4 ms·

Facebook's valuation (in Whoppers)

40 points by JoelSutherland 18y ago

run4yourlives 18y ago
In my mind, Facebook's value is 0 until it can demonstrate profitability. This whole idea of it not being big enough yet is asinine.
- eru 18y ago
  Facebook can be made profitable right now: Just display lots of ads on it and sell all its (user) data. I guess the side would not last long with this approach, but it would make a few dollars in the next days.
  - tom_rath 18y ago
    Who would buy those ads? That seems to be Facebook's problem. The 'platform' seems to be dominated by idle people who prefer free services that let them spend their day throwing virtual sheep at each other. That's not a particularly valuable demographic for businesses seeking to advertise their wares. Much better, by far, to purchase targeted advertising on Google.
    - jwesley 18y ago
      There is millions of dollar being made every day with Facebook ads. You can target them very specifically and drive large amounts of traffic cheaply. No, it is certainly not Adwords. For some offers it doesn't work. For some it works better than search. Just because it's not search does not mean it's not an incredibly valuable marketing channel. They will never be as profitable as Google because the CTR of the ads is pathetically low (compared to search) and the clicks are much less valuable, but there is massive traffic there. Even if they never develop the killer ad product there is still a big business there.
- shawndrost 18y ago
  Facebook made ~$200mm in 2008. It's pretty clear they could profit on those revenues, and instead are choosing to invest in further growth (with outside capital). Why is the parent comment's belief so widespread here on hn?
  - deleted 18y ago
    [deleted]
  - alaskamiller 18y ago
    Because snarking on Facebook is fun! My belief is that with straight up direct ad sales and limited targeting ads, MySpace cleared $1B this year. That's the potential upper limit of how much Facebook can make with just straight up ad sales. But having a much more complete understanding of relationships, Facebook wants to find something more effective and profitable than AdSense. That's what Mark Zuckerberg really pitched to everyone that has invested into Facebook: his team's ability to reinvent online advertising. The products they have so far -- Beacon, Social Ads -- are kind of lame but Facebook Connect is getting pretty big and they have quite a lot of money and time to work on it. But all this doesn't matter. Facebook isn't profitable! And somehow this affects hackers around the world.
    - incomethax 18y ago
      Of course this would affect hackers around the world. Anything that Google, Microsoft, Apple, etc. affects hackers because so many hackers are employed by these companies. Facebook is the same way, the churn of ideas that goes through each of these companies matters because only through working with other hackers do hackers develop and refine their own ideas. Without these large companies subsidizing hacker side projects we wouldn't get any of the idea building that spins into new companies and growth for our economy.
      - alaskamiller 18y ago
        Facebook is more of a kids paradise than hackers paradise.
    - 18y ago
cvg 18y ago
I think he's off here. Rather than 10 users being worth one whopper. I think it should be 10 connections are equal to one whopper. This would make FB worth a lot more than Kottke's $1.8 billion.
- alex_c 18y ago
  That is how he's calculating it. 1 user = 100 connections (on average), divide by 2 because the connections are two-sided, 50 connections, 5 whoppers per user.
- zain 18y ago
  Did you read the article? He establishes that on average, FB users have 100 connections, and derives 5 whoppers per user from there.
  - cvg 18y ago
    Oops, he's bad at math, I'm bad at skimming.
indigoviolet 18y ago
ha. a) nothing prevents you from re-adding those friends b) let's see you offer $12 for someone to stay off facebook forever.
- ed 18y ago
  I bet most users wouldn't leave facebook for $12. Interestingly I doubt most would pay $12 for the service, either.
  - indigoviolet 18y ago
    over their lifetimes on facebook? i'd bet that facebook could easily get a substantial fraction of its users to pay that much every two years or so; whether they want to go that route is up for debate.
  - qw 18y ago
    I am not on Facebook at all, even if it is free because I just haven't seen the need for it. I might develop some apps for it in the future, but that's about it. I'm not on Twitter, Friendfeed or Myspace either... For me, the value of Facebook is 0
pavel_lishin 18y ago
With the limit of one burger per customer, the maximum value is (users * whopper_cost), bringing the ceiling to 360 million dollars. It should actually be a little less, since at some point there will only be 9 users who will have missed out on the flurry of unfriending, like victims of a fattening ponzi scheme.
- sam_in_nyc 18y ago
  Untrue about the last 9 users. Every user can have more than 10 friends.. meaning every user can get a whopper. That's 100,000,000,000 calories (50,000,000 days worth of food for a 2000 calorie diet), for anyone who's into counting calories.
ivankirigin 18y ago
the network effect means that the top layer of connections are actually more valuable. But for individuals, the last 10 connections are either strangers (useless) or people you just met that you want to know better ( very important ). So this linear analysis is pretty bad. A slightly different algorithm could yield $180M or $18B.
svjunkie 18y ago
How did he arrive at the assumption that the connections are where Facebook derives the majority of its value? Doesn't most of its existing targeted advertising revolve around user-volunteered information, not information about users' connections? Facebook is interesting in the event that any of its concepts around creating value really manage to take off. The concept of an open platform for app development could provide a model for next-gen end-user computing (barring net neutrality issues and the tubes getting clogged, etc.). Also, the virtual goods being exchanged on facebook and other online communities make up a billion dollar industry (http://www.marketingvox.com/virtual-goods-make-for-billion-dollar-industry-030872/ http://www.marketingvox.com/virtual-goods-make-for-billion-d...).
KevBurnsJr 18y ago
I LoL'd
durbin 18y ago
This guys reasoning is faulty and he doesn't even know how facebook friendships work, so why would anyone take his funny valuation seriously? waste of time.
- MrRage 18y ago
  Are you trying to be ironic?
tlrobinson 18y ago
Burger King has a damn good viral marketing agency if they can get Hacker News to vote up two submissions about them in two days.
jwesley 18y ago
Ha. As reality based as any other Facebook valuation.

