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Facebook is not worth $33 billion

37signals.com

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Re: Facebook is not worth $33 billion

#21

Post by mrtron »

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…

Facebook makes a sizeable amount of revenue now. Why does everyone talk about them like they don't make a dollar?

Re: Facebook is not worth $33 billion

#23

Post by sachinag »

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 != Chicago

Re: Facebook is not worth $33 billion

#24

Post by jacquesm »

spolsky wrote: post #7
jacquesm wrote: post #2

What facebook is really worth we'll know when they IPO and they sell off a majority portion of the stock. Until then it's anybody's guess. I wouldn't buy their stock at any valuation, there are much more solid ways of investing than speculating on something that already feels over valued. And if I would want more risk then I'd rather put my money in start-ups than facebook. The next bubble is here, and it will go the…

That's not correct. There is a secondary market for Facebook stock which is plenty liquid (see Sharespost, et. al).

Ok, point taken, but compared to the total number of facebook shares I would imagine that is a relatively small amount traded? (the site requires registration for any data to be even visible)

Re: Facebook is not worth $33 billion

#25

Post by ryanwaggoner »

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…

their utter and complete misunderstanding of all the basics of business is starting to grate on me

Their linkbait really grates on me as well (though I happen to agree with this post's conclusion, if not the methods), but I think it's pretty unfair to say that they misunderstand all the basics of business. They seem to be doing pretty well for a shop their size. In fact, I'd say there's a good chance they're doing better than Fog Creek. Maybe misunderstanding the absolute perversion of what too often passes for "business basics" in Silicon Valley isn't such a bad thing.

Re: Facebook is not worth $33 billion

#26

Post by timr »

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…

"Secondly, EVERY SINGLE COMPANY IN THE WORLD that has shares that trade is valued by taking the last share traded and multiplied by the number of shares outstanding. It's just the DEFINITION of valuation. It's TAUTOLOGICAL."

Indeed. And Pets.com was worth $100 million on the day of its IPO. And tulip bulbs were worth more than a man's annual salary in 1637. And that house down the street was worth a million dollars last year. Someone paid for those, too.

You don't have to have a different definition of "valuation" to see that a small sample of the most eager investors in the private market doesn't guarantee a reliable estimate of value.

Re: Facebook is not worth $33 billion

#27

Post by pclark »

ZachPruckowski wrote: post #19
dabeeeenster wrote: post #4

"In other words, the evaluation is resting on the flawed assumption that Facebook could actually ever get 33 times as much money to change hands if they wanted to. There’s just no way, no how that’s happening right now. If it could, they’d IPO tomorrow." This is simply not true. There are many reasons why a company may want to stay private.

> "There are many reasons why a company may want to stay private" True. But there are a billion reasons to be looking for an exit - all those VC investors are eventually going to want to close out their funds and get real money for their institutional clients. Not to mention all the employees. Most of these shareholders are going to want to cash out in the next few years, and $200 million in profits won't go far towa…

There's no doubt Facebook will IPO eventually.

I imagine a lot of the employees could and probably have cashed some shares out in previous rounds. I'm sure VCs are happy to wait for their IPO (they can probably raise funds just by saying they own Facebook stock)

Re: Facebook is not worth $33 billion

#28

Post by raheemm »

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…

What does Chicago have to do with FB valuation? KTHX. DHH makes a good point though - what are FB's profits/profit projections? No one knows. Assuming its $200M, how the hell can FB be worth $33B? That's all...

Re: Facebook is not worth $33 billion

#29

Post by dhyasama »

dhh wrote: post #18
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…

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…

I can verify point five. New York does indeed smell.

Re: Facebook is not worth $33 billion

#30

Post by biznickman »

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 billion users).

They haven't even begun to open up the revenue faucet. 37signals should stick to providing advice to "lean startups" who want to build small businesses.

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