We've certainly entered the silly season of Silicon Valley tech valuations, but one company strikes me as not richly valued enough: Facebook. You can argue about the company's privacy policies, its data hoarding policies, its choice of that ugly blue but one thing seems beyond doubt: Facebook is worth at least as much as Google …
Facebook is a scam
I like facebook, and I use it a lot, but there is no way that FB should be valuated at $75b. I have dozens of FB friends, but only about 3 or 4 who are active. The rest do nothing. Every few days, they may pop on to see what I've said, but they don't post anything of their own. Yet, those same people use Google every...single...day... several times.
There is a reason FB has resisted going public for this long. Once people can really look at the number of active eyeballs, it will be seen that their numbers are inflated. FB is like any other Internet company - a lot of casual viewers, but only a small cadre (less than 5%) who are active users. No different from Digg, for example.
The only reason it hasn't gone public yet is because Goldmann Sachs has not hyped up the investment enough so that they can make kajillions of dollars off of the IPO, leaving the rest of the folks holding the bag. Once they get that right, FB will go public, will soar on the first day, and then crash hard.
Again, I'm not a FB hater. I like FB. But this is just crazy. I can't believe we are going to relive the tech bubble mania of the 1990's. Apparently, nobody learned anything.
Completely agree. I consider myself a relatively normal person and of my 100 or so facebook 'friends' (I've no idea how many, because it really doesn't matter to anyone but Facebook), maybe a dozen post regularly. Most of those are pictures of their dinner or telling me they've just checked in at a railway station.
I don't care.
So, where's the business model here? This writer claims 'social' is the key to all human commerce. Nonsense. I went to the supermarket today, nothing social there. Far from it. In fact, there IS an algorithm at play: when you go shopping, you consider parameters such as 'who is cheapest?', 'which is closest?' or 'which has the best quality product?'. All these feed into the choice of vendor. I do not choose my supermarket based on the manager friending me on facebook.
Social means going to the pub and having a normal conversation with normal people, not buying into some crappy group voucher for a cheap manicure that will put the promoter out of business because they have given half their cash to Groupon to give a special offer to a bunch of people who won't provide repeat business because they'll just wait for the place down the road to do their own promotion.
And if you do want to carry out some kind of transaction based on recommendations, there are niche verticals for that.
As the author himself states, Facebook are capturing more of the mobile traffic. Because of the limited real estate, there are no ads, so how do they monetise this? And where are the games? Maybe they're there, but again, I don't care and neither do most people I know. I go to the facebook website on my pc maybe once a month, if that. Maybe they're hedging on everyone having an iPad?
Google have a more sustainable business model. They have a respectable portfolio of business applications, from mail services, to Google Apps to App Engine. Facebook on the other hand can offer your brand a 'like' facility that will make your marketing department wet themselves until the next shiny thing comes along.
No, Facebook is overvalued and has a lot more to lose than Google.
This article is representative of the sort of lunacy from the original dot com bubble that is starting to reassert itself in the Valley. Stop it.
It isn't a lot of money these days. Ask for One... Hundred... BAJILLION DOLLARS!
... the idea of Facebook or iOS is the same : to be a platform where others will be compelled to build on top you, like M$ of yesteryears. That's the difference between myspace and facebook.
Any app which requires a social component - "dating" being the obvious one (eg: zoosk / datehookup) - will find it easier to re-use facebook's user-base rather then build on a user base from scratch.
The potential for brain dead social gaming is also endless as shown by zynga. If you don't know what zynga is I wouldn't be surprised but it's heading for a 900+ million dollar revenue this year (revenue, not valuation). If it was an isolated website, it would be lucky to reach 1 million in revenues. facebook keeps 30% of the revenue... about fair share, I would say.
I am 35+. Me and my friends use facebook mainly for photosharing more than anything else and probably we are not targets of the social networking websites. Its the younger generation - in colleges/just out - where they are growing up with myspace, twitter, facebook and texting - the fundamental structure of "friend circle" has changed for them... I hardly had any overlaps between my circles.. but it's a common theme for youngsters to have 30-40% overlap between their circles. Why should it result in better valuation for FB ? There is no direct answer here, but it means more power to social networking tools.
The other users of facebook are still evolving.. eg: it's acting as a news aggregator for communities.. eg: you can do a "like" on west minister abbey" or your local pub and you will get any updates on their calendars. You don't have to subscribe to their newsletter and then mark it spam a month later.
In future, you might have to "pay" a dollar for a <like> (implying subscription) on "the Guardian" facebook. So it just becomes another app store like apple's - but even easier to buy.
So yeah, facebook as a business is a little more than news feed from mostly absent friends.
