8 ms·

Ford vs Facebook

71 points by asto 14y ago

DVassallo 14y ago
Value is being determined based on activity (page views, ad impressions, users), instead of real things like... you know... money and assets. Users, pageviews, etc, are assets. If the market will be able to determine their "correct" value... that's another question.
- AndrewDucker 14y ago
  Users and pageviews are _potential_ assets. You cannot sell either of those things, but you might find ways of making them produce money.
  - DVassallo 14y ago
    There are many other intangible assets that produce money but are not easily sell-able: Trademarks, human capital, trade-secrets, other intellectual property, etc.
    - muyuu 14y ago
      All of these would be in Ford's side without any doubt. Maybe profit-per-capita is the single benchmark they'd clearly lose at, and the fact that their workforce is largely unionized, which is a serious risk in times of hardship (they'd find themselves unable to cut expenses significantly, as it has happened many times in the past). Ford vs Google might be a close one in terms of IP - hard to compare across industries though - but vs Facebook it's quite one-sided for Ford.
- joe_the_user 14y ago
  You are correct these things can be viewed as assets. However, if the author is deriving his data from Facebook's own declarations, then even they aren't claiming the value of their assets including User-loyalty, are anywhere near their market cap.
  - DVassallo 14y ago
    Auditors would stick to the the accounting standards and conventions to give a monetary value to users and other intangible stuff. Whereas the market (in theory) can value the whole company's ability to use these intangibles to generate money in the future. That's why there's often a significant difference between the "assets - liabilities" on the balance sheet, and the market cap. Now, whether such a big discrepancy is justified... that's another thing.
    - HackersCapital 14y ago
      Under GAAP, there are a lot of intangibles that are not reported on the balance sheet. Basically all of facebook's internally developed intangibles are not on the BS, but all of Instagram's intangibles will be there. Kind of weird, but this is how purchase accounting works.
TazeTSchnitzel 14y ago
Perhaps it's a bubble, but Facebook is used by an eighth of the people on the planet. Tell me that's not an asset. A single company has lots of information about and can display advertising to an eighth of the alive human race. Then again, so does Google, I suppose.
- excuse-me 14y ago
  The English language is spoken by a larger number - that doesn't mean the OED is worth a trillion $
  - TazeTSchnitzel 14y ago
    The OED doesn't know your social connections, your sexual orientation, your date of birth, your address, your previous address, your current location, your gender, your age, your interests, your employer, all the websites you've visited or even what you look like.
    - tatsuke95 14y ago
      So, they have good information for advertising. And that's going to valuable, no doubt... ...but that's it. They aren't building a physical product, they're going to sell other people's products. Or, sell information so that other people can sell other people's products. I find it absurd that the market for web based adverting, between Google and Facebook and others, can be this valuable in the long run. These are advertisers, for crying out loud. People can talk about how many users Facebook has, but there are more automobiles worldwide than there are Facebook users. What is worth more; a car purchaser, or a Facebook user?
      - reinhardt 14y ago
        Ford is one of many car manufacturers, Facebook is a de facto monopoly when it comes to social networks.
        14y ago
jerrya 14y ago
Certainly what makes Facebook valuable is their huge network which is sustained, I think, through barriers to entry (network effect), and barriers to switching (owning your data). I wonder what might happen, if it could happen that the EU or US FTC mandates api access into and out of Facebook, perhaps after a decision that 2015 Man will use social networking as a needed public infrastructure, to be provided on a common carrier like basis. Can the sheer size of Facebook's network trigger monopoly break up? Or the sheer size combined with lack of API access?
- TazeTSchnitzel 14y ago
  Facebook does make it surprisingly easy to get a copy of all your data. There's a single big button on the site which will make a ZIP file containing all your data on Facebook, except for data stored in Apps (outside of FB's control), and comments you've made on other people's posts. It will even tell you your previous IP addresses and I think auth tokens.
  - jerrya 14y ago
    I'm thinking more of API access so that external apps can be created to link Facebook to other networks, so that tweets and google plus and tumblr posts and all that stuff can just flow from one network to the next like telephone calls can do now. I just clicked on "Start my archive", Facebook will email me when they are done zipping it up.
    - moocow01 14y ago
      This was more or less what Opensocial was trying to do but I believe it is pretty much dead.
jwilliams 14y ago
