5 ms·

For the "Facebook is worth zero"/"lol no business model" crowd, I'd like your answer to these two questions: 1. At what valuation would you invest in Facebook?

• patio11 18y ago
  Why is your number so different from that of people who have a lot more information than you? People who are a lot smarter and had much better information than me thought that loaning $300,000 to a minimum wage immigrant (one anecdote among hundreds of thousands) was a highly profitable business, too. For eight of the last ten years they were looking pretty prescient now weren't they.
  • modoc 18y ago
    No need to bring immigration status into it. Frankly loaning huge sums of money to people with poor credit ratings and not enough income to pay it off with if they wanted to was a horrible idea, and yet tons of "smart" people made it their primary business. And yes, some of them actually got very rich from doing it. Doesn't mean I want to do business like that.
  • antiismist 18y ago
    Actually it was completely reasonable to have made those loans and I'd have done it too given that Fannie Mae was willing to guarantee it. If that's all that you did then you'd be fine (everyone else is of course another story but business is business).
    • chadmalik 18y ago
      There were in fact some people who worked at banks who refused to participate in the fraudulent lending activity, falsification of income statements, no-doc loans etc. - they quit or were fired. It may be "reasonable" to engage in fraud when the government is enabling it - but its not honest. Hopefully our country can come to a point in the future where being honest is viewed as the "reasonable" thing to do.
• modoc 18y ago
  1) I wouldn't. It's simply not something I'd put my money into. For lots of reasons you clearly wouldn't agree with, which is fine, you can invest your money in it. 2) Like those people who invested in the bonds backed by subprime mortgages? Or the people who invested big in the first bubble? Or the people who are really just playing with other people's money? What makes the group of people who think Facebook is somehow worth billions smarter than those groups? Only time will tell. It's a big gamble on either A) Facebook monetizing their traffic to the tune of a few billion dollars or B) finding BIGGER suckers down the road to buy/merge/invest in/buy the stock of/etc... A is imho a big gamble, and B is imho both a gamble and a poor way to do business (not poor $ wise, but banking on big suckers seems unethical to me somehow). All of it is unattractive as a way for me to wager my money. I also don't bet on boxing or horse races. Am I that much smarter than people who do? Hard to say.
• potatolicious 18y ago
  1 - I'm no investor, I prefer to spend my money building things :) But nonetheless, I wouldn't invest in a company unless I saw a road to profitability - doing otherwise is playing the hype/bubble game, and we all know how well that works. 2 - Do they have more information than us? They might have concrete operating costs, revenue, etc, but I'm convinced that many analysts haven't a clue how the internet works. Historical perspective also works too: remember the last dotcom crash? Those companies were being valued in the billions by a large number of analysts who "know a lot more" than the average joe. Hell, kicking and screaming against ridiculously absurd valuations at the time was a minority voice.
  • electromagnetic 18y ago
    I have two personal addendum's, one to each point: 1 - I wouldn't invest in a company unless it needs a road for profitability. 2 - I grew up on the internet and I have no clue how the internet works. I have no clue how advertising works, but I'm probably unique against normal people that advertising doesn't make me buy a single thing. (Anecdotal example: My reason for buying an Xbox 360 was because it can push 720p to a HDTV and was cheaper than a new PC. I was never told it could do this through advertising, I found it out myself.) I understand how Real Estate works, how all functions of commerce and trade works. I just do not get advertising. Does Coke advertising make me buy it over Pepsi? No, Pepsi is too sweet. Do all the dozen adult-phone services make me call them? No, these didn't even work when I was twelve. The only place I've noticed advertisements to ever work on me is for movies, however I regularly go to apple trailers so I generally see the advert before I see it on TV or in the Cinema, which negates the point of advertising; IE you can't make me buy something I'm already trying to buy. This, however, doesn't extend to the crap they used to put on VHS's and now DVD's, which I find offensive and disgusting. I pay $30 for a movie, I don't expect there to be 20 minutes of trailers, just like when I go to eat my cereal I don't want fifty advertisements for other cereals.