Bottom line: Is facebook valuation at 75 billion too low/too high ???? I don't know - the current $10-20 billions revenue suggests that a $50billion is definitely ON, except by most conservative evluation models designed for classic industries which have linear & predictable growth patterns.
But anything beyond 100bill$ looks high (to me, a commentard). Why, don't I believe in the social networking fairytale ??? Well, I do believe that any fairytale will come to an end/plateau
sooner or later. It did for Google. It will for Facebook.
To end the long rant: let's say we all hate Apple, Facebook & Google for being evil in the ways they do things... take from us without our permission, snoop on us and in general they de-power us in our digital lives.... And our protests will keep them honest. But there is no denying that they are doing their part in shaping how 21st century will be, and for that, <respect>.
What about those numbers?
In addition to the point you made about usage, must be added a factor for multiple aliases. Here's a wild guess, 4 per real user? As for the site visits, give me a break - i use an aggregation service that drops ALL my Social Media accounts into my email box twice daily - makes it easy to ignore the "chaff", consequently does FB have chance to pitch anything to me ? NO WAY. Add to that Mr Z's famous (they trust me, the dumb f...s) put-down of his customers and the value being talked up here is fanciful nonsense...
Re: Facebook is a scam
Congratulations, you've got 40 up-votes for completely missing the point.
"Every few days, they may pop on to see what I've said" Thus reading and, apparently, clicking on adverts.
"they don't post anything of their own" Who cares? Not facebook and not it's shareholders. In fact, up to a point (the point at which facebook becomes irrelevant), passive users are preferable. Eyeballs on ads without load on servers.
Re: Facebook is a scam
Your analysis is valid, up to a point. However I remember back in the 90's that the killer idea for the WWW was the "portal". Like so many other IT notions ("cloud", "client/server") "portal" meant whatever the would-be vendor meant it to mean.
But just because the dogs bark and the caravan moves on doesn't mean that the portal was a bad idea, or even that it went away, because it didn't. It changed, it grew, and now Facebook is the portal that everyone was dreaming of back then.
I once had a conversation with a car designer, who told me that he thought the SGI workstation that he designed cars on was an "Alias machine", because he only used it to run Alias software. He didn't realise that it could do other things as well, but he wasn't interested in finding out anyway.
For the vast majority of people who use computing devices nowadays it's about the function. Not how it works, but what it does. If you are a complete beginner and want to use the Internet for digital communication then Facebook will have you up and running in minutes, seconds even.
So IMHO the valuation of the company for the debt-money parasites is based on that fact. The technically-savvy and the quick learners have already been on-line for years, but Facebook opens up the web for the next set, those who haven't had the patience, or couldn't see the benefit or were intimidated by the jargon or whatever.
Plus you don't need a PC any more - it's on phones as well these days. But whether it's a phone or a PC, for the new recruits it's a "Facebook machine".
And if you own a piece of Facebook then all these newbies are belong to you...
Author is on crack
$75 billion valuation is "almost certainly too low"? Only someone with Silicon Valley bubble blinders could possibly think so, let alone consider for even a moment a valuation of a trillion dollars. To say he's delusional is an understatement!
Facebook made a profit of $300 million last year (reported in the media from people who saw their finances as part of the Goldman Sachs offering) Their room for growth is rapidly dimishing, what with most Americans who will ever join it already joined, and limited prospects in other big markets like China or South America where competitors already dominate. Even if they eventually grew 10 times larger than they were in 2010, to a profit of $3 billion/yr, which would require pretty much everyone on the planet between 14 and 70 to join, it'd only be worth $30 billion at a traditional P/E of 10 for companies that have reached their growth limits (that's about what Microsoft is trading at these days, and they still do grow a bit)
Sure, some will claim that they can increase their revenues, but I think people will be resistant to seeing a bunch more advertising and certainly most would refuse to pay a monthly fee - it would be the end of Facebook to even suggest such a thing.. It only took overlooking all the spam postings to cause Myspace to go from its dominant position into decline, so Facebook can't treat its users as if they're locked in.
Already I notice amongst some of my friends who have been around Facebook for a long time like me a bit of Facebook fatigue, where status updates become less and less frequent. The most active users are a small segment of people who are really into it, and those who only joined in the past year or two for whom it is still fairly new.
fb net income vs goog
net income of facebook in 2010 .. about $500 million(?)
net income of google in 2010 .. about $8,510 million .. 30% over 2009
I really don't see fb increasing it's net income by 17 times to catch goog, and goog's increase in net income from 2009-2010 was $2,000 million .. 4 times fb's total net for 2010
how does that translate in anyone's mind that fb is worth anything close to goog ?