Capital will ("should") flow to where it can be the most useful at producing wealth. This is just the market saying "I'd rather see what Facebook can do with X billion than Ford." Which on the face of it seems fair - Google had a similarly crazy PE when they floated. They grew into it pretty quickly though.
- johnhartigun 14y ago
  Investors don't invest because of curiosity. They want to earn money.
  - jwilliams 14y ago
    I didn't mean it in a frivolous way. What I'm saying is it's not a basic value equation. Buying an asset does not create wealth. It's the application of that asset. It's not simply Facebook has a book-value of X -- It's The market thinks Facebook can build more wealth with their $ than Ford.
  - rabidsnail 14y ago
    And the reason they're allowed to earn money is that their capital produces more value than it's worth. The only way that can happen in an efficient market is by taking risk. If you don't want any risk don't invest in the stock market.
  - rjb 14y ago
    Yes. Investors believe Facebook's value perception will catch up with its reality, since they are currently out of whack. They believe the current imbalance is in their favor. It's the only way to make money investing.
    - johnhartigun 14y ago
      They may be also thinking "It's overpriced but it will be overpriced even more in the future. If I get off the train early I will earn money."
  - photon137 14y ago
forkandwait 14y ago
I am personally a lot more likely to log on to Facebook than to EVER buy a Ford -- just saying.
- vibrunazo 14y ago
  The point is that even tho you are logging to facebook, you are not paying them as much as those buying fords.
  - potatolicious 14y ago
    But we know that the auto industry is cut throat and low-margin. Paying $30K for a Ford doesn't mean Ford just made $30K. Between manufacturing, R&D, marketing, and raw customer acquisition cost (dealerships aren't free), I'd be surprised if Ford walked away with 5% of that.
    - vibrunazo 14y ago
      That's why the author specifically mentions profit, which Ford has 8x more than Facebook.
rabidsnail 14y ago
Valuation lower than assets means you get eaten by corporate raiders, unless you're as big as Ford or the majority of the stock is held by a single family. That just shows how unhealthy Ford is.
- siavash 14y ago
  Could you please elaborate on this?
  - Lexarius 14y ago
    Suppose that someone is able to buy up enough of your stock to essentially own your company, and they notice that the cost of doing so is less than the value of all of the things your company owns. Someone could make a profit by buying your company and then butchering it, keeping a few prime cuts for itself and selling off the rest. This doesn't happen if the raiding company can't put together enough money to make the purchase, or if not enough of the stock holders are willing to part with their shares.
  - nandemo 14y ago
    Lexarius' answer is great, but if you want to read more about it just look up "corporate raid[ing]" or "leveraged buyout", e.g.: http://en.wikipedia.org/wiki/Corporate_raid http://en.wikipedia.org/wiki/Corporate_raid
- photon137 14y ago
  You mean equity valuation lower than book value of equity. Assets don't come into the picture at all.
- natnat 14y ago
  That's not true. Ford is more than $100 billion in debt. If a corporate raider were to take over Ford, they would be saddled with a ton of debt too, making such a takeover a much less attractive option.
  - rabidsnail 14y ago
bgentry 14y ago
This is the Dot.com era all over again The "dot-dot-com" era?
- sandieman 14y ago
  Dot 2.0
moocow01 14y ago
The other thing that isn't reflected is staying power or perhaps it might be called company lifetime revenue/profit/etc. Historically for internet based companies this metric on average has been very low especially when put in comparison with the auto industry. Where Facebook will be in 5-10 years is just about anyone's guess.
HackersCapital 14y ago
Ford IS more valuable that facebook. This guy's analysis is an apples to oranges comparison. Ford has $100.5 billion in debt and facebook has no debt - the companies should be compared based on enterprise value: Enterprise value in billions = market capitalization + debt - cash Ford’s enterprise value = 40.4 + 100.5 - 15.2 = $125.7 Billion facebook’s enterprise value = 90 + 0 - 1.5 = $88.5 Billion See here for a post I did on this article: http://hackerscapital.tumblr.com/ http://hackerscapital.tumblr.com/
- photon137 14y ago
  Wrong. EV should include debt at _market value_. FB could just as easily issue debt in billions and I'd think that the market will be valuing it higher than that of Ford's for the same issue coupon (which just came back into the investment grade club after residing in the junk club for quite a while). FB would probably have a good income-to-interest coverage ratio if it ever issued debt so the discounting of its debt's cashflows would be less severe than that for Ford.
  - HackersCapital 14y ago
    I will take a look at the book value of Ford's debt tomorrow on Bloomberg. I agree that the market value of debt should be used for the analysis, but I don't think it will change the conclusion.
    - photon137 14y ago
