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Facebook is not worth $33 billion

37signals.com

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Re: Facebook is not worth $33 billion

#61

Post by marknutter »

spolsky wrote: post #41
dhh wrote: post #18

Earlier quoted context omitted.

1. Thanks for the word correction, updated. 2. Publicly traded companies have instant liquidity on many more shares, which makes using "last share sold" an meaningful metric. 3. When only 3% of the money a company is supposedly worth has been moved around, it's a poor indicator of what the other 97% would go for. 4. They haven't figured out how to make much profit yet. And it's still questionable whether they will. M…

2. That's just not correct. Spend twenty minutes talking to anyone who trades in bonds or equity before you make assumptions about what liquidity you need to get a good price... it's not much. Facebook trades all the time on sharespost, certainly enough to be liquid and to reach a market price. Google itself only has a tiny fraction of the shares available to the public (10% if I remember correctly) and far less than…

Sheesh, did this topic hit close to home or something? Someone needs to chill and lay off Chicagoans, or red bull, or something..

Re: Facebook is not worth $33 billion

#62

Post by dhh »

spolsky wrote: post #41
dhh wrote: post #18

Earlier quoted context omitted.

1. Thanks for the word correction, updated. 2. Publicly traded companies have instant liquidity on many more shares, which makes using "last share sold" an meaningful metric. 3. When only 3% of the money a company is supposedly worth has been moved around, it's a poor indicator of what the other 97% would go for. 4. They haven't figured out how to make much profit yet. And it's still questionable whether they will. M…

2. That's just not correct. Spend twenty minutes talking to anyone who trades in bonds or equity before you make assumptions about what liquidity you need to get a good price... it's not much. Facebook trades all the time on sharespost, certainly enough to be liquid and to reach a market price. Google itself only has a tiny fraction of the shares available to the public (10% if I remember correctly) and far less than…

2. The bond and equity markets are based on sound regulation, transparency, and quarterly statements. Facebook has none of those things when it operates in the dark of the secondary markets.

3. Again, these premiums are based on outstanding shares traded under the transparency of the public stock market. See Secondary Suckers for a nice take on the perils of the secondary market: http://www.homethinking.com/brontemedia/2010/09/17/secondary...

4. Do you have their P&L handy to back that up? If the valuation was so wonderful and they were raking in the profits, then taking series E funding three months ago doesn't make much sense.

Re: Facebook is not worth $33 billion

#63

Post by dmillar »

I don't want to put words in his mouth, but it sounds like David is arguing that should Zuckerberg decide to just walk away from Facebook today, he would have a very difficult time coming up with $6.9B in cash in exchange for his equity. (Not to mention if other equity holders wanted to liquify at the same time.)

It is important to point out however, this a valuation does not make. Liquidity is not part of the equation.

Re: Facebook is not worth $33 billion

#64

Post by pclark »

jacquesm wrote: post #59
pclark wrote: post #38

Earlier quoted context omitted.

How can you "not detect" a business model for a company that has revenues of over a billion dollars? seriously?

Yes, seriously. I can't make soup of it. What's their intention long term, everything seems to be in anticipation of what they're really going to do. In all the time that I used facebook (haven't used it in months) I had a very hard time figuring out how they were making money on or off me. It can't be the ads I never clicked and it wasn't the subscription fee I never paid.

I believe Facebook has at least 6 business models in operation today, including:

* ads in margin

* special paid for groups

* sponsored likes

(these are discussed in Kirkpatricks book of Facebook - and here: http://www.quora.com/Facebook-1/What-is-the-revenue-distribu...)

Additionally, Facebook has just launched Facebook Credits. Zynga (revenues $600M+) is their launch partner. Facebook gets 30% of their spend.

I do not think they are struggling to monetize.

Re: Facebook is not worth $33 billion

#65

Post by lovskogen »

spolsky wrote: post #20
seldo wrote: post #13

Earlier quoted context omitted.

A dime per user is nice and all, but they need to make 20x that for a billion dollars in revenue. That's still only $2 per user, but a lot harder.

They're almost certainly making $2 per user. Another dime is gonna be easy.

Haven't got a dime from me, and they don't have an idea on how to.