It's called "Google"
GOOG is Google's stock ticker
The commentator should have capitalised it, though.
The bubble is expanding
Are we forgetting the end goal of a company is to make money?
Google earned $29 billion in 2010 compared to Facebook’s estimated $2 billion.
Isn't this "don't mind about a business plan, all that matters is the number of users" clearly a market bubble?
"Are we forgetting the end goal of a company is to make money?"
You're thinking about *quoted* companies or privately held manufacturing companies.
The purpose of IPO's is to convert the owners large block of stock or "paper" into block of *cash* supplied by the new owners.
The bigger the block, the better.
Making a profit then becomes *their* problem, although the greater the *apparent* profit being made (or even the *potential* for such profit) the better chance you have of offloading in the first place.
The book "Startup" is a nice guide to the internals of VC funding and how Microsoft handle competitors.
Revenue, revenue, revenue! Profit!
If an established company has no revenue, then it's worthless. I don't care how many users you've got - no revenue means that those users are a *liability*, not an asset!
For a new startup, it's more complicated as you're projecting forward to work out what revenues you are likely to get in the future.
So very simply - Google and Facebook are both established. Neither are likely to have big revenue growth spurts without major acquisitions, they're both consolidating their market.
Which has more revenue? Which makes more profit? Which has better margins?
That's the data that tells you which company is worth more.
Numbers of "Users" tells you nothing at all, especially as it's impossible to delete yourself from either.
I discovered that it is now possible to disable an account on fb, and apparently it will disappear forever. I will believe it when I see it.
The people with the greatest difficulty deleting themselves are deceased.
I never figured out how to remove myself from google or hotmail for that matter
Is Facebook worth more than Google?
That has got to be one of the worst ever Zuckasms I've ever heard. First company to be worth over $1tn? Do me a favour. Hoarding the private data of millions of fuckwits will not get them over the line. They are the current fad, there will be another, and another, and another.
Facebook is too well established to go anywhere now.
"I'll Facebook you later" has become a phrase in the same way that "I'll eBay some parts" or "Just Google the recipe" have. Once that happens, it's very hard to imagine that it could be replaced by something else. I don't think any web site is worth a million million dollars, that seems a bit over the top, but when the President of the United States has a page on your web site I think that's a pretty clear sign that you've become a firmly established part of the collective consciousness.
Facebook owns social?
"Once that happens, it's very hard to imagine that it could be replaced by something else."
Tell that to hoover and biro, now small players in their respective markets despite being spelled with a lower case letter.
I seem to recall that Murdoch paid a (then) huge sum for a social networking site, but I can't remember the name of the site.
Beyond the basics like name, address and credit card details, most of the supposedly valuable personal info on Facebook is completely ephemeral stuff. Do you think anyone trawls the Stephen Fry archive? Of course not. They look at what he said today. What he said last week is barely a memory and if he started using a different site then within a month the "transition" would be complete.
"Social" has a short half life. It needs constant input. If you try to own it, you'll simply find that your initial investment decays away to nothing.
"Established" is not "Forever"
You lack imagination. Like fax machines, nearly every office still has one, they just sit there for the most part unused and forlorn. 35 years ago it was difficult to imagine business life without Telex. 20 years ago it was hard to imagine life without Fax.
Something else will come along to challenge FB in a minute. After all, the most assiduous FB users are kids. Fickle kids, who are used to getting everything for free. Good luck trying to squeeze money out of them.
Sell it while it's hot.
Do you Hoover your house?
I do. I don't however have a vacuum cleaner made by Hoover, like most people I know.
After a while people will forget that Google, eBay and Facebook were brands rather than the generic name and will look for alternatives.
Facebook becoming a common term counts for nothing in the long run.
Another brand that is/was equally well established is Hoover. You go and Hoover the carpet, even go and buy a new Hoover.
But the chances are it won't be made by Hoover despite the name becoming common currency.
In the same way that to Google something means to search for something on the internet. You might be surprised to find that many people who say they are Googling something are not even using Google. They are often just using the search bar in their browser with little or no idea or interest on which search engine is being used.
"...too well established to go anywhere..."
Yeah, just like MySpace.
enough of fecesbook already
Dunno about that. The only reason Facebook appears to have more traffic than Google is because Google is designed to get things done, while the only purpose of Facebook is to get people to spend more time on Facebook. I already went to high school once, I didn't like it the first time so why would I want to do it again, all day, every day? A couple of weeks ago I just stopped using it entirely. I didn't even make a decision to do it -- it sort of just happened. Today I finally scored a Google+ account. It's a better Facebook than Facebook, and I hope everyone agrees and moves there too.