      It will. Issued debt rarely ever trades at 100 (except in special cases - ie debt near maturity etc). And, in any case, you cannot compare market values of two companies with different leverages such as FB and Ford without renormalizing earnings to the same leverage level. Earnings on equity are amplified if the company has debt (which Ford has). FB has no leverage - its unleveraged earnings give it a whopping market value of $95B. Ford can't even manage half of that figure with its $100B (!) of debt. Edit: I am relying on your figures.
      - 14y ago
rmATinnovafy 14y ago
Buy F now. It is paying a twenty cent dividend on a stock price of about $10. Cheap. Plus its making cars that are very competitive.
- firefoxman1 14y ago
  http://www.youtube.com/watch?v=8ZwvImsYo4E http://www.youtube.com/watch?v=8ZwvImsYo4E
  - rmATinnovafy 14y ago
    Would you mind explaining what the video is about? I do not use youtube. Thank you.
    - firefoxman1 14y ago
      Its just a 6 minute interview with the CEO (the guy who came in and saved the company from near-bankruptcy) and is now pushing to make Ford an investment-grade stock.
      - rmATinnovafy 14y ago
        Thank you. Mullaly is indeed a charismatic CEO. He ignited the culture in the company. Going as far as giving engineering the tools and respect it deserved. The old Ford was run by accountants. It is now more balanced. Isn't it incredible? How one of the oldest startups in the history of the U.S.A. has managed to come back?
        firefoxman1 14y ago
        Quite a feat. I think a big key to Ford's comeback is, like you said, enabling engineering to drive the company forward. It probably helps that Mullaly was once an engineer himself.
powertower 14y ago
> You forgot one important thing: Potential for Growth The key to understand this madness is so right in front of our faces, that we can't even see it. Due to the dynamics/nature of the market, stock investments seems to be more about a gamble today, and you can't gamble on Ford too much except for it to go down. Forget trying to spot the value. It's all about what's hot. Hence Facebook is getting crazy valuations.
- firefoxman1 14y ago
  That's how I used to feel too until I read more economic history. Turns out, that's the way it's always been. At the end of the day, stock prices are 100% driven by supply & demand (beside the IPO price I suppose). Sure, fundamentals are what a lot of people base their buying or selling off of, but what's "hot" is all that matters just like it always has. Maybe a company just crushed their numbers for the quarter or a drug company attained a new patent; and while that may contribute to the true value of the company, when it comes to the stock price nothing matters except how many people buy.
michaelochurch 14y ago
I've heard so many people talk about buying Facebook "as soon as I can get in". I think that's ridiculous. When it comes to individual stocks, buying or selling without concern for price is for suckers. That's what got us into the last bubble (or few): people who would buy something (like a house) regardless of the price based on an obscene overconfidence that it would appreciate. I have no idea what the thing's worth, but I cringe when I hear people talking about how they're sure it's a good bet because of some X which is almost certainly already priced into the market.
- firefoxman1 14y ago
  Hype is what drives anything up. You just have to get out before the hype dies. The problem is that most people ("suckers" as you call them) get in late and don't get out in time.
- swah 14y ago
  People still feel like that about investing in land and houses (where I live at least) - they are seen as an investment that is never going to be a bad one (freqently comparing this to renting a place to live). But there is got to be a catch.
firefoxman1 14y ago
> You forgot one important thing: Potential for Growth The problem arises when that growth occurs but instead of the price now being reasonable at those levels, it increases further...which is probably what it's going to do.
hartror 14y ago
This is why investing in stocks is also called speculation, investors are speculating that Facebook's revenue and profit is going to grow to exceed that of Ford in a reasonable amount of time.
teyc 14y ago
These two businesses are in entirely different industries. Not only that, they have very different market characteristics. Ford is a capital intensive industry that reminds me of Berkhire Hathaway - the textile company that Warren Buffett could never figure out how to make money from. It has competitors everywhere making relatively undifferentiated products. Facebook on the other hand, is more like a media company. It has 1 billion eye balls who spend an average 30 minutes a day on its site on user-generated content. If you were a TV station, how much would you be valued at with that kind of metrics? FB has a beachhead in the sense that it is a marketplace of users who create content, and users who view them. This makes it incredibly sticky and also difficult for a competitor to come about. The downside with FB is that audiences can be fickle. If they think FB is a fad, they will start leaving. Therefore, FB had to establish itself as a habit-forming medium, like e-mail, so that people constantly reengage with it.

