
Facebook’s Zuckerberg Now Richer Than Steve Jobs - bjonathan
http://blogs.forbes.com/stevenbertoni/2010/09/22/facebooks-zuckerberg-now-richer-than-apples-steve-jobs/
======
elblanco
Jobs' money is closer to real money than some arbitrary (and frankly
unbelievable in the realm of fantasy) valuation metric. Steve could (in
theory) cash out tomorrow and those 5.5million shares would be worth more or
less their face value. Zuckerberg has to actually sell his company.

And to be honest, Facebook would be a really lousy investment at the current
valuation (whatever that number happens to be depending on the phase of the
moon $14-$100 billion). Even at the conservative end of this ridiculous
metric, say $25 billion, it would take about 30 years at current revenue to
equal that let alone make any money on it -- that's a shitty investment as bad
as buying a house. They'd have to _double_ their revenue stream _every single
year_ to make it worth buying at that price within some reasonable payoff-time
like 5 years (a saner metric that most people use when valuing corporate
assets, "what's the 5 year revenue expectations of this company?). Sure
they're on an exponential growth path right now, how much longer do
exponential growth paths last? History shows, "not long".

Their bigger problem is that they pretty much have most of the Internet
connected human species with broadband and disposable income already signed
up. I don't think any of the analysts understand this. You'd have to drag huge
chunks of the population of _the planet_ out of poverty and into
middleclassdom to make any meaningful movement upwards in those numbers. FB
might be able to squeeze 750 million users this _generation_ out of the
planet. But getting more than that will involve bringing world peace to the
Earth and feeding and educating all of humanity.

Looking at hard numbers, in markets where FB has about %50 market penetration,
their growth rate is ~4% per month. Actually, the ~4% metric works even down
to 30% penetration. And you see <10% growth for places with around a 15%
penetration. The _only_ places with high growth are current low penetration
markets like India and Brazil, with ~14% growth, but <4% penetration. One
could reasonably expect that as penetration increases, growth will decrease
(yeah yeah every point growth in India is some huge number, but India is not
some huge middle-class affluent market waiting for penetration, You're simply
not going to sign on 30% of India's population only 7% have any Internet
access _at all_ , exactly the same as last year).

Doubling revenue year over year for 5 years is fantasy-land in most cases, not
going to happen if you've saturated the market. And unless we make
interstellar contact soon, or can expand Facebook into the Dolphin and Chimp
populations, it's not going to grow much more. At some point, FB's new signons
are going to start tracking global birthrates (and active users will start to
decline as the baby boomers start to pass on). The human population growth
curves of the planet look bleak for FB.

Don't get me wrong, FB is a valuable company, maybe $5-7 billion, maybe 10 on
the very high end. Those are still very impressive numbers. But these
valuation numbers that float around are some of the most fantastic multiples
of revenue I've seen in ages. Either the models the analysts are using are
wrong, or they're simply pulling random numbers out of their asses. I'm
guessing the later since I've seen some pretty wild ranges.

So my real question is, Zuckerberg is richer than Jobs, based on what? How
many wishes and unicorns Zuck can buy with his fantasy valuation money?

Valuation means nothing until it's turned into real money.

~~~
bl4k
and now they can grow revenue up across the base and increase effective $/user
with:

1\. More time on site through more features, more facebook connect
implementations and more platform support

2\. More efficient and targeted advertising with better technology (Google did
this very well and are the envy of everybody)

3\. Taking a bigger slice of platform revenues by forcing the use of Facebook
credits, which means they get 30% of what Zynga et al make (Zynga made more
than Facebook in '09)

Your argument assumes that $/user will remain static, when in truth it is very
early days for Facebook in that regard. I think their $/user run-rate is good
atm considering how shitty their ads are.

Point 3 alone could more than double $/user in the next 12 months. Point 2 is
the jackpot that could see them surpass GOOG revenues in due course.

