Facebook Would Like To Remind You It Isn't For Sale (Wink Wink), But Is Now Worth $8 Billion

from the economic-indicators dept

Fri, Dec 15th 2006 5:12pm — Carlo Longino

It was reported earlier this week that Yahoo was prepared to shell out up to $1.62 billion to buy Facebook, based on the inflated expectation that it could generate a billion-dollar profit by 2015. Apparently Yahoo's offer of $1 billion to Facebook got rejected, and the company never got another chance to bid. While most rational people would have taken the money and ran, Facebook now says it's no longer for sale, with a board member saying they want to build the company up. We'd like to again take this opportunity to point Facebook to the history of Friendster, which is the classic example of not knowing when to sell out -- the company was being shopped around for $5 million earlier this year, after Google had offered to buy it for $30 million worth of pre-IPO stock in late 2003, and a price of $200 million was mentioned for it in 2005. But, true to form, Facebook is following the Skype billion-dollar buyout plan (most recently enlisted by YouTube): a board member says that the company isn't for sale... but that it's worth $8 billion -- as much as that fly-by-night youth-oriented business MTV. Clearly the Skype blowout buyout business model is seeing the effects of inflation (otherwise known as a bubble), which is mildly amusing given talk that Skype is having some trouble meeting the targets to trigger the $1.5 billion earnout that was on top of the $2.6 billion eBay paid for it in cash and stock. Getting the cash up front, then running as far and as fast as you can, really seems like the best play for these companies.

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26 Comments

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Dan, 15 Dec 2006 @ 6:38pm

Honestly though, facebook is really awesome, the interface is way better then friendster and myspace ever was, I'm not a shill, i just really enjoy the service. but 8billion? no way! yay for bubble 2.0!
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SimplyGimp, 15 Dec 2006 @ 6:38pm

Like we say in MMORPGs
The item (in this case, a website) is worth what the highest bidder is wanting to pay. People used to complain about this in WoW. Yeah, I know, what a stretch to associate this news article with WoW. Point being is that the seller (aka Facebook) sets the price of their item (themselves) at whatever they think they could get for that item. If someone pays, lucky day, if not, you lower the cost a tad.

Not exactly sure why this is news anyway, considering they're "not for sale"...
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Horace Kingman, 15 Dec 2006 @ 6:50pm

Bubble 2.0
To the folks at FaceBook, look up a company called PointCast from 1995-97. You should have taken the money.

When it implodes and you are left holding the bag think about what you could have had before your belief that a social networking site would actually change the world.
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Spud, 15 Dec 2006 @ 8:03pm

LOL.....$8 billion. they can't be serious.
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Anonymous Coward, 15 Dec 2006 @ 8:12pm

lo.. . 8 billion my arse.
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Anonymous Coward, 15 Dec 2006 @ 8:18pm

Just looked up PointCast, and that is nothing compared to Facebook. Facebook thrives on students, and that resource will never run out. Facebook is basically a mandatory resource at colleges, I don't see it being replaced.

Can someone explain how facebook will implode?
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Koko Loko, 15 Dec 2006 @ 8:20pm

JTS?
Facebook has not yet jumped the shark. Sadly, Myspace did this long ago.
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Justin Biegel, 15 Dec 2006 @ 8:56pm

Google
Facebook may want to go IPO and become another player in the market for web-based services and advertising, perhaps because of their ever so fast increasing growth and share of the market. That said, they are certainly not valued at $8 billion today, even though I agree completely with their board member that the exclusive community of Facebook is unique and the attractiveness of the service to its users has too many characteristics and has already crossed the chasm (became the defacto standard), and therefore is not replaceable. My guess on a valuation in the future depends on a lot of factor, like their revenue, and other consolidation in the Internet property market, but I would say they are valued around $2B, perhaps even more as they open their web site to not only students, but others as well with improved security features making the service continue to have the limited access and exclusivity that made it so popular in the first place. On another note, instead of Yahoo, in my personal opinion, it will ultimately be Google that buys Facebook because of not only their portfolio of web-based services, whether it is mail, calendar, IM, search, video, what have you, of course highly targeted advertising to the college age market, including those that may presently be in/out of college for whatever given circumstances. This is just my quick $0.02, but I have been following Facebook for several years, and truly believe it's not even comparable to a Friendster, not even comparable.
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zeroJJ, 15 Dec 2006 @ 10:39pm