71 points by asto 14y ago

Value is being determined based on activity (page views, ad impressions, users), instead of real things like... you know... money and assets. Users, pageviews, etc, are assets. If the market will be able to determine their "correct" value... that's another question.

AndrewDucker 14y ago
Users and pageviews are _potential_ assets. You cannot sell either of those things, but you might find ways of making them produce money.
- DVassallo 14y ago
  There are many other intangible assets that produce money but are not easily sell-able: Trademarks, human capital, trade-secrets, other intellectual property, etc.
  - muyuu 14y ago
    All of these would be in Ford's side without any doubt. Maybe profit-per-capita is the single benchmark they'd clearly lose at, and the fact that their workforce is largely unionized, which is a serious risk in times of hardship (they'd find themselves unable to cut expenses significantly, as it has happened many times in the past). Ford vs Google might be a close one in terms of IP - hard to compare across industries though - but vs Facebook it's quite one-sided for Ford.
joe_the_user 14y ago
You are correct these things can be viewed as assets. However, if the author is deriving his data from Facebook's own declarations, then even they aren't claiming the value of their assets including User-loyalty, are anywhere near their market cap.
- DVassallo 14y ago
  Auditors would stick to the the accounting standards and conventions to give a monetary value to users and other intangible stuff. Whereas the market (in theory) can value the whole company's ability to use these intangibles to generate money in the future. That's why there's often a significant difference between the "assets - liabilities" on the balance sheet, and the market cap. Now, whether such a big discrepancy is justified... that's another thing.
  - HackersCapital 14y ago
    Under GAAP, there are a lot of intangibles that are not reported on the balance sheet. Basically all of facebook's internally developed intangibles are not on the BS, but all of Instagram's intangibles will be there. Kind of weird, but this is how purchase accounting works.

TazeTSchnitzel 14y ago

Perhaps it's a bubble, but Facebook is used by an eighth of the people on the planet. Tell me that's not an asset. A single company has lots of information about and can display advertising to an eighth of the alive human race. Then again, so does Google, I suppose.

excuse-me 14y ago
The English language is spoken by a larger number - that doesn't mean the OED is worth a trillion $
- TazeTSchnitzel 14y ago
  The OED doesn't know your social connections, your sexual orientation, your date of birth, your address, your previous address, your current location, your gender, your age, your interests, your employer, all the websites you've visited or even what you look like.
  - tatsuke95 14y ago
    So, they have good information for advertising. And that's going to valuable, no doubt... ...but that's it. They aren't building a physical product, they're going to sell other people's products. Or, sell information so that other people can sell other people's products. I find it absurd that the market for web based adverting, between Google and Facebook and others, can be this valuable in the long run. These are advertisers, for crying out loud. People can talk about how many users Facebook has, but there are more automobiles worldwide than there are Facebook users. What is worth more; a car purchaser, or a Facebook user?
    - reinhardt 14y ago
      Ford is one of many car manufacturers, Facebook is a de facto monopoly when it comes to social networks.
      - 14y ago

jerrya 14y ago

Certainly what makes Facebook valuable is their huge network which is sustained, I think, through barriers to entry (network effect), and barriers to switching (owning your data). I wonder what might happen, if it could happen that the EU or US FTC mandates api access into and out of Facebook, perhaps after a decision that 2015 Man will use social networking as a needed public infrastructure, to be provided on a common carrier like basis. Can the sheer size of Facebook's network trigger monopoly break up? Or the sheer size combined with lack of API access?

TazeTSchnitzel 14y ago
Facebook does make it surprisingly easy to get a copy of all your data. There's a single big button on the site which will make a ZIP file containing all your data on Facebook, except for data stored in Apps (outside of FB's control), and comments you've made on other people's posts. It will even tell you your previous IP addresses and I think auth tokens.
- jerrya 14y ago
  I'm thinking more of API access so that external apps can be created to link Facebook to other networks, so that tweets and google plus and tumblr posts and all that stuff can just flow from one network to the next like telephone calls can do now. I just clicked on "Start my archive", Facebook will email me when they are done zipping it up.
  - moocow01 14y ago
    This was more or less what Opensocial was trying to do but I believe it is pretty much dead.

jwilliams 14y ago

Capital will ("should") flow to where it can be the most useful at producing wealth. This is just the market saying "I'd rather see what Facebook can do with X billion than Ford." Which on the face of it seems fair - Google had a similarly crazy PE when they floated. They grew into it pretty quickly though.

