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Facebook's Revenues Leaked
eldavojohn writes "Think that Goldman Sachs spent too much on Facebook with the $450 million investment? Well, a very wealthy customer of theirs decided to leak Facebook's financials yesterday after receiving it over lunch: '... during the first nine months of 2010, Facebook generated $1.2 billion in revenue. Net income at the firm was $355 million. The financial statements were not audited and offered little detail about how Facebook generates its revenue, said the source, who did not want to be identified because he had signed a non-disclosure agreement.' Expanding this nine-month period to a year yields $1.6 billion in revenue and under half a billion in income. Given that, should Facebook be valuated at $50 billion?"
Reader frontwave adds news that other social tech companies are hurriedly considering IPOs of their own.
Facebook has five hundred million users. Is each user really worth a hundred dollars? Facebook is going public soon. What are the chances that this 'leaked' report is designed to pump up the stock, and therefore Goldman's profit?
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Facebook has five hundred million users. Is each user really worth a hundred dollars?
I'm not a businessman but I'm not so sure this is the correct way to think about this.
... but there's no guarantee that Facebook remains the de facto standard that far out. You need to consider future growth.
Everything depends on how much the market is penetrated for social in two ways: users and advertisers. Can they grow that revenue/profit? And if so, to what point? If Zuckerberg sneaks it into China then I think you're looking at a potential to increase that significantly. Facebook hosts its statistics so you can guess if it's got a half billion in revenue yearly at half a billion users and it scales perfectly, that's a dollar per year per user. Can it get up to a billion users? It's probably clear that in the long run as the younger generation matures, that penetration will slowly expand
The other factor, advertisers and game publishers, could also be troublesome. Is this a "Honeymoon Period" for advertisers where they're paying an unsustainable amount to Facebook for the time being just to gain exposure? Could the above assumptions about scaling with userbase actually be false if advertisers aren't willing to spend more than they are now once more users join?
Consider that these numbers put Facebook's Net Profit Margin at almost 30%. That's very high for the industry. They're in the same region as Google and Microsoft but as I stated above can it scale?
One last thing, you seem to think that Facebook's worth is only its users. They are also a large company with almost two thousand employees and are building infrastructure. Include that on your assets sheet.
Facebook is going public soon. What are the chances that this 'leaked' report is designed to pump up the stock, and therefore Goldman's profit?
I think the SEC would come down pretty hard on GS if they did that -- they have before for less. Misleading investors is very serious.
My work here is dung.
Is Facebook a viable long term business model ?
All internet companies are butterflies. Something newer and hipper will come around. Facebook too will one day go the way of MySpace and LiveJournal.
(And Google will one day go the way of Altavista, Hotbot and ftpsearch.ntnu.no)
Normally I would agree, but I don't think so in this case. Facebook has done one thing well, and it's appealed to the masses across all demographics. MySpace was too quirky, convoluted, etc. Facebook has kept things relatively simple. As long as they don't result in mass bank fraud due to users' personal information being listed, they have a pretty safe model.
Facebook also does not appear to be stagnating the way MySpace did when it thought it was the only option. They have a pretty good partnership with Zynga that supplies gimmicky, addictive games for Joe Public and they continue to add new "features." Whether those features are beneficial to the end-user or Facebook itself, it still comes across as innovating.
I think companies have started to wisen-up after the dot-com burst. Investors are also going to be prone to stay with companies that have shown some resilience in the downed economy.