~~~
elblanco
These are excellent points. Basically, FB is going to have to radically change
their revenue model in order to make this valuation seem worth it. More ads,
more cross licensing deals, bigger cuts of current deals, sell junk direct. I
can only imagine the outcry when all that junk starts hitting user's pages.
(FWIW, I have yet to see a single advertisement on my FB page)

I was actually having this exact conversation recently with some friends
(which is why it's all so fresh for me), and by way of comparison. Google's
revenue for 2008 and 2009 is 21.8bil, 23.6bil and looks on track to be just
over 24bil for this year. Their exponential growth curve is over, it ended in
2006 but nobody was paying attention because their growth percentages were
still really good.

I'm still not sold on FB using Adverts to grow to Google sizes. I just don't
see it. Their friend suggests are terrible, I don't think they've suggested
anybody I actually know ever, I can't imagine how bad targeted adverts will
be. Plus they have a miserable privacy record. On top of that, FB isn't really
used in the same way Google is. It's an entirely different usage model, one
that I'm not sure lends itself to adverts the same way.

I think #3 is their best bet. Turn FB into a platform for apps, and license
access to that platform. Basically an online videogame console with really
really good social connectivity.

One thing to think about, my group of FB friends is almost entirely different
from my group of linkedin friends is almost entirely different from my group
of steam friends. I know I'm an anecdote, but other anecdotal evidence from
people I know with the same type of disjoint friends and associates across
different sites seems to support this data point.

~~~
bl4k
Facebook and Google have a similar reach, but Facebook has much higher
pageview counts (pageviews are redundant today anyway) and much more time on
site (I will dig up the numbers again).

The problem that Google has is that it is a doorway to other sites - they have
spent 10 years now trying to find ways to keep this userbase on their site
further with different applications. I think it is fair to say that Gmail is
probably their only success in this regard - and even that hasn't solved their
problem of diversifying revenue.

I think much of the current GOOG valuation is predicated on both the revenue
growth they were seeing (as you point out, though investors should have seen
the flat line coming) and a bet on the ability for Google to utilize their
place on the web to build out a 'platform' of sorts with applications and
other services. They have failed at both tasks, and it is only a matter of
time that the market wises up to this and brings the value of the stock back
to a PE more in line with that of a traditional media company (as that is what
Google is at its core with this revenue model).

Watching Facebook grow must be really painful for Google, a real punch in the
face and a bruised ego. At some point, I wonder, when will they take a step
back and admit failure and re-evaluate their entire management structure.

I have the numbers somewhere, but Google's eCPM rate is just insane. I imagine
that Facebook atm would be lucky to achieve a penny - so there is some room
for improvement but I do agree with you that their primary business model will
come from platform.

I think if FB are game, they could try in-stream advertising. A scenario would
be a new movie being launched. The marketers for the movie could throw away
their traditional website and go to the FB sales team, setup a custom page and
then specify who they want targetted - say, 18-30 year old males in the US.
Facebook could carve out this demographic, and then run an exclusive in-stream
pop-in for a 24 hour period for millions of dollars. The users might react,
but they could just make the ad clear. This is much more powerful than what
Google offers - since they can only target a users attention, while Facebook
is the only website with a global reach where users can be targeted directly.

I think in 2-3 years time that $3-5B from advertising is possible. Add another
$3-5 from platform, and you are at $6-10B, with a lot of room to grow and a
potential $60-150B valuation.

Also as an aside, won't Facebook be forced to go public at some point due to
SEC regulations? I know they have placated employees by offering a sanctioned
second market, but at some point they have to bite the bullet and list. It
could be possible that they are waiting to book 12 months of platform revenue
and a full year of those results for the prospectus (which will make the
filing look a lot better - 2 major sources of revenue and strong growth).

Overall a very interesting topic. If you had a chance to today, would you buy
Facebook stock at $20B? or $10B? :)

~~~
elblanco
This is really a great piece of analysis. I don't have anything to add at all.

