4 Votes
The Value of FaceBook
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How much is FaceBook worth? Investors are about to find out when the social media company goes public on the 18th. Indications are the stock will be offered between $28-$35 a share up front and enough shares are on the table to put the FaceBook’s value at nearly $100 billion. It’s principle owners stand to make a killing by selling their own stock options as part of the initial offering with estimates that founder Mark Zuckerburg could be sitting on $1 billion in cash that day. A mere eight years ago, Google went public with pre-IPO estimates predicting $2.7 billion to be raised worth of stock sales. Is FaceBook overpriced or can investors bank on another meteoric chance to “get in early?”
Similarly tagged OmniNerd content:
- FaceBook's Botched IPO, by VnutZ 12 months ago
- Facebook Worm and User Relationships, by VnutZ over 1 year ago
- Does Internet Privacy Matter, by VnutZ about 2 years ago
- Public Facebook Data, by VnutZ almost 3 years ago
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my opinion by vukivan
My opinion is that investors want to buy because prices on internet giants tend to increase with years. Take example google, some time ago, the shares were around $300 per stock, and they are $600!
RE: my opinion by Occams
The future value of Facebook will depend upon how much its managers can monetarize the social interaction provided by the site. There are limits regarding how much the users of the site will tolerate advertising based on using the private information relating to their use. I suggest that this limit is rapidly being approached. Some kick-back can be expercted by all the web sites that are taking advantage of the small print of their privacy agereements.
Facebook acknowledges that it does not have the business smarts that Google has. By comparison, it is a one trick pony. Perhaps its new owners will take it to the next level: perhaps not. I think it is a much higer risk investment than most observers do based on projecting its current rate of growth.
However, I am biased because I have never understood the advertising industry. I cannot get past the fact that their intrusions are so irritating and dishonest that they arouse nothing but hatred in me for both the product and the medium. So my interest in Facebook has been declining in inverse proportion to its financial success.
RE: my opinion by scottb
However, I am biased because I have never understood the advertising industry. I cannot get past the fact that their intrusions are so irritating and dishonest that they arouse nothing but hatred in me for both the product and the medium.
It’s not quite as simple as that. Advertisers actually do have information that you want — the problem they face is that they don’t have a way to identify the people who want/need their information from those who don’t. But the costs are such that false positives (showing ads to people who don’t want the product) don’t really cost much compared to the payoff for true positives (showing them to people who do want it).
This is one of the ways that Facebook is in a position to monetize their site: advertisers are willing to pay sizable premiums for well-targeted advertising. It doesn’t matter whether they pay $100 to show an ad to one guy who’s virtually certain to buy the product or pay 10¢ an impression to show an add to 1000 people who each have a 0.1% chance of buying — the end result is it cost them $100 to make a sale.
Facebook is in a position to know a lot of detailed information about its users, which means they’re potentially in a position to offer very well-targeted advertising. Google is in a similar position — they can use your searches, the content of your email, documents you put on GDocs, and so on to find out what information you find valuable.
In the long run, that should improve the situation with advertising. Those “irritating” intrusions are there because they don’t have the information to target the ads. If they have it, they’ll use it, and you won’t see the ads.
The (unreachably) ideal situation would be that almost immediately after you’ve made up your mind to buy something, you’d be exposed to ads giving you the information you need to buy it.
Not that it’s all sunshine — there are some negatives, too. I’ve got no problems with advertising that’s informative — telling me who’s got the product, its features, and price — but there’s a lot of advertising that’s manipulative, with the goal of “creating” a market, rather than merely attracting an existing market. It’s usually pretty easy to identify, if you know what you’re looking for — statements like, “you can’t buy a better X” (as opposed to “our X is the best”), really mean “they’re all the same, so we’re just hoping you’ll buy ours because you heard our name more recently than the other guy’s”. That kind of advertising we can do without.
And there are some obvious social risks — most notably privacy. Google and Facebook have lots of incentive to learn everything they can about you, but very little incentive to keep it private.
On the whole, though, I think our relationship with advertising is more complicated than “I hate it all”.
RE: my opinion by Occams
Sure Scott, all true. I had reasoned all that out myself.
My objection to advertising is more fundamental than that. It comes down to the fact that I have learned in life and business not to trust anyone who lies or exaggerates to me, especially on financial matters. When that happens I lose interest and refuse to deal with them. They have no honour.
Why are we expected to abandon this sensible attitude when it comes to advertising? When combined with the intrusiveness I mentioned, advertising in the form we have so much of just should not work. And yet it does.Leaving aside the privacy vioolations, well targeted advertising may well be more efficient and less intrusive in terms of getting in the way of what you are trying to do, but it will be just as dishonest. I don’t agree with you that advertisments have information that you want. The advertisers probably do have it, but they won’t tell you because they are too conflicted. We need to know if and how their product is any better than its competitors. The professional advertising industry has developed an array of clever psychological tricks to con people into buying stuff that they don’t need. Mostly it is about brand swapping without making any real contribution to the economy or benefits to consumers. In fact it forces the price up on everything and makes us much worse off.
I don’t understand why there is so much tolerance for it. It is hard to avoid the conclusion that the target audience has not developed powers of critical thinking. Perhaps most Americans were like that in the 1920s when advertising started on radio and developed its present characteristics. The integrity aspects did not change much on through the arrival of television in the 1950s and on through to the 1980s, except that advertising became the most successful business model for vast and highly profitable networks.
However, now, with the variety of media resources of the digital age, ordinary people are more discriminating and the old assumptions about aiming ads at people of low intelligence and poor education should not be valid.
I realise that mine is not a popular view in free enterprise, competitive USA, but I hope you are right in that things will have to change when the old model fails. It would be nice to hope that at the same time advertisers might come to realise that their work could be more effective if they learned to respect their audience a lot more. Fat chance! No one ever went broke by underestimating the intelligence of the masses.
RE: my opinion by scottb
I don’t agree with you that advertisments have information that you want.
So, you’ve never learned of a new product through an ad? You’ve never used what you’ve seen on ads to decide where to buy something? You’ve never taken advantage of an advertised sale?
Nonsense. There’s definitely valuable information in ads — the problem is the poor