

Report: Facebook Revenue Was $777 Million In 2009, Net Income $200 Million - chailatte
http://techcrunch.com/2011/01/05/report-facebook-revenue-was-777-million-in-2009-net-income-200-million/

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patrickgzill
Let's say that they have quadrupled that, so $3.2 B revenue, and that they
have greatly reduced their operating expenses (new servers, etc.) - so let's
say they are making 50% net income, which would be almost impossible - that is
still at best-case scenario $1.6 B a year, which hardly justifies $50B .

Even the most optimistic growth targets are going to bump up against hard
limits: people can't spend more than x hours a day online, there are maybe 5
billion users worldwide as a potential market.

Unless the CIA is going to pay them a couple billion a year for data mining
access (CIA's VC arm was an early investor) since we have all so nicely
classified ourselves and our social graphs for "TIA" purposes, I can't see the
valuation sticking.

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callmeed
So, where the heck is this $50B valuation coming from? I know those are '09
numbers, but even with wicked growth, that's quite a P/E.

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svlla
it's called faith-based investing.

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aheilbut
The user base is growing at something like 200% a year. In five years, they'll
have over 32 billion users. Just figure out a way to make one or two dollars
off each user...that can't be so hard, right?

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asnyder
Unfortunately there's a hard cap on the number of potential users in the
world. There's about 7 billion people in the world right now, even if we're
generous and suggest that 50% of the population are potential users you're
limited to a 3 billionish maximum. They currently claim over 500 million
active users, which means they're already at 1/6 of their maximum.
Furthermore, the law of diminishing returns suggests that their growth will
slow as they get close to their population limit. So unless they can figure
out how to monetize those users in some significant way I can't see the
potential for revenue being close to what the current evaluations are
suggesting.

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aheilbut
Irony is no fun when it is explained.

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kondro
Ironically that was sarcasm anyway.

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aheilbut
You're right! I'm so terribly sorry for getting my words all confused. It's a
great thing that HN has such sharp and savvy editors like you to set shmucks
like me straight.

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kondro
You're very welcome :-).

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christophe971
At least. Some numbers. NOW the debate is going to be fun, with some numbers
to play with...

So let's see...

Google is valued at $195B, and had a profit of $6.5B in 2009. 6.5/195 => 0.033

Apple is valued at $306B, and had a profit of $14B in 2009. 14.0/306 => 0.045

Same ballpark.

Now...

Facebook is valued at $50B, and had a profit of $200MM in 2009. 0.2/50 =>
0.004

Facebook over-valued in the long term ? Sure. In the short term ? It's the
(speculative) market at work.

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sandee
The average of both Google and Apple = (0.033 + 0.045)/2 = 0.039

Assuming a profit of 500M over a revenue of 2B , the valuation should be =
0.5/0.039 = 12.82B

The valuation of Facebook is 3.9x over this, which does not look so bad !

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JSig
My place of employment currently allows users to surf Facebook, though it
blocks many other sites. I wonder if the guys upstairs will one day pull the
plug on FB when firing people is no longer an option to boost productivity. I
wonder how much of a risk this scenario is to FB. There are a lot of un/der
employed folks out there though.....

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spitfire
So we find out the emperor has no clothes. Unsurprising.

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alnayyir
Can anyone get profit/revenue to valuation ratios on pre-IPO Google so that we
can do some more rational comparing?

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kondro
How would this be rational? Facebook is not Google. Google's primary market
(search) is nothing like Facebook's (personal communication).

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Pyrodogg
Both of them market in advertising. The delivery method is different, but it's
still advertising.

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kondro
That's like saying that because Fry's and The Olive Garden both accept cash
that they are in the same business.

Just because Facebook and Google both make money by selling advertisements
doesn't mean they are in the same market.

For example, Google makes so much money from advertising because they can show
users ads pertinent to their search query at the point they are often making a
buying decision.

However, Facebook users are on the site because they bored or communicating
and not even considering buying something. Not to mention that a large portion
of Facebook users have very little discretionary spending money or ability to
purchase online anyway.

The market and motivation involved between the two companies is completely
different and not comparable.

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skbach
Bingo! I purchase a lot of online ads, and I can tell you, I give nearly all
my ad budget to Google. I tried Facebook for a while, with the exact same ads
and the exact same product, and the result was shocking. Nearly 10x less
conversions than with Google. I think the reason is simple. Google users were
already searching for me, facebook users were just bored looky-loos. When
people start to realize this about fb it could be the short of the century.