    • webwright 18y ago
      You should read Blink (specifically the section on priming) and then tell me again that advertising doesn't change your behavior. Advertising isn't just about "see the ad, go buy the product" - it's meant to shape your thinking. Two example priming studies: Gladwell mentions the study of two Dutch researchers who had several groups of students each answer forty-two Trivial Pursuit questions. Half were asked to take five minutes to think about what it would mean to be a professor and write it down, while the other half were asked to do the same with soccer hooligan in place of professor. The students who thought about professors ended up getting 55.6 percent of the questions correct, while the soccer group got 42.6 percent correct. and In a separate study, when African-American students were asked to identify their race on a pre-test questioner, the simple act of checking the box next to African American was enough to prime them with negative cultural stereotypes associated with African Americans and academic achievement. The number of items they got right was cut in HALF. Malcolm Gladwell makes a strong point that priming is a powerful thing. Personally I think this has incredible implications in our society. If ‘smart’ is really just a frame of mind, these social cues (such as African American=less intelligent) are shaping not only the results of standardized tests, but the way we interact with each other in business and other professional fields. How do you think priming effects your buying decisions? How about your research decisions when pondering a purchase? How do you think it effects jury trials? Of course, you like to think you're above such manipulation-- so does everyone else.
• brk 18y ago
  #1: I don't see anything that is truly unique, or that presents a barrier to entry for competitors in Facebook. I've often called it the GeoCities of Gen Y. So there is no valuation that I'd likely invest in FB. #2: The biggest reason here is likely because I am thinking about it in terms of MY money. Most VCs are working with somebody elses money, and I think this can affect a persons judgement and cause them to take chances they wouldn't ordinarily take. I would invest $0 of my money in FaceBook. But, I'd gladly invest $10M of YOUR money. And I could talk it up in a manner that made you think I was doing you a great favor. If I turn out to be right, then I look like a visionary. If I turn out to be wrong then we were both fooled by them, or snookered by the economy, etc. More information does not always enable you to make better decisions...
• ericb 18y ago
  People with different degrees of "smartness" are on opposite sides of many issues. Sadly, it is not as simple as smart=correct. Apply your same reasoning to pets.com in 1999 and it does not fare very well. Does facebook have value, yeah I think so. Does it have an intrinsic value in the billions? I think skepticism is warranted.
• banned_man 18y ago
  The problem with Facebook is that they make very bad decisions at an executive level. Facebook is clearly not worth $0, but I don't think I'd invest in it at any valuation, only because I wouldn't trust Zuckerberg to manage my capital.
• mynameishere 18y ago
  At what valuation would you invest in Facebook? Oh, come on. I'd put down 50K for 51 percent of the whole. How's that? Obviously, a one-sided bid is pointless.
• mdasen 18y ago
  1. I'd probably invest at a valuation of around $100M. Why? Facebook has no road to profitability that they've created. Sure they're popular, but lots of things have been popular and faded into nothing. Geocities, a myriad of search engines, Friendster just to name a few. If Facebook would accept a buyer for less than a billion, they'd be able to unload the site, but the longer they run independently, the harsher the reality is going to become that they have no real plan for making any money. I'm not saying that it doesn't have value - more that it has value that's damn hard to monetize to the point that it's more useful as a piece of someone's portfolio than as an independently profitable product. To clarify what I mean a little: something like Google Maps is a good thing for Google to own even if they loose money on it because it keeps people around and thinking of Google for their needs. 2. Because there are some people that are willing to wager their money on a 1% chance that their money will become 10x larger. It's a terrible bet, but people make it all the time. I mean, if you are investing in Facebook at $15B, really someone has to buy it for a lot more than $15B for it to have been worth the risk and I don't see Facebook selling in the $50-$100B range. The fact is that Facebook is a much riskier investment than a company that has already been in the black. It could potentially just flop as a business. Google might not become as profitable as you expect, but it isn't just going to flop. So, Facebook is this really risky investment that can never sell high enough to justify the valuations they seek. At best, Facebook continues along nicely and makes some money. They aren't the next Google. Seriously, what are the odds that Facebook is going to sell for a lot of money? If you place it at 50%, then you really need to be thinking it will sell for $30B to justify buying in at a $15B valuation. If you place it at 25%, you really need to think it will sell for $60B eventually. And how likely do you think that is? Facebook is more like a YouTube than it is like a Google and what Facebook wants its valuation to be just can't be justified by what it has going for it. Companies will buy popular things just because they're popular in the sub $1B range - sometimes even slightly over that in the YouTube case. But they won't spend the $30B that would justify a buyout to the VC who have invested at a $15B valuation. I mean, those VCs don't just want to break even on their investment. Unless Facebook can find a way to be profitable - and hugely profitable - it just won't be bought for such a substantial amount. A $30B buy would put Facebook at a third of a Google and it just isn't that.