In my mind, Facebook's value is 0 until it can demonstrate profitability. This whole idea of it not being big enough yet is asinine.

eru 18y ago
Facebook can be made profitable right now: Just display lots of ads on it and sell all its (user) data. I guess the side would not last long with this approach, but it would make a few dollars in the next days.
- tom_rath 18y ago
  Who would buy those ads? That seems to be Facebook's problem. The 'platform' seems to be dominated by idle people who prefer free services that let them spend their day throwing virtual sheep at each other. That's not a particularly valuable demographic for businesses seeking to advertise their wares. Much better, by far, to purchase targeted advertising on Google.
  - jwesley 18y ago
    There is millions of dollar being made every day with Facebook ads. You can target them very specifically and drive large amounts of traffic cheaply. No, it is certainly not Adwords. For some offers it doesn't work. For some it works better than search. Just because it's not search does not mean it's not an incredibly valuable marketing channel. They will never be as profitable as Google because the CTR of the ads is pathetically low (compared to search) and the clicks are much less valuable, but there is massive traffic there. Even if they never develop the killer ad product there is still a big business there.
shawndrost 18y ago
Facebook made ~$200mm in 2008. It's pretty clear they could profit on those revenues, and instead are choosing to invest in further growth (with outside capital). Why is the parent comment's belief so widespread here on hn?
- deleted 18y ago
  [deleted]
- alaskamiller 18y ago
  Because snarking on Facebook is fun! My belief is that with straight up direct ad sales and limited targeting ads, MySpace cleared $1B this year. That's the potential upper limit of how much Facebook can make with just straight up ad sales. But having a much more complete understanding of relationships, Facebook wants to find something more effective and profitable than AdSense. That's what Mark Zuckerberg really pitched to everyone that has invested into Facebook: his team's ability to reinvent online advertising. The products they have so far -- Beacon, Social Ads -- are kind of lame but Facebook Connect is getting pretty big and they have quite a lot of money and time to work on it. But all this doesn't matter. Facebook isn't profitable! And somehow this affects hackers around the world.
  - incomethax 18y ago
    Of course this would affect hackers around the world. Anything that Google, Microsoft, Apple, etc. affects hackers because so many hackers are employed by these companies. Facebook is the same way, the churn of ideas that goes through each of these companies matters because only through working with other hackers do hackers develop and refine their own ideas. Without these large companies subsidizing hacker side projects we wouldn't get any of the idea building that spins into new companies and growth for our economy.
    - alaskamiller 18y ago
      Facebook is more of a kids paradise than hackers paradise.
  - 18y ago

