Facebook gets $10B valuation…really???

By: ispeculatornew
Date posted: 05.29.2009 (5:00 am) | Write a Comment  (1 Comment)

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facebook_logoFacebook, the leading social network by many measures received a cash injection a few days ago by a Russian investment firm that purchased close to 2% of shares in exchange for $200M valuing the company at $10 B, which is less than it was a few months ago when Microsoft purchased its stake but given the market decline, that is actually a very decent valuation and still a healthy sign for a company that is increasingly facing competition from all kinds of different companies from LinkedIn to Twitter, Google and others. Can Facebook survive? It is certainly still growing and doing so through a more open website that allows for useful applications to be used, much like the Ipod. And in a way, Facebook is indeed remaining sticky and certainly an interesting investment for a company that is looking for eyeballs. But in pure financial terms? I’m not as convinced. While Facebook will probably not fade anytime soon even if it loses its “coolness” factor (MySpace is a great example of this), it is still not clear how the company will be able to generate much profit.

There is talk about more advertisements as well as possibly charging users for some features, but in the era of “free”, it’s not easy to see what these features would be and why a company like Google could not simply come in and offer that service for free. Of course, Facebook has the logistic advantage of c0nnecting friends that Google cannot quite compete with but the line between the two is not as big as it seems. Google would simply need to add a more “socially integrated” platform through its Gmail email system for many users to be able to forbid Facebook to keep in contact. It is not quite clear if Google will even attempt this but as it has itself admitted, live search is becomming more important and it will be difficult for Google to be competitive with Twitter and Facebook if it does not receive the same kind of user interaction..

All in all, I do think Facebook is a wonderful venture and would love to invest if I had spare money. But would I invest in it because it is the best investment, never… It is just not quite clear to me how Facebook would ever be able to generate the same earning power as a Google, Apple, Microsoft…

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  1. […] tip – Intelligent Speculator – Facebook gets $10 Billion Valuation « Tiffany Sales Under Pressure – Difficult Diamond […]

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