Basically, becoming a platform is where both companies need to go, and start
monetizing that platform. But unfortunately for Google, they are much further
away from being that than FB is.

I would go so far as to say that Google has utterly failed to figure out a
good diversification strategy -- at this point, they just dump something out
there and slap some targeted ads on it. But outside of search and gmail, they
don't really have much of interest they can monetize on.

Google Apps might be their next billion dollar product line, if they can turn
it into something decent. Enterprises are where lots of money is at, but their
enterprise offerings are really rather lousy.

I'm actually sometimes flabberghasted at how much wasted potential Google has
in terms of obvious monetize-able offerings they have in their basket, but all
of them are treated like incomplete one-off projects done on employee's
20%...with vast stretches of time between obvious enhancements and/or some
necessary things never getting built at all.

FB, on the other hand, _has_ the platform but isn't doing anything with it
that's readily monetize-able, and they can manage to keep people at the site,
but there's really not a whole heck of a lot for people to actually spend
money on. Once again, I don't understand why something like Ping or
Pandora/last.fm isn't a central part of FB's strategy. It's like a videogame
console with only 1 or 2 games.

------
sbaqai
Can someone explain to me Facebook's value? And please understand, I don't ask
that to be antagonistic - from what I understand and have read, I've yet to
take a side on whether facebook is the new king in SV or if its a sign of
another bubble. If someone can calmly explain what value they provide, their
prospects for future growth, and future competitive advantage, I'd seriously
be grateful.

Here is what I understand:

Facebook earned $650M in revenue in 2009. Most of that came from brand and
performance-based advertising. $50M from Microsoft ads alone. $10M on virtual
goods. [1]

Their biggest revenue share comes from advertising. Now, again, from what I
understand, their ad targeting isn't as focused as, say, Google. I'm going to
make an assumption, but it makes sense to me that Google users demonstrate
more purchasing intent, which is why they can charge high CPC. I've never
found a Facebook ad relevant to my purpose for being on the site, but
regardless, I can understand the value for any company to spend money on brand
awareness, getting views on a high traffic site with quantifiable
demographics.

Performance advertising is interesting in facebook's case. When I type in
'Digital Camera' in google, I'm voluntarily giving out a query in exchange for
information. Ads for digital cameras, photography books, etc would in fact be
quite welcome for a decent percentage of people. But the search-engine user
controls that exchange of service. Its akin to using a hammer. Google is the
tool. The functionality is in your hands.

Facebook's model is more of an extraction process. Someone has opened a coffee
shop with free coffee - but its only free if you hang around the place. Over
time, they are trying to develop a model of you based on information that is
overheard and asked of you. This is where I'm unsure if its sustainable. I'd
also say a great majority of facebook users don't realize how the site has
changed since its inception. A large majority of my non-technical friends have
no idea how information is being analyzed. I'm not sure how robust facebook's
brand is if some terrible scandal/event breaks out and people become really
sensitive to what they share with the site. This "social contract" between
users, facebook, and advertisers is something I don't think the majority of
users understand. They just see it as a site with their friends. And its to
facebook's benefit for users not to fully understand.

The last point I want to make is about Social Media. I understand how its
shifted interaction and all that. But my concern is with its ties to the
capitalistic sense of value. Technological progress does not always = making a
ton of money. There are a lot of major technologies that changed the world .
There were 2000 car companies at one point, and now only 3 american companies
remain. Cars changed everything, city planning, etc, but investors, in
aggregate, got fucked. The airline business is a similar story. There was also
the tech bubble.

EDIT: I also want to add that since it is a private company, it is in almost
everyone's favor to drive up its valuation. Founders, investors, and employees
with stock, etc all benefit. When a company is public, there is an incentive
to introduce negative information (hence the utility of short sellers).

Now, I'd love to hear an explanation on why its such an 800lb gorilla in the
valley.