Winners and losers...
As with any investment, i.e., stock market, vc, etc - the money has to come from somewhere. When someone loses alot of money, someone else wins big. So when somebody wins big (maybe fakesbook) the question is - where does that money come from?
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Bill Butler, 15 Dec 2006 @ 11:54pm

Re: Bubble 2.0
the mention of Point Cast...ifunny. I remember them, but have not heard mentioned in a very long time.
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Ivan, 16 Dec 2006 @ 1:10am

Re: Like we say in MMORPGs
"Point being is that the seller (aka Facebook) sets the price of their item (themselves) at whatever they think they could get for that item."

Wrong! The price is set by the buyer, i.e. they pay it. The seller can only ask. But that means nothing.
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Pramit, 16 Dec 2006 @ 2:45am

Facebook: only hype
This is getting rediculous. It is the start of the web 2.0 bubble - all this talk valuation in billions of dollars. It spoils the menatlity of all other entrepreneurs. Everyone is intent on creating the next facebook. Where is the innovation.

MediaVidea wrote on the Web 2.0 bubble some days back.
http://mediavidea.blogspot.com/2006/12/why-google-yahoo-and-microsoft-should.html
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Blaise, 16 Dec 2006 @ 4:03am

Re: Facebook: only hype
You clearly have not used Facebook my friend, if you think there is no innovation behind the hype. But I agree, $8 billion is hype. But at the same time, as a Facebook user, I am very interested in seeing where they take the company as they "build it up;" if they keep innovating in the way that they have over the past few years, they could have some serious staying power, having already infiltrated a generation of undergrads. If they can keep the 85% of college students who use Facebook as users, using Facebook to stay in touch with their friends after college, Facebook would have some serious pull through a generation like no other such service ever really has.

If you're comparing Facebook to Friendster, you clearly haven't used Facebook. (or your generation isn't on Facebook :P lol )
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misanthropic humanist, 16 Dec 2006 @ 6:26am

Re: Facebook: only hype
"It spoils the menatlity of all other entrepreneurs. Everyone is intent on creating the next facebook. Where is the innovation."

Indeed. If another bubble is emerging then by all indications it will be faster and more explosive than the last, more people will get burned with even larger sums of money being lost when it goes bang.. thus leading to even more distrust and damage of the technology sector. The reason it will be worse this time is because there is even less substance in these hyped enterprises than there was before. At least lastminute.com and those cranky 90's ideas had some tangible merit as business ideas- most of the crap now like YouTube and FaceBook has absolutely no business model other than emo teenagers stuck at home stoned. The moment they try to tap it for revenue it will collapse in a heap.

We have to break this merry-go-round. Business markets that behave like a drug addict in cyclic manic depressioin help nobody but a few lucky people who win the lottery. High follows low follows high - and each time the feeling is that it will be different next time around. Thatcher and LeMont understood this oscillation and tried very hard to break the boom/bust cycles of the 1980s here in the UK. But sustainable growth is anathema to the super-capitalists of today whos shortsightedness extends only as far as making themselves personally as rich as possible and getting out at the top. What the short term capitalists don't get is that a long term series of boom-bust cycles can be *worse* than a zero sum game - you can end up digging your economy further down with each iteration.

A lucky few people will make a huge fortune on FaceBook. Most people will lose a small investment. It's just wealth redistribution.
Net result- fuck all, it's a pointless product that is implicit in computer network systems already and only owes its manifestation to IP manipulation and clever marketing. It is empty, and anyone with a grain of sense can see it. Invest in commodities!
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Anonymous Coward, 16 Dec 2006 @ 9:27am

> Net result- fuck all, it's a pointless product that is implicit
> in computer network systems already and only owes its
> manifestation to IP manipulation and clever marketing.
> It is empty, and anyone with a grain of sense can see
> it. Invest in commodities!

You mean like, UNIX admins? Or Oracle DBAs? Those are the commodities created by the previous tech bubble.

Noticed how the tech job market has been "coming back" since, oh, six months ago? Much more of this irrational exuberance in the tech market, and most of us will be laid off again like in 3/2001. The lucky ones who get to keep their jobs will then do our work on top of what they already had to do, which is still too much.

