80-1 P/E valuation seems a bit steep to me. I still see this as a $25 Billion company in the long term, which isn't bad for a site that gets much of its revenue from display ads.
You'll notice that just about every site in the top 15 sell goods and services (physical: Amazon, eBay or digital: Netflix, iTunes) or search ads (Yahoo, and Google). Display ad based sites languish at the bottom for several reasons, including the fact that the content of those ads are not what you came to the site to engage with.
If the numbers are right, then Facebook is bringing in about 1/3 the revenue of eBay, but analysts on secondary markets and elsewhere are giving it a valuation twice that of eBay's: http://finance.yahoo.com/q?s=EBAY or five times that of Yahoo's which has twice the revenue: http://finance.yahoo.com/q?s=YHOO
Hopefully people can see through the hyperbole, and find a fair market value for this company.
Value is more a function of future revenue, and margin, than it is of past revenue. So upward momentum, which Facebook has and Yahoo and EBay do not, explains the higher valuation.
Also, valuation comes from the expectation over all possible outcomes. Perhaps there's a 60% chance Facebook winds up just a $25B company. But there's also a 38% chance that it becomes a $200B Google and a 2% chance it becomes a one-of-a-kind $400B post-Google monopoly. The weighted average of those outcomes is $99B, even though your "$25 Billion company" sense remains the modal/most-likely outcome.
Facebook's ad platform is still relatively immature, especially when it comes to long tail advertisers. Hence they have much more potential for growth than say eBay which is a much more mature product.
There are standard advertising features such as day-parting and A/B testing that don't exist on Facebook but would significantly increase conversion rates. They're also choosing at the present not to offer targeting on high-value demographic information (for example by job title - linkedin's CPM is 10x that of Facebook on job title targeted ads) which again would allow them to significantly increase revenue.
Facebook could cannibalize all of these markets you mention: nothing prevents them from turning it into a marketplace of new/used stuff and a platform to watch movies on or sell songs. Have a look at the (pirate friendly) Russian vkontakte.ru: whole american TV series and movies can be watched there.
"Net income in the first half of 2011 came to almost $500 million, according to the source, who wished to remain anonymous because privately-held Facebook does not disclose its results."
I am not convinced that facebook's advertising can ever be as effective as adsense. In fact, i think these numbers represent the revenues from game developers switching to facebook credits (facebook made it mandatory in july, but most developers started earlier).
Net income in the first half of 2011 came to almost $500 million, according to the source, who wished to remain anonymous because privately-held Facebook does not disclose its results.
[+] [-] shoham|14 years ago|reply
Here's a list of websites by 2010 revenue:
http://www.incomediary.com/top-earning-websites-in-the-world...
You'll notice that just about every site in the top 15 sell goods and services (physical: Amazon, eBay or digital: Netflix, iTunes) or search ads (Yahoo, and Google). Display ad based sites languish at the bottom for several reasons, including the fact that the content of those ads are not what you came to the site to engage with.
If the numbers are right, then Facebook is bringing in about 1/3 the revenue of eBay, but analysts on secondary markets and elsewhere are giving it a valuation twice that of eBay's: http://finance.yahoo.com/q?s=EBAY or five times that of Yahoo's which has twice the revenue: http://finance.yahoo.com/q?s=YHOO
Hopefully people can see through the hyperbole, and find a fair market value for this company.
[+] [-] gojomo|14 years ago|reply
Also, valuation comes from the expectation over all possible outcomes. Perhaps there's a 60% chance Facebook winds up just a $25B company. But there's also a 38% chance that it becomes a $200B Google and a 2% chance it becomes a one-of-a-kind $400B post-Google monopoly. The weighted average of those outcomes is $99B, even though your "$25 Billion company" sense remains the modal/most-likely outcome.
[+] [-] ig1|14 years ago|reply
There are standard advertising features such as day-parting and A/B testing that don't exist on Facebook but would significantly increase conversion rates. They're also choosing at the present not to offer targeting on high-value demographic information (for example by job title - linkedin's CPM is 10x that of Facebook on job title targeted ads) which again would allow them to significantly increase revenue.
[+] [-] deleo|14 years ago|reply
[+] [-] plainOldText|14 years ago|reply
[+] [-] protomyth|14 years ago|reply
[+] [-] bane|14 years ago|reply
[+] [-] zerostar07|14 years ago|reply
[+] [-] ig1|14 years ago|reply
[+] [-] unknown|14 years ago|reply
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[+] [-] typicalrunt|14 years ago|reply
Revenue is all well and good, but what's the profit number? That's a very important, but missing, part of the story.
[+] [-] mdasen|14 years ago|reply
Net income in the first half of 2011 came to almost $500 million, according to the source, who wished to remain anonymous because privately-held Facebook does not disclose its results.
[+] [-] Zakuzaa|14 years ago|reply