cvg 18y ago

I think he's off here. Rather than 10 users being worth one whopper. I think it should be 10 connections are equal to one whopper. This would make FB worth a lot more than Kottke's $1.8 billion.

alex_c 18y ago
That is how he's calculating it. 1 user = 100 connections (on average), divide by 2 because the connections are two-sided, 50 connections, 5 whoppers per user.
zain 18y ago
Did you read the article? He establishes that on average, FB users have 100 connections, and derives 5 whoppers per user from there.
- cvg 18y ago
  Oops, he's bad at math, I'm bad at skimming.

indigoviolet 18y ago

ha. a) nothing prevents you from re-adding those friends b) let's see you offer $12 for someone to stay off facebook forever.

ed 18y ago
I bet most users wouldn't leave facebook for $12. Interestingly I doubt most would pay $12 for the service, either.
- indigoviolet 18y ago
  over their lifetimes on facebook? i'd bet that facebook could easily get a substantial fraction of its users to pay that much every two years or so; whether they want to go that route is up for debate.
- qw 18y ago
  I am not on Facebook at all, even if it is free because I just haven't seen the need for it. I might develop some apps for it in the future, but that's about it. I'm not on Twitter, Friendfeed or Myspace either... For me, the value of Facebook is 0

pavel_lishin 18y ago

With the limit of one burger per customer, the maximum value is (users * whopper_cost), bringing the ceiling to 360 million dollars. It should actually be a little less, since at some point there will only be 9 users who will have missed out on the flurry of unfriending, like victims of a fattening ponzi scheme.

sam_in_nyc 18y ago
Untrue about the last 9 users. Every user can have more than 10 friends.. meaning every user can get a whopper. That's 100,000,000,000 calories (50,000,000 days worth of food for a 2000 calorie diet), for anyone who's into counting calories.

ivankirigin 18y ago

the network effect means that the top layer of connections are actually more valuable. But for individuals, the last 10 connections are either strangers (useless) or people you just met that you want to know better ( very important ). So this linear analysis is pretty bad. A slightly different algorithm could yield $180M or $18B.

svjunkie 18y ago

How did he arrive at the assumption that the connections are where Facebook derives the majority of its value? Doesn't most of its existing targeted advertising revolve around user-volunteered information, not information about users' connections? Facebook is interesting in the event that any of its concepts around creating value really manage to take off. The concept of an open platform for app development could provide a model for next-gen end-user computing (barring net neutrality issues and the tubes getting clogged, etc.). Also, the virtual goods being exchanged on facebook and other online communities make up a billion dollar industry (http://www.marketingvox.com/virtual-goods-make-for-billion-dollar-industry-030872/ http://www.marketingvox.com/virtual-goods-make-for-billion-d...).

KevBurnsJr 18y ago

I LoL'd

durbin 18y ago

This guys reasoning is faulty and he doesn't even know how facebook friendships work, so why would anyone take his funny valuation seriously? waste of time.

MrRage 18y ago
Are you trying to be ironic?

tlrobinson 18y ago

Burger King has a damn good viral marketing agency if they can get Hacker News to vote up two submissions about them in two days.

jwesley 18y ago

Ha. As reality based as any other Facebook valuation.