johnhartigun 14y ago
Investors don't invest because of curiosity. They want to earn money.
- jwilliams 14y ago
  I didn't mean it in a frivolous way. What I'm saying is it's not a basic value equation. Buying an asset does not create wealth. It's the application of that asset. It's not simply Facebook has a book-value of X -- It's The market thinks Facebook can build more wealth with their $ than Ford.
- rabidsnail 14y ago
  And the reason they're allowed to earn money is that their capital produces more value than it's worth. The only way that can happen in an efficient market is by taking risk. If you don't want any risk don't invest in the stock market.
- rjb 14y ago
  Yes. Investors believe Facebook's value perception will catch up with its reality, since they are currently out of whack. They believe the current imbalance is in their favor. It's the only way to make money investing.
  - johnhartigun 14y ago
    They may be also thinking "It's overpriced but it will be overpriced even more in the future. If I get off the train early I will earn money."
- photon137 14y ago

forkandwait 14y ago

I am personally a lot more likely to log on to Facebook than to EVER buy a Ford -- just saying.

vibrunazo 14y ago
The point is that even tho you are logging to facebook, you are not paying them as much as those buying fords.
- potatolicious 14y ago
  But we know that the auto industry is cut throat and low-margin. Paying $30K for a Ford doesn't mean Ford just made $30K. Between manufacturing, R&D, marketing, and raw customer acquisition cost (dealerships aren't free), I'd be surprised if Ford walked away with 5% of that.
  - vibrunazo 14y ago
    That's why the author specifically mentions profit, which Ford has 8x more than Facebook.

rabidsnail 14y ago

Valuation lower than assets means you get eaten by corporate raiders, unless you're as big as Ford or the majority of the stock is held by a single family. That just shows how unhealthy Ford is.

siavash 14y ago
Could you please elaborate on this?
- Lexarius 14y ago
  Suppose that someone is able to buy up enough of your stock to essentially own your company, and they notice that the cost of doing so is less than the value of all of the things your company owns. Someone could make a profit by buying your company and then butchering it, keeping a few prime cuts for itself and selling off the rest. This doesn't happen if the raiding company can't put together enough money to make the purchase, or if not enough of the stock holders are willing to part with their shares.
- nandemo 14y ago
  Lexarius' answer is great, but if you want to read more about it just look up "corporate raid[ing]" or "leveraged buyout", e.g.: http://en.wikipedia.org/wiki/Corporate_raid http://en.wikipedia.org/wiki/Corporate_raid
photon137 14y ago
You mean equity valuation lower than book value of equity. Assets don't come into the picture at all.
natnat 14y ago
That's not true. Ford is more than $100 billion in debt. If a corporate raider were to take over Ford, they would be saddled with a ton of debt too, making such a takeover a much less attractive option.
- rabidsnail 14y ago

bgentry 14y ago

This is the Dot.com era all over again The "dot-dot-com" era?

sandieman 14y ago
Dot 2.0

moocow01 14y ago

The other thing that isn't reflected is staying power or perhaps it might be called company lifetime revenue/profit/etc. Historically for internet based companies this metric on average has been very low especially when put in comparison with the auto industry. Where Facebook will be in 5-10 years is just about anyone's guess.

HackersCapital 14y ago

Ford IS more valuable that facebook. This guy's analysis is an apples to oranges comparison. Ford has $100.5 billion in debt and facebook has no debt - the companies should be compared based on enterprise value: Enterprise value in billions = market capitalization + debt - cash Ford’s enterprise value = 40.4 + 100.5 - 15.2 = $125.7 Billion facebook’s enterprise value = 90 + 0 - 1.5 = $88.5 Billion See here for a post I did on this article: http://hackerscapital.tumblr.com/ http://hackerscapital.tumblr.com/

photon137 14y ago
Wrong. EV should include debt at _market value_. FB could just as easily issue debt in billions and I'd think that the market will be valuing it higher than that of Ford's for the same issue coupon (which just came back into the investment grade club after residing in the junk club for quite a while). FB would probably have a good income-to-interest coverage ratio if it ever issued debt so the discounting of its debt's cashflows would be less severe than that for Ford.
- HackersCapital 14y ago
  I will take a look at the book value of Ford's debt tomorrow on Bloomberg. I agree that the market value of debt should be used for the analysis, but I don't think it will change the conclusion.
  - photon137 14y ago
    It will. Issued debt rarely ever trades at 100 (except in special cases - ie debt near maturity etc). And, in any case, you cannot compare market values of two companies with different leverages such as FB and Ford without renormalizing earnings to the same leverage level. Earnings on equity are amplified if the company has debt (which Ford has). FB has no leverage - its unleveraged earnings give it a whopping market value of $95B. Ford can't even manage half of that figure with its $100B (!) of debt. Edit: I am relying on your figures.
    - 14y ago

rmATinnovafy 14y ago

Buy F now. It is paying a twenty cent dividend on a stock price of about $10. Cheap. Plus its making cars that are very competitive.