[1] [http://www.businessinsider.com/facebook-wont-be-a-multi-
bill...](http://www.businessinsider.com/facebook-wont-be-a-multi-billion-
dollar-company-for-many-years-2010-3)

~~~
edanm
I can think of a few things that would make Facebook worth a _lot_ more money.
The biggest is the "Instant Personalization" idea.

You say, rightly so, that Google's ads are more targeted than Facebook's,
because users show purchasing intent. But Facebook knows a _lot_ more about
users overall than Google knows (Google only knows a search term). Right now,
this isn't such a big deal, since Facebook isn't _really_ exploiting it. But
pretty soon, Instant Personalization will give any site you visit a lot of
useful information about you that can help them sell you stuff. This is
something companies will pay a _lot_ for.

Let's take a simple example. Let's say I have a friend called "Tom" who has a
birthday next week. I visit Amazon's site (just looking for something for
myself), but right there on Amazon's front page, I see a huge ad, with a
picture of Tom, saying "Tom has a birthday next week. Why not buy him this
book from his favorite author?" Obviously this is just a quick first example,
but I'm guessing ads like this will drive up sales for Amazon _big time_. How
much would Amazon pay Facebook for making ads like the above possible?

------
ryanwaggoner
On a semi-related note, I think it's really interesting that something like
80% of Jobs' net worth is from Pixar (now Disney), not Apple. And yet a lot of
people don't even know he was involved in Pixar at all.

~~~
yardie
I watched the Pixar story movie and learned a lot about Jobs, Lasseter and
Pixar. Lasseter is definitely the visionary behind Pixar, financially so is
Jobs. He bought them from Lucas in '86. Toy Story wasn't released until '95.
That means for 9 years, not only was he not making money, he had to write
personal checks to pump in money every year just to keep the company afloat.

The man deserves every bit of credit he gets for Pixar.

~~~
ZeroGravitas
The Pixar company originally sold hardware and then software, before it became
all about animation. Even on the animation side it was doing adverts to bring
in money. So it wasn't a charity project with the aim of creating great art,
it was just an unsuccessful technology business until the Disney deal.

------
rblion
Steve Jobs is still cooler and has more respect.

------
lukeqsee
On paper. Facebook owns a lot of eyeballs. Apple owns a lot of people. (It's
time versus cult following.)

People > eyeballs

------
code_duck
I bet Steve wishes he hadn't ditched all that stock in the 80s. Not like it
really matters; obviously he has total say over the company and is surely more
than comfortable enough financially.

And, we'll see what happens in 10 years, huh? Facebook might be worth 20 times
as much, or 1/20th. Apple is pretty stable at this point and not likely to go
anywhere but steadily up, in my opinion.

\------------------------

Ha! Please, wise HN users, explain to me why you downvoted this. I'm
interested in hearing the rationale.

~~~
siglesias
They've got 95% of the PC market to take. You think they'll just give that up?

~~~
code_duck
Who - Apple? Wait... Facebook? What do you mean?

~~~
siglesias
You tell me who owns 5% of the PC market and let's work from there.

------
duck
But did Jobs ever say he was going to F&#@ his users in their ears?

~~~
benologist
Jobs spent the last few months _doing it_ because he felt like it. That's a
bit bigger than saying it.

~~~
duck
I'm not a big Apple fan, but I think Jobs gives his users _exactly_ what they
want. That probably isn't what is right or what we want, but we're not the
users he wants.

~~~
borism
wow! double denial in one sentence.

------
forensic
When you look at how Jobs quit Apple and sold his shares, the fact that he's
even a billionaire is pretty impressive. He made all the money from NeXTSTEP
and Pixar.

~~~
philwelch
He bought Pixar, and founded Next, from the money he made at Apple.

Next was actually acquired on a down valuation--according to Wikipedia,
Canon's investment gave them a $600 million valuation in 1989, whereas they
were acquired by Apple for $429 million in 1996.

------
aresant
Despite being a long time Apple investor I was caught completely off gaurd
that Jobs only owns 5,500,000 shares out of well over 900,000,000 outstanding.