Re: Facebook is not worth $33 billion

#66

Post by earle »

spolsky wrote: post #5

I hate to leap in with what seems like an ad-hominem attack on the 37 signals, but their utter and complete misunderstanding of all the basics of business is starting to grate on me, and I'm wondering if it has anything to do with Chicago. Is the problem that they're sitting there in a city without any other Internet industry, stewing in their own witty ideas, listening only to the adoring comments they get from the…

Last I checked one of the most profitable "internet" businesses (Groupon) in the last decade is in, and founded in, Chicago.

Re: Facebook is not worth $33 billion

#67

Post by bl4k »

Andrew_Quentin wrote: post #17
ulf wrote: post #3

"Facebook has been around for seven years. It has 500 million users. If you can’t figure out how to make money off half a billion people in seven years, I’m going to go out on a limb and say you’re unlikely to ever do." This is a strawman. If they wanted to make money right now they would. But they also observed many examples of turning-the-faucet-on gone wrong, especially with the whole privacy issues, that they are…

what exactly are they waiting for? They have half a billion users. You know, that is more than America and Russia together, or comparable to the entire population of the geographical Europe. They can only go down hill from here I think. Therefore, personally I certainly would not wait. The truth is really that they do not know how to monetize themselves effectively

My best guess is that they are waiting to book an entire year of platform revenues - which will give investors a better idea of what their business model actually is.

This time next year they will have 12months of ads + platform revenue to show off. Their business model hasn't been complete up until now.

That is why they opened and sanctioned the secondary market, because of employee pressure and because they had to buy time before going public.

Besides companies prefer to remain private, esp because of the amount of overhead being public adds (esp after Sarbanes Oxley). The role of CEO completely changes when you are a public company.

If anything the reluctance to go public is a good thing, since it means that Facebook are thinking it through and establishing themselves - not making a dash for cash.

Google was also very reluctant to go public, but the SEC and their own employees forced the issue.

This is going to be one hell of an IPO.

Re: Facebook is not worth $33 billion

#68

Post by bherms »

I agree that this valuation is absurd and that Facebook will never really be worth this much. I also really like the 37signals guys and a lot of their opinions.

HOWEVER, one thing that has been bugging me is the thought, espoused by 37signals, that not generating a large profit as a business is a bad thing. We're forgetting that these businesses that don't make huge profits are still employing large amounts of people, creating new jobs every day, and giving back to the community in many ways. Facebook has over 1000 employees. Granted they may not be making 33bil in profits (or even revenue), but that's pretty cool that they were able to create 1000 new jobs that didn't exist before, while also improving the lives of many people who use the service--eg, helping people keep in touch with friends and loved ones, helping people find old friends, etc. If they break even for the rest of the existence of the business, they're still doing pretty damn well IMO.

Re: Facebook is not worth $33 billion

#69

Post by lovskogen »

biznickman wrote: post #30
spolsky wrote: post #5

I hate to leap in with what seems like an ad-hominem attack on the 37 signals, but their utter and complete misunderstanding of all the basics of business is starting to grate on me, and I'm wondering if it has anything to do with Chicago. Is the problem that they're sitting there in a city without any other Internet industry, stewing in their own witty ideas, listening only to the adoring comments they get from the…

37signals is great at understanding the laws of small business, however arguing with those same laws doesn't always work when scale is involved. This would have been a valid argument 2 years ago if Facebook was trading at this valuation, however Facebook has a reasonable valuation given their rapid revenue growth. They may surpass $200 million this year and their user base is still about to double (yes, to beyond 1 b…

What if there's not faucet to open?

Re: Facebook is not worth $33 billion

#70

Post by lovskogen »

biznickman wrote: post #30
spolsky wrote: post #5

I hate to leap in with what seems like an ad-hominem attack on the 37 signals, but their utter and complete misunderstanding of all the basics of business is starting to grate on me, and I'm wondering if it has anything to do with Chicago. Is the problem that they're sitting there in a city without any other Internet industry, stewing in their own witty ideas, listening only to the adoring comments they get from the…

37signals is great at understanding the laws of small business, however arguing with those same laws doesn't always work when scale is involved. This would have been a valid argument 2 years ago if Facebook was trading at this valuation, however Facebook has a reasonable valuation given their rapid revenue growth. They may surpass $200 million this year and their user base is still about to double (yes, to beyond 1 b…

What if there's not faucet to open?
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