firefoxman1 14y ago
http://www.youtube.com/watch?v=8ZwvImsYo4E http://www.youtube.com/watch?v=8ZwvImsYo4E
- rmATinnovafy 14y ago
  Would you mind explaining what the video is about? I do not use youtube. Thank you.
  - firefoxman1 14y ago
    Its just a 6 minute interview with the CEO (the guy who came in and saved the company from near-bankruptcy) and is now pushing to make Ford an investment-grade stock.
    - rmATinnovafy 14y ago
      Thank you. Mullaly is indeed a charismatic CEO. He ignited the culture in the company. Going as far as giving engineering the tools and respect it deserved. The old Ford was run by accountants. It is now more balanced. Isn't it incredible? How one of the oldest startups in the history of the U.S.A. has managed to come back?
      - firefoxman1 14y ago
        Quite a feat. I think a big key to Ford's comeback is, like you said, enabling engineering to drive the company forward. It probably helps that Mullaly was once an engineer himself.

powertower 14y ago

> You forgot one important thing: Potential for Growth The key to understand this madness is so right in front of our faces, that we can't even see it. Due to the dynamics/nature of the market, stock investments seems to be more about a gamble today, and you can't gamble on Ford too much except for it to go down. Forget trying to spot the value. It's all about what's hot. Hence Facebook is getting crazy valuations.

firefoxman1 14y ago
That's how I used to feel too until I read more economic history. Turns out, that's the way it's always been. At the end of the day, stock prices are 100% driven by supply & demand (beside the IPO price I suppose). Sure, fundamentals are what a lot of people base their buying or selling off of, but what's "hot" is all that matters just like it always has. Maybe a company just crushed their numbers for the quarter or a drug company attained a new patent; and while that may contribute to the true value of the company, when it comes to the stock price nothing matters except how many people buy.

michaelochurch 14y ago

I've heard so many people talk about buying Facebook "as soon as I can get in". I think that's ridiculous. When it comes to individual stocks, buying or selling without concern for price is for suckers. That's what got us into the last bubble (or few): people who would buy something (like a house) regardless of the price based on an obscene overconfidence that it would appreciate. I have no idea what the thing's worth, but I cringe when I hear people talking about how they're sure it's a good bet because of some X which is almost certainly already priced into the market.

firefoxman1 14y ago
Hype is what drives anything up. You just have to get out before the hype dies. The problem is that most people ("suckers" as you call them) get in late and don't get out in time.
swah 14y ago
People still feel like that about investing in land and houses (where I live at least) - they are seen as an investment that is never going to be a bad one (freqently comparing this to renting a place to live). But there is got to be a catch.

firefoxman1 14y ago

> You forgot one important thing: Potential for Growth The problem arises when that growth occurs but instead of the price now being reasonable at those levels, it increases further...which is probably what it's going to do.

hartror 14y ago

This is why investing in stocks is also called speculation, investors are speculating that Facebook's revenue and profit is going to grow to exceed that of Ford in a reasonable amount of time.

teyc 14y ago

These two businesses are in entirely different industries. Not only that, they have very different market characteristics. Ford is a capital intensive industry that reminds me of Berkhire Hathaway - the textile company that Warren Buffett could never figure out how to make money from. It has competitors everywhere making relatively undifferentiated products. Facebook on the other hand, is more like a media company. It has 1 billion eye balls who spend an average 30 minutes a day on its site on user-generated content. If you were a TV station, how much would you be valued at with that kind of metrics? FB has a beachhead in the sense that it is a marketplace of users who create content, and users who view them. This makes it incredibly sticky and also difficult for a competitor to come about. The downside with FB is that audiences can be fickle. If they think FB is a fad, they will start leaving. Therefore, FB had to establish itself as a habit-forming medium, like e-mail, so that people constantly reengage with it.