubt this. There is no group more expert at (knowingly) inflating a bubble for their own gain. And they take no risk because they get 0% loans from the Fed and are the definition of "too big to fail". This is dangerous behavior.
Aqwis 16y ago
Why are 300 million Americans a more valuable advertising market than 300 million Europeans?
- redthrowaway 16y ago
  Because those 300 million Americans shop at the same place, and, generally speaking, speak the same language. If I run a department store in England, advertising in France doesn't do me much good. Ukranian universities don't much care about advertising in Spain. The US is the largest, richest single market in the world, with the possible exception of China/India. Those markets, however, are undeveloped.
MarkMc 16y ago
"Google's P/E is ridiculous" - really? Google's P/E is around 25 which I think is reasonable for a company that a) has been growing earnings on average 20% per year for the last 3 years; and b) Is sitting on a big pile of cash worth about 15% of its market value. (Disclosure: I own google shares)

yequalsx 16y ago

Their growth rate in new users can't be expected to continue but their growth rate in revenue might be justified. Clearly Goldman thinks their plan for revenue is quite good and they expect Facebook's revenue to greatly increase while maintaining a sufficient profit margin. I expect we've only seen the beginning of their revenue growth.

redthrowaway 16y ago
I don't think Goldman's investment can necessarily be taken as a sign of their confidence in facebook's financials, or its future ability to justify its $50B valuation. Rather, it should be taken as a sign of Goldman's confidence in their own ability to profit from the deal, both from the private $1.5B sale of stock, as well as its favoured position come facebook's inevitable IPO.
- danenania 16y ago
  Exactly. Look no further than subprime if you doubt this. There is no group more expert at (knowingly) inflating a bubble for their own gain. And they take no risk because they get 0% loans from the Fed and are the definition of "too big to fail". This is dangerous behavior.

Aqwis 16y ago

Why are 300 million Americans a more valuable advertising market than 300 million Europeans?

redthrowaway 16y ago
Because those 300 million Americans shop at the same place, and, generally speaking, speak the same language. If I run a department store in England, advertising in France doesn't do me much good. Ukranian universities don't much care about advertising in Spain. The US is the largest, richest single market in the world, with the possible exception of China/India. Those markets, however, are undeveloped.

MarkMc 16y ago

"Google's P/E is ridiculous" - really? Google's P/E is around 25 which I think is reasonable for a company that a) has been growing earnings on average 20% per year for the last 3 years; and b) Is sitting on a big pile of cash worth about 15% of its market value. (Disclosure: I own google shares)