The problem I see Google+ is that it's another way to profile you to sell your soul to advertising. And all the info that is on Facebook is Google's wet dream to know everything about you.
a $1 trillion company could put out a decent Android app that didn't get worse with every update.
I will believe it when.......
I suddenly have to start paying $5/user/month if my office has over 10 users like I do for google apps nowadays.
WTF is this facebook thing
and why the hell do I need it. If I wanted to stay in touch with my classmates or previous co-workers I would have. Fuck off Facebook, your time is coming to an end and I think it will be sooner rather then later.
Facebook usage is approaching decline in the US and western Europe, Facebook games are not mobile-friendly, their site has terrible browser/capability detection, the list goes on. By q1 2012 when they are due to release IPO, the company valuation may already be in decline. Kneel and apologise to the readers you have just trolled.
Maybe I'm getting old
I was a freshman in college when Facebook appeared. You had to have a .edu address from one of a few dozen schools to register, and it was very student-oriented; its "killer app" was that you could list your class schedule and find your classmates for... uh... study sessions, yeah. There was no news feed and no FarmVille to fill it with crap. At one point I had the largest Daily Show fan group on the site, because you could stick a 0 in front of your group's name and bump it to the top of the list... heh. It was a fun community but actual online communication still overwhelmingly took place over AIM.
Anyway, then the feeping creatures started to multiply, the useful stuff died (if it still does class schedules, I don't know where they went) and I lost interest approximately as quickly as my message box filled up with hundreds of daily requests to plant virtual seeds. And finally, around the time they opened the doors to grade schoolers and grandmas and corporations, the hardcore suckage began; suddenly you'd have innocent-looking "SuperPokes" popping up from friends, and when you tried to SuperPoke them back, you had to give SuperPoke the rights to your firstborn son. Every little goddamn thing anyone did spammed all of their friends' walls with a notice about their garden or whatever. The site was taken over by machines.
So eventually they came up with the News Feed, which was meant to fix the horrendous signal-to-noise ratio by prioritizing, you know, stuff that your friends were actually sharing with you instead of some app. And I interact with that using a LauncherPro widget on Android. I don't use apps, I don't use groups, I don't see a single ad, much less click them. And it's an okay diversion. But from my perspective, Facebook died a long time ago. On the other hand, my perspective and a trillion dollars will let you buy out Facebook.
So I'm excited about Google+. Whenever I start medical school, I think its group messaging stuff will be pretty popular. That said, I know that ads and Chrome web apps are coming, and I hope that it doesn't become unusable like Facebook did in its awkward teen phase.
Re: Maybe I'm getting old
What you've described could pretty much be applied to using the Internet in general. And thus the circle of life continues: something else which isn't spoiled by idiots and scammers rises from the ashes (arise Google+) to be dirtied and defiled until it too is of no further value.
Try to create the ultimate "something for everyone" walled garden and experience the same fate!
Facebook is worthless in its current form.
I use FB on an iphone.
How many ads to I see. NONE.
What do FB make from me, NOTHING
If they start charging for FB will I continue to use it? NO
As we move more and more to mobile access (ie phones with small screens) there is less room for ads to be displayed. If I was an advertiser I would not pay to advertise on FB. You can do it for free by setting up a new user page as many of my friends have done for their own businesses.
If your paying for ads to be displayed on FB your a FOOL.
FB need to change their model and fast or they will become WORTLESS.
Would I buy FB shares. HELL NO.
History tells us their FATE.
Re: worthless in its current form
"If I was an advertiser I would not pay to advertise on FB"
If I was an advertiser, I don't think I'd pay for any internet advertising.
How many TV or magazine adverts can you remember from your childhood? Quite a few. How many internet ads can you remember from this year? Hardly any. It just doesn't have the impact, even for those who aren't using ad blockers.
Your ad is always "somewhere off to the side" and if it wasn't then your audience would spend more time finding out how to block it. Unlike old-fashioned TVs, the target audience has some control over the viewing platform. Interestingly, this is also true of new-fangled TVs and TV advertising revenues peaked a long time ago everyone knows that everyone else records the program and fast-forwards through the ads.
Only Google really make it pay and that's because they are offering something qualitatively different from everyone else. Paying to have your company appear in somebody's search results is not advertising. Your viewers have self-selected for actually being interested in the "ad".
Its only when you turn off the ad blockers..
that you realize just how crap, intrusive and down-right awful t'internet ads really are.