So it's a very, very pertinent observation that FaceBook is somewhat exclusive, has a great interface, and might get sold for way more than it's worth IFF those FaceBook dudes would go ahead and agree to trade wampum for cash.

I'm hoping for reason to prevail. I'm also hoping for that monkey to stop pressing the bar that gets him more crack cocaine.
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Opinionated, 16 Dec 2006 @ 10:04am

FACEBOOK(?)
Will someone please explain to me what the heck FACEBOOK is?
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sham, 16 Dec 2006 @ 1:06pm

Facebook is a social utility that helps people better understand the world around them. Facebook develops technologies that facilitate the spread of information through social networks allowing people to share information online the same way they do in the real world. Facebook is made up of many networks - individual schools, companies or regions - each of which are independent and closed off to non-affiliated users. To join Facebook, people can authenticate into a school or work network, or they can join a regional network. They can then create profiles to connect with friends, share interests, join groups, send messages, write notes and post photos.

Facebook launched in February 2004, and the website now has over 13 million registered users across over 40,000 regional, work, college and high school networks. According to comScore, Facebook is the seventh-most trafficked site on the web and is the number one photo-sharing site.

I think they should stay around and develop the company.
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factfindingmission, 16 Dec 2006 @ 2:17pm

Easy to calculate
This is a very easy calculation. To determine the value of facebook, look at its main demographics and its current saturation. extrapulate and determine the maximum number of members. attach a cost per member (myspace sold for 10 bucks a member - quite low) . so , last check, facebook has 8 million members. let's assume it can triple that in 3 years...24 mill members. x 40 bucks per member = 1 billion dollars.

let's assume that they can break into non-college markets and double there membership to 50 mill members. then they would be worth 2 billion dollars.

there's absolutely no scenario where they would be worth 8 billion. absolutely none.
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Anonymous Coward, 16 Dec 2006 @ 4:57pm

You can't go by "cost per person" with websites like this. Super Bowl commercials cost 2.4 million for only 30 seconds of air time. That goes out to 86 million people. So using this "very easy calculation", let's see how much owning facebook for a year is worth.

15778463 30-second clips in a year.
$669,767 is the cost of reaching 24 million viewers for 30 seconds.

You have a value of $10,567,893,828,121

Of course this isn't even realistic, but neither is saying that there is no way Facebook can have a value of 8 billion.
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Völker, 16 Dec 2006 @ 5:15pm

My question is, why dish out 1,2,3-8 Billion dollars, for something you could create and market for much less? I know Facebook might have the market share in this case, but wouldn't a 1 Billion dollar program, backed by another 3-4 billion dollars of marketing be even better?

I guess what it all amounts to is Big Profiteering companies, who have young CEO's who want to buy everything that is new (not innovative), just new.

You could also resort to sweatshops in China, and have them create something for less! Wal-Mart!
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Anonymous Coward, 16 Dec 2006 @ 8:21pm

facebook has already infiltrated the non-college market quite nicely.
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Facebook user, 17 Dec 2006 @ 12:57am

Uhhh, facebook is open to everyone...
I'm surprised by all the comments. I signed up for facebook when I was a student, and then, true, it was student only. But now it's open to anyone with an email address.
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The InstantBull Team, 17 Dec 2006 @ 8:49am

We're linking back on our new Chatter Analysis blo
Good post Carlo! We're linking back on our new Chatter Analysis blog (click Go to check it out) Cheers, The InstantBull Team www.InstantBull.com
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satan, 17 Dec 2006 @ 9:50am

don't you read what you write
Facebook Would Like You Remind You It Isn't For Sale

wtf does that mean? what's with the first you?
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Andrew Pollack, 17 Dec 2006 @ 5:38pm

Speaking of which....
...I'd like to remind you that my 2004 Pacifica is not for sale either, but with the modifications I've made is now worth 250,000 dollars. Just in case you were wondering.
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holla@urboi, 11 Jan 2008 @ 9:22am

just checked out point cast, i dont think anything like that can happen to facebook since its growing bigger and biggerand again facebook cannot be worth $8b. why thru dirt in the publics eye.
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