A few weeks ago, I wrote about the fact that Facebook will be able to help in many ways online as it becomes a more “reliable” ID for each person. I’ve written quite often about how Facebook is the company that I would most like to buy right now if that was possible, even explaining in depth what I think of the $75-100B valuation. A reader asked me why I was writing this, that it could drive others to buy and make it more expensive. It’s flattering that someone thinks I have that much influence but I somehow doubt it. I also sometimes wonder if I’m wrong here, if I’m missing something that would make me back off. So far, nothing. Nothing to convince me that Facebook will not turn out to be the next Google.
Am I Setting Myself Up For A Big Disappointment?
As you all know, in the end, it’s all about valuation. It’s difficult for me to tell you exactly how much I think Facebook should be worth right now as that would take me an incredible amount of time and depends on so many different factors. That being said, I will probably do this exercise at some point. What I can tell you is that the current $100B valuation is a major bargain. However, there is certainly risk that it will come out at a much higher price with tons of hype and millions of small and big investors wanting to get a piece of their favorite social network. That scenario gives me nightmares…
Facebook Right Now
Facebook is bound to become the biggest internet IPO in history, by far. It is expected to raise $10B at a $100B valuation. To give you an idea, that is 6 times more than Google raised in 2004. What explains the valuation? Facebook has over 800 million users and by some reasonable estimates, it will reach 1 billion users by August 2012… By that measure, Facebook’s valuation would imply a value of about $100 per user. I don’t know about you but that does not seem outrageous to me. Far from it.
1 billion users! How many people on earth can actually connect to the internet? 3 billion maybe?
That being said, getting users is hard, getting them to log in every day is that much more difficult. Yet, over 500 million users log into Facebook every day. That is very impressive.
Facebook is expected to have generated a bit over 4 billion in revenues last year, mostly through advertising. How? Facebook is now getting 1 out of 6 display advertising dollars on the web as it moves past Google, Yahoo, Microsoft and others.
We’ve Barely Scratched The Surface
I think that Facebook will be able to keep up the growth in users although that will slow down obviously. What will accelerate though is growth in revenues. As time goes by, thousands of companies around the world are becoming more committed to Facebook, they are putting money into their Facebook pages, into getting users there, etc. At some point, Facebook will start to shift a bit of its focus to making more money and that is when growth will explode in my opinion. Facebook is doing the smart thing right now to focus on users and making a better product. Why?
Facebook Is Taking Control Of The Web
As times goes by, we have seen competitors such as Google become more nervous about Facebook. Why? Because users are spending an increasingly large amount of time in Facebook, doing all kinds of things that Google cannot help with, get involved in or even know about. A few years ago, Google was the dominant player around which the internet revolved. That has started to change as the internet is starting to revolve around Facebook instead. That is priceless!!!
So please Facebook, get this over with, go public at a $100B valuation, let everyone talk about the bubble and how the value is insane… I’ll be working my buy orders:)