AdBlock Plus is the biz.
crap, intrusive and down-right awful t'internet ads
I dont bother with Adblock. I find internet Ads about intrusive as a poster on a bus shelter - I dont notice them. But they do provide income for websites - without Ads, how do you think they would generate income?
Both are overvalued, to the extreme.
Neither actually have a sustainable product, and both have huge overhead.
Once the principles start cashing out, the market will correct itself.
Holland, tulips, etc.
Don't know about that
Facebook yeah- they don't do anything other than sit there creaming off developers. Well, off Zygna. No-one else makes enough money to be bothered with. Advertisers, too, are a source of income- but they're pushed to one side of the page and don't appear at all on the mobile version so that's not a sustainable solution.
Google, on the other hand, has a mobile phone platform (soon to be joined by another- Chromium), more processing power than God, their own (surprisingly good for most uses) office suite, their own (popular) web browser, /paying customers/, links to governments and major arty and engineery organisations around the world and is used several times in a day-potentially several times a minute- by people around the world. They even have their own fibre infrastructure carrying data across the planet.
@jake: Troll fail
So you wouldn't count any of the products here as sustainable?: http://www.google.com/intl/en/about/products/
@A handle is required
I'm not trolling, I'm a realist. NONE of the crap on that link can't be done here at home, easier, cheaper, and with a better eye on our family's security.
Stop sipping the goolade.
I'd love to see your first crack at any of them.
@A handle is required
I tried to answer your "first crack" question, but apparently one of the mods has issues with my background. ::shrugs::
No problem. Agree to disagree?
@A handle is required
I can always agree to disagree. The techie world is what it is :-)
Attempt to post my first reply follows ... maybe ;-)
@A handle is required
*MY* first crack at that kind of shit?
Gawd/ess, where would I start ... Personally, probably the BBS I ran in the late 1970s. Prior to that, I was active in the early NCP version of what we now call "The Internet". During and after that, I was active in the development of TCP/IP. Before, during & after TCP/IP I was active in development of UUCP, NNTP and (S)MTP ...
I was at the wrong place (S.F Bay Area) at the right time (student). ::shrugs::
More beer ... and I almost never use icons ...
None of these things are analogous to what Google have created.
@A handle is required
Not impressive. Wrong place, wrong time. I was a small cog in a world-wide machine that was experimenting with connectivity (ever hear of "Community Memory"? I participated).
Disagree on "not analogous".
Google has, in a nutshell, re-created the BBSes of the '70s and Fidonet of the '80s, and the "Portals" of the '90s (throw Usenet in there, just because) ... and commercialized them on the backs of their userbase ... the very concept of which was always an anathema to those of us figuring out this technology in the later third of the 20th century.
I'm fairly certain that without all us small cogs, google wouldn't exist as it is today.
Giants on the shoulders of midgets, to coin a phrase ...
It's all about the adverts
Google has a platform that is perfect for the delivery of adverts. If I'm searching for something then it's entirely plausible that I might want to buy something, and if I do the adverts will be relevant. So when Google serves me an ad it's both less likely to annoy me than Facebook, and more likely to result in a sale.
Facebook has millions of eyeballs, but unless it can use it's dominance of social to take search it won't be able to monetize them, because adverts in facebook are more annoying, less relevant, and less likely to find me in a buying mood.
this is a title
Google+ has been in existence to the normal folk for little over a week.
It's already got roughly 900,000 - 1.2million users depending on how ultra accurate you are with your search terms.
While there are no official figures as such - I have made more friends on G+ in the last 5 days than I have in 3 years on Facebook.
Additionally - I *actually* enjoy talking to the new people I don't really know on Google+ whereas I use Facebook as a business tool these days more than anything.
Once I discovered however that Facebook strips all the EXIF data off the photos that you upload to their service - meaning every photo I have uploaded since 2006 to the service has no DateTaken info attached to it - I decided enough was enough and will only be maintaining my "pages" on Facebook now - I can't be arsed updating my personal stuff.
Google+ on the other hand is a joy to use with a slight downside in that it's incredibly addictive and people are finding it hard to switch it off.
Huh. Evil+, more like.
"Google+ on the other hand is a joy to use with a slight downside in that it's incredibly addictive and people are finding it hard to switch it off."
Yeah, kinda like heroin.
This author is an amazing troll!
..or just fucking stupid.
- Review Apple takes blade to 13-inch MacBook Pro with Retina display
- Game Theory The agony and ecstasy of SteamOS: WHERE ARE MY GAMES?
- Intel's Raspberry Pi rival Galileo can now run Windows
- Microsoft and HTC are M8s again: New One mobe sports WinPhone
- Worstall on Wednesday Wall Street woes: Oh noes, tech titans aren't using bankers