Makes the perks like the private jet look like peanuts vs. value he's brought
to the table.

~~~
dcurtis
The Apple board has consistently granted him options, but he never exercises
them (except for a couple grants in 1998-1999 that brought his company
ownership to SEC-required levels for the CEO position). He has given up
billions of dollars by simply letting his options expire.

Apple's SEC filings are generally interesting, if you're ever incredibly
bored.

~~~
elblanco
I wonder if it's a function of "I already have enough money doing this for the
love of it"?

~~~
loewenskind
This is why I always find the Apple hate from Google fan boys amusing. If Jobs
is evil, what are his goals? It can't be money because he's literally throwing
away billions. He wont live long enough to take over the world. I think he
just wants to go down in history as providing the best user experiences so
he's doing what he thinks will make that most likely. You may disagree with
how he's trying (I do myself on some things) but I think he believes in it.

Compared to that, how benevolent is Google actually? Not that they need to be.
They don't owe that to anyone anymore than Jobs does. So I wish conversations
about Apple/Google could drop the good/evil nonsense. It's about trade offs
and results. Why they do what they do is their own business.

EDIT: Removed unnecessary sentence (made an irrelevant call on Google's
benevolence).

~~~
dschobel
_Compared to that, how benevolent is Google actually?_

<http://www.google.org/>

~~~
loewenskind
Every company gives to charity. It's tax deductible and great PR. Think of the
most evil fortune 100 company you can come up with and then go look how much
they're giving in charity. Did Google's founders join Warren Buffett and co.
on donating half their wealth to charity?

My point is that people should stop looking for motivations in these companies
and see them for what they are: companies who provide us some service or
product. Especially since if you force the issue and make us compare who is
more benevolent I think a strong argument can be made for Jobs being more
benevolent than Larry and/or Sergey (and again, it doesn't matter).

------
patrickaljord
Dell is richer than Steve Jobs too btw.

~~~
josefresco
Michael Dell? Really? Funny considering Dell was basically funded by Intel for
years. URL with data would be nice.

------
sankara
All the real money vs hyped money thing apart, I read somewhere that a 2003
decision by Steve Jobs to swap his options for a low return but safer
alternative has costed him a lot. As per the article his worth would have been
at least $13 billion now.

Couldn't locate the original article; found the following with a google
search. [http://www.marketwatch.com/story/apples-steve-jobs-
blunders-...](http://www.marketwatch.com/story/apples-steve-jobs-blunders-on-
options-swap-2010-05-18)

Anyone care to confirm or deny this?

------
rlmw
Whats more interesting for me, is the way that a lot of news stories are
specific examples of interesting things ripped out of the odd bit of research.
For example, once the Forbes 400 list has been compiled you could pretty much
auto-generate articles like this one.

They've just dragged in a load of facts about the two people, combined with
facts about the people from their Rich List. There's pretty much no non-
trivial analysis here.

------
pyre
Well, duh! Steve Jobs only makes $1/year working for Apple! ;-)

------
BenSchaechter
Maybe. But Steve Jobs is currently a lot more liquid than Zuckerberg.

~~~
Aetius
And this matters because?? I've heard Larry Ellison is the most illiquid
billionaire, as he finances everything with loans against his massive equity
in Oracle. He's still in the top 5 richest people. Zuckerberg is no different.

~~~
quizbiz
How exactly does one finance everything with loans against equity? What does
that mean? How does he pay back the loans? With shares?

~~~
borism
wow, borrowing against stock, how risky is that (for both him and his
shareholders)?

apparently he has been sued about it
[http://articles.sfgate.com/2006-01-31/news/17279373_1_oracle...](http://articles.sfgate.com/2006-01-31/news/17279373_1_oracle-
stock-larry-ellison-shareholder-lawsuit)

~~~
shasta
The way I read your link, he was sued for something else, and this practice
came to light during discovery.

------
jordanbrown
Hard to believe he is only 26.

------
Poiesis
There's no accounting for taste.

