Feeds

How much is Facebook worth?

What's on your mind? I've just realised who the mark is...

Build a business case: developing custom apps

Comment How much is Facebook worth? Hundreds of billions or spit? The answer to that question depends upon who you're asking: and indeed how you're doing the asking.

“At what price would you buy Facebook stock?” will get you a very different answer than observing how many people are willing to dig into their wallets at that price.

The artist Damien Hirst isn't troubled by the fact that the market determines the value of art. “I’m one of the few people in the world who can say, ‘I know what everything is worth'," he declares. "Everything in the whole world is worth what anyone else is prepared to pay for it. And that’s it. Simple.”

It's as good a method as any other: in a market economy something is worth what people are willing to pay for it in that market. Thus Facebook is worth around that mid $70bns level that its stock is changing hands at on the private market where it trades. (That it's a private market is a side effect of the rules under which it incorporated and sought initial investment. Until it IPOs onto Nasdaq or similar, it is limited to 500 shareholders at any one time.)

Then again, we've seen that such market valuations are - how shall we put this - variable. One day the mortgage bonds of America were worth one amount, seemingly the next day $7trn less.

So how might we go about trying to value the company from the fundamentals? It claims 500 million users, if it gets their advertising truly sorted out, how much do we think it can get per 1000 page views? What's the average number of page views per user per year? $1 per thousand is easy enough, can be done with Google Ads (your blog or mine can manage that). There are sites out there that get $10 per 1,000 (and sell all their inventory) and those that claim rates of $30 and up (but very rarely seem to sell them all).

Of those users, how many see how many pages? We all know of those who seem to live their entire lives on the site: then there's people like me. I was sufficiently bored one day to claim my name and haven't been sufficiently bored as yet to either revisit or work out how to delete my account (something which isn't easy and which might boost those account numbers just a tad).

Our problem with this measurement by fundamentals is that much of the information we need isn't publicly released: it's released only to those fewer than 500 insiders and so the best proxy we have for them is... what those insiders are valuing the company at.

Yet another method would be to look at what the most popular internet sites of their day were worth and are worth now. From Geocities to Yahoo via AOL, that's not an encouraging picture for immediate valuations lasting into the long term. Perhaps social media has more stickiness, more ability to keep the punters? There is, after all, a network effect; once you've linked up with all your buddies, moving has a cost.

But then Bebo, Myspace and Friends Reunited don't seem to have shown that to be true. It's almost as if social media works like the stock market does: by the time everyone's talking about shares, you should be selling. By the time everyone's on a site then all the cool kids will leave: like a nightclub, in fact?

Build a business case: developing custom apps

More from The Register

next story
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Sonos AXES support for Apple's iOS4 and 5
Want to use your iThing? You can't - it's too old
Amazon says Hachette should lower ebook prices, pay authors more
Oh yeah ... and a 30% cut for Amazon to seal the deal
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
Chips are down at Broadcom: Thousands of workers laid off
Cellphone baseband device biz shuttered
Feel free to BONK on the TUBE, says Transport for London
Plus: Almost NOBODY uses pay-by-bonk on buses - Visa
Nintend-OH NO! Sorry, Mario – your profits are in another castle
Red-hatted mascot, red-colored logo, red-stained finance books
Twitch rich as Google flicks $1bn hitch switch, claims snitch
Gameplay streaming biz and search king refuse to deny fresh gobble rumors
Stick a 4K in them: Super high-res TVs are DONE
4,000 pixels is niche now... Don't say we didn't warn you
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.
Maximize storage efficiency across the enterprise
The HP StoreOnce backup solution offers highly flexible, centrally managed, and highly efficient data protection for any enterprise.