
Facebook: $6 Billion? Nah. [John Battelle] - aston
http://battellemedia.com/archives/003809.php
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epi0Bauqu
Does anybody else think this logic is crazy? I believe Facebook's two major
financing rounds were for $13M and $25M (see [http://www.startup-
review.com/blog/facebook-case-study-offli...](http://www.startup-
review.com/blog/facebook-case-study-offline-behavior-drives-online-
usage.php)). Given those numbers, they couldn't have taken that much money out
compared to what they would be able to take out in a $6B acquisition. We're
talking like a 1:500 ratio.

And they may not "need" anyone right now, but that doesn't mean they shouldn't
sell at that price or that they don't have real risks to their business. There
is always risk in moving forward, and in their case, I think there is a whole
lot of risk. Their perceived valuation is tied up in (a) continual increases
to their traffic; (b) continual dominance in the college age group; and (c)
longer-term, in their creation of real earnings. Any perception that they will
not deliver on any of that and the offering prices will immediately drop off
that ridiculous multiple.

Firms like Google may not care about their earnings, but I think other firms
like Microsoft, Viacom, and Yahoo do, and if those firms fall by the wayside,
the ultimate sell price is going to go way down. Of course, they could IPO
too. But they should do it quickly while they are still hot.

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AF
It is just a joke that Facebook could be valued at $6 billion. An absolute
joke. FB has 30 million users, and that's not considering potential
duplicates. The number of active users may be even smaller than that, and some
people like I only log on once a week or so.

If FB gets sold for $6 billion, that means the new owning company would need
to make $500 million a year for 12 years(!) to break even. Frankly, the
Internet will probably be drastically different a decade from now. FB doesn't
even make $50 million a year, who in their right mind thinks that they will
all of a sudden make a profit off Facebook by spending that much money?

I swear some of these big companies just like throwing money at things. Yes,
the dot-com bubble is here once again.

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mynameishere
Well, it's only about twice electronic arts' valuation:

<http://finance.yahoo.com/q?s=ERTS>

...but consider the fact that facebook's awesome abilities include showing
_pictures_ on a _webpage_. No WAY anyone is going to crack through that entry
barrier.

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mynameishere
oops. I mean half. What happened to the edit button?

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sethjohn
My sense is that the people in charge of Facebook are happy to take big risks
with their company, and I don't see why they shouldn't.

Whether the company sells now for $6 billion or tanks and sells for $600
million in a few years, they'll have a lifetime of riches. With money a less
important consideration, the question becomes which would be a more
interesting activity for the next decade: Building a globally powerful company
that fundamentally changes how the internet game is played...or becoming idly
rich?

Financial risk/benefit calculations are much different for an individual than
they are for a large corporation.

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Goladus
_It got me thinking. After all, in 2002, tons of folks were asking the same
question. Why Google, why now, when there were dozens of other search engines
out there?_

Why google, why now(2002)?

People need to search the internet. Google is far and away the cleanest,
fastest, most effective, and easiest to use. It took 15 minutes of using
www.google.com to reach that conclusion. Some people didn't realize how
incredibly valuable the service was, but it was basically impossible to deny
the superiority of the service. Recommend Google to anyone: Grandma, your
little sister, your mac-using artist friend, an exchange student and watch
them use it.

Facebook isn't so obviously superior. It has lots of great features and is
well-designed, but compared to google it's very complicated to use.
Restrictions on joining networks, friend confirmation steps, javascript
glitches, and tagging are all evidence of a learning curve that is simple
nonexistant with google. Furthermore, many of the things that make facebook
effective exclude other features. Facebook is not simply a way better version
of myspace, there are pros and cons.

If I had to put money on Myspace or Facebook, I'd pick Facebook, but not with
the same confidence that I'd have picked google over every other search engine
back in 2002.

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pg
You're measuring FB too much by Google criteria. Cleanness and efficiency
matter more for search than for what FB does. FB's plan seems to be to own
personal relationships the way Google owns finding stuff. That could be very
big. Maybe bigger than search, maybe not. Who can say? But it will be
important and they are the clear leader.

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myoung8
I agree, although Google's goal is to create a searchable directory of the
world's information, right? Are personal relationships information? I think
they are represented that way online, or at least on Facebook.

It's not the best comparison right now, but I think it will grow stronger with
time as their services converge--barring an acquisition by Google, of course.

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pg
That goal of Google's is just the vector describing their path through the
same space every other tech company exists in. They can't turn it into a line.
So FB doesn't have to worry if the intersection of the extensions of their and
Google's vectors are far enough away from the current tip of Google's.

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Goladus
I agree. Google connects people to information. Facebook connects people to
people. Information, once created, doesn't change. People do.

