Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The Companies Worth Less Than Facebook

larrycheng.com

Post reply on HN
Print view View original

31–40 of 40 posts

Re: The Companies Worth Less Than Facebook

#31

Post by justin »

16s wrote: post #13
rospaya wrote: post #11

Earlier quoted context omitted.

You are presuming the stock market is somehow fair.

Yes, you are right. I was confused. BMW engines deliver pigs to markets so people can eat. One can buy and sell virtual pigs on FaceBook by playing Farmville. To me, actual bacon is more valuable than pretend bacon.

How "important" work is is only one factor in the creation of value. How much you produce, how it is valued by other people, what your margins are, what your future revenue streams will be -- these things are all factored into company value.

There are many companies that make non-essentials that are valued more highly than farms and utilities.

Re: The Companies Worth Less Than Facebook

#32

Post by justin »

ijuhyftgreduy wrote: post #17
muhfuhkuh wrote: post #14

Earlier quoted context omitted.

Isn't that simply debasing the value of all internet and software technology companies, then? None of them are older than BMW, and none of them make engineered steel products. Yet, I'm very sure that more people use Facebook and, say, Windows, than own a BMW.

But the people that use facebook pay facebook $0 The people that use BMW pay BMW $50,000 Lose money on every customer but make up for it in volume is not a sustainable business model

... aggressive use of basic arithmetic is required to understand Facebook's model compared to high cost, physical goods.

If Facebook makes $.10 in advertising off 500m people a month, and each person costs $.05 to serve, that is $25 million / month.

If BMW makes $50,000 / car but only sells 1,000 cars a month, and each costs $25k to make / ship / sell then they are only making $2.5 million / month.

Clearly both companies make more than that, but this is an illustration of how selling high cost goods might not be as profitable as a website used by 10% of the world.

Re: The Companies Worth Less Than Facebook

#33

Post by dstein »

magicalist wrote: post #23
dstein wrote: post #8

It's important to note that stock valuations are derived from the expected future profitability of a company. Stock is a claim on future profits. Compared to a company like Halliburton, who has to build billion-dollar oil rigs before they make any profit, a technology company like Facebook is a lot more lucrative and thus its stock can inflate quickly if the profits expand faster than costs. And generally technology…

while stock valuations and expected future profitability are usually correlated (to some extent), if a company isn't paying dividends, wouldn't it be much more correct to say that stock valuations are derived from the expected future valuations of that same stock?

It's the same thing. If the company isn't paying dividends the stock price includes whatever dividends the company will pay out in the future. The value of the stock is the total value of all expected future dividends priced in today's dollars. And in Facebook's case investors think (or want you to believe) that the future profits will be pretty big.

Re: The Companies Worth Less Than Facebook

#34

Post by ijuhyftgreduy »

justin wrote: post #32
ijuhyftgreduy wrote: post #17

Earlier quoted context omitted.

But the people that use facebook pay facebook $0 The people that use BMW pay BMW $50,000 Lose money on every customer but make up for it in volume is not a sustainable business model

... aggressive use of basic arithmetic is required to understand Facebook's model compared to high cost, physical goods. If Facebook makes $.10 in advertising off 500m people a month, and each person costs $.05 to serve, that is $25 million / month. If BMW makes $50,000 / car but only sells 1,000 cars a month, and each costs $25k to make / ship / sell then they are only making $2.5 million / month. Clearly both compa…

Facebook has revenues of $500M/year - which allows them to be cash flow positive, no word on how much profit. To be worth $50bn, 100x as much, it needs to find 100x as many users or earn 100x as much per user.

BMW has $50Bn of earnings for selling 1M cars/year to make twice as much it simply has to sell 2M cars

Re: The Companies Worth Less Than Facebook

#36

Post by rottendevice »

lbrandy wrote: post #12
16s wrote: post #10

Earlier quoted context omitted.

I would think that hundreds of years of engineering (mechanical and electrical) and solid products used all across the globe would be more valuable than a social website, but maybe I'm wrong.

I would think that hundreds of years of engineering (mechanical and electrical) and solid products used all across the globe would be more valuable than a search website, and I would definitely be wrong.

You could easily argue that about a hundred years of engineering have gone into computer science, and many, many more than that into mathematics and algorithms. And this is the stuff that Facebook is built off of.

Also, Audi is certainly not the only player in town when it comes to automobile makers. On the flip side, Facebook has hardly any serious competitors right now, and no one seems likely to catch up any time soon.

If we're using cars as an analogy, Facebook has basically created the Model T of online communications, and it will take a while before other car companies can come along and steal market share.

Wouldn't that sound like a sweet deal if you were an old and not-so-tech-savvy investor?

Re: The Companies Worth Less Than Facebook

#37

Post by gsmaverick »

ijuhyftgreduy wrote: post #34
justin wrote: post #32

Earlier quoted context omitted.

... aggressive use of basic arithmetic is required to understand Facebook's model compared to high cost, physical goods. If Facebook makes $.10 in advertising off 500m people a month, and each person costs $.05 to serve, that is $25 million / month. If BMW makes $50,000 / car but only sells 1,000 cars a month, and each costs $25k to make / ship / sell then they are only making $2.5 million / month. Clearly both compa…

Facebook has revenues of $500M/year - which allows them to be cash flow positive, no word on how much profit. To be worth $50bn, 100x as much, it needs to find 100x as many users or earn 100x as much per user. BMW has $50Bn of earnings for selling 1M cars/year to make twice as much it simply has to sell 2M cars

Citation for Facebook revenues? Recent rumours have it at ~$2 billion.

Re: The Companies Worth Less Than Facebook

#39

Post by wlievens »

fleitz wrote: post #29
netcan wrote: post #27

Earlier quoted context omitted.

I guess the OP's comment should be reworded "people who haven't put their money in it"

Thats the great part about a public market. Anyone may speak as long as they put their money where their mouth is. (Or conversely put their mouth where their money is, aka. talking your book)

Which is not the case with facebook. (not that I'm disagreeing with you)

Re: The Companies Worth Less Than Facebook

#40

Post by wlievens »

justin wrote: post #31
16s wrote: post #13

Earlier quoted context omitted.

Yes, you are right. I was confused. BMW engines deliver pigs to markets so people can eat. One can buy and sell virtual pigs on FaceBook by playing Farmville. To me, actual bacon is more valuable than pretend bacon.

How "important" work is is only one factor in the creation of value. How much you produce, how it is valued by other people, what your margins are, what your future revenue streams will be -- these things are all factored into company value. There are many companies that make non-essentials that are valued more highly than farms and utilities.

Exactly. Not to mention the fact that facebook is near monopoly status. If you were to add every single car manufacturer together, surely you'd get a much high valuation.

If the social network space were as diverse (in terms of relative player weight, not total number of players), we wouldn't be having this discussion.

Facebook's valuation reflects the value of the social-networking market perhaps more than its value as a single business?

Post reply on HN