

Why Facebook is not worth $ 100 billion (or what is business) - skala
http://swturl.com/x575

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benohear
I have no idea what Facebook is actually worth, but the author is completely
missing the point, which is that Facebook has the potential to increase the
effectiveness of all advertising (except search engine advertising) by an
order of magnitude or two.

Advertising is about getting the right message to the right person. Search
engine marketing works because the person has already expressed their
interests (and therefore segmented themselves very precisely) by typing in a
search query. Retargeted ads are also effective because you are targeting the
valuable segment of "people who have visiting your site".

Facebook, on the other hand, allows to define a random person really
precisely. Not only on their demographics but also which web pages they liked,
what their friends like etc etc.

This could extend to any ads. Banners obviously, but also TV ads shown on
streaming programs. Imagine the impact if you can avoid paying for the 99% who
are fundamentally not interested in your message, and different ads are shown
to different, very precisely defined, segments.

~~~
bsenftner
However, the barrier to entry against what they provide is pretty low. Yes,
they have this fantastic database - but many people are wary of FB's data
collection activities and are guarded with what information they share. My
point being, there is low probability they are the last, final large popular
social network. The effort necessary to visit, use and become active at other
web destinations is simply too low.

I personally believe we'll see a flowering of special interest social networks
- like github & HN is for us, but across the spectrum of human interests. Such
targetted-interest destinations provide a social service FB or G+ is not going
to provide. And they don't need to. These other social networks are probably
already out there, growing their sub-culture communities right now. Look at
Pinterest for example; they appeal to a specific subculture and have decent
traction at the moment. FB is like pop radio - too generically bland.

Specific purpose social networks will eventually dominate, I believe, because
only in such an environment is sophisticated dialogues about the subculture
subject matter at hand possible. At the more generic social networks ones'
deeper, technical exchanges get interrupted by "friends" interjecting meme
humor or other info-noise to such exchanges. Who needs that when trying to be
serious?

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elchief
what a poorly written article

~~~
glesica
Needs serious proofreading, yes. But the overall point is valid, though maybe
not terribly original.

Facebook's valuation seems to be based on exuberance (rational or otherwise)
but also on uncertainty. No one really knows how social networking is going to
be used going forward. So if you've got a truckload of money you don't really
need and like the idea of having two truckloads of money, it might actually
seem risky _not_ to invest in Facebook...

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shingen
They're worth a hundred billion... three or four years post IPO, and if they
don't screw it all up.

As an investor, they're not worth buying at a hundred billion. There's little
to no value upside over the next five years (value, not price; value being
what you get, price being what you pay), short of a stock market bubble
spiking everything.

It's not surprising FB would get a $100b valuation though. Investors are
desperate for growth.

Compression is a word FB investors should get used to. Facebook will spend
years growing into that valuation, much like other tech stocks in a similar
outsized valuation situation.

Google for example has returned a weak 6% per year for the last five years.
Not much greater than the dividend that Verizon and AT&T pay. eBay has spent a
decade growing into their crazy dotcom days valuation, and now sport a very
modest 15x pe ratio.

At $8 billion in sales, FB can generate $3 billion in net income. Their model
scales extremely well in terms of margins and expenses per extra dollar of
sales/profit.

At $3 billion in net income, they'd have a 33 pe ratio. They can absolutely
hold a valuation around those levels three years out. This is assuming their
sales growth continues to slow. However, point being, there's no value upside
left in the stock.

