Charismatic

From the Torygraph:


The underwriters have been caught with $11.76bn in a $16bn IPO. I'm thinking there will be a few who are tempted to go short on FaceBook next week. So I ask you, can it really be worth half a google at the moment?

The Dean

Difficult to say.......... an IPO often comes with contractual obligations for the leads/underwriters to mop up any stock that doesn't get sold, but an obligation to support the price after launch??

Not sure.

I look at it the other way round - if the company really is worth 100 billion, it isn't a very good company, profit-wise........

Millhouse

Spot on. How on earth can they value something so high, when profits are so low.

As for 'underwriting' post IPO... no. After all, in the short term, facebook really only care about the cash raised on the IPO day - not the share price thereafter, that is someone elses' problem.

I hope the underwriters get burned badly - the whole concept goes against the idea of a free market.

shiva

The data Facebook has on nearly 900 million people is worth far more than 100 billion. The only problem is nobody can work out how to cash in on that data without breaking multiple laws and pissing off all 900 million users. The ipo and price is largely a gamble that someone will work out how to monetize all that information before their star wanes and the next big online hit comes along. Now there's a load of shareholders involved the pressure will be on to monetize so expect huge and unpopular changes to Facebook very soon

Millhouse

That's the whole point. You can't make money out of it. I mean, who has ever bought anything from a click-though ad? I can honestly say, I only ever click them by accident.

Let's not also forget that facebook can be replaced and fall from the stars as quickly as it got there.

Norm_uk

That's probably the best synopsis of the whole issue I've read.

N.

The Dean

Right.......... so it's NOT worth 100 billion then................

Millhouse

Personally, I doubt even a 1/100th of it. I also wonder how many of the 900million users are active.

The Dean

I'm not a Facebook user, and never will be, but tell me: is it free-of-charge to register as a member? If so, there's a possible source of future revenue (charging a membership fee) - but how many of the 900 million would be willing to pay?

Millhouse

I am not a member either... but it's free.

weasel decentral

I would say none of the 900 million would pay for the site, they would simply move to the next social networking site that comes along.

britexpat76

I am a member, though lots of my friends have now left. And Zuckerberg has publicly stated it will always remain free.

shiva

millions of people click ads every day eg google makes a fortune selling them to advertisers who in turn make enough of a profit to justify paying google.
its a huge huge industry that drives most of the internet that most people just dont see or arent aware of.

click through rates of 1 person in a thousand views are considered good with buyers at upto 10% of visitors (most convert about 1% at best) to a well designed and targeted landing page.

to give you an example, one of the most prolific ads currently is a weight loss product, its bloody everywhere, the owner of the product and his affiliates are spending tens of millions of dollars a month in online advertising. the bloke who owns it makes about 3 million usd a month profit with god knows what total revenue. Facebook click through rates are far far lower but plenty of people do click, enough that there are a good few people making a small fortune from them.

when people ponder just how and why facebook and google make money they forget that they are the .1% that are able to ponder and wonder whereas the 99.9% of internet user are ****ing idiots who are easily parted from their cash.
Think infomercials but on a much much larger scale. anyone with any sense cant for their life see why they make money but the industry makes billions every year, year in year out

Charismatic

The problem is their rival, Google +, doesn't charge.

From ZeroHedge:

Autonomy

For people that wonder how Facebook makes money (Mr Shiva knows):-

"In its filing, Facebook reported 2011 revenue of $3.71 billion, an 88% increase from the $1.97 billion total reported for 2010, though falling short of eMarketer's 2011 projection of $4.27 billion. The increase was mostly attributed to the 69% growth of advertising revenue, which was buoyed by a 42% increase in the number of ads delivered and an 18% increase in their average price.

While advertising made up $3.15 billion of Facebook's revenues last year, the company earned $557 million from Facebook Payments -- the virtual currency it began requiring game developers on the platform to use as of July 1 -- and other fees. Payments are making up an increasingly hefty chunk of Facebook's revenue, and in the fourth quarter of 2011, advertising constituted just 83% of revenues, down from 90% the previous year. Facebook takes a cut of all money exchanged through the use of "Payments," and in the case of virtual goods purchased on Zynga, that cut is up to 30%. "

Is it worth $100B today - according to the first day sales price - yes. But really - no, not yet. Strong user growth in China, India and Brazil will push it well past 1B users. Simple use will never be charged for. Add ons and apps (they have launched an app store) will attract user revenue. Monetisation of mobile is 100% key to future growth.

Ads in Facebook work similarly to Googe Adsense ads - the advertiser specifies campaign parameters and spending limits. These are currently pretty well targeted and do work for click through, it's then up to the advertiser to achieves sales on that click through.

If they can further refine this granularity and provide even more targeted ads then this will boost further ad sales, especially at a local small business level.

Sort out an easy to use ecommerce ability within facebook for small local business to conduct online sales from within their facebook pages would be huge...

Is FB the next MySpace or AOL or even YAHOO - I don't think so. It's part of the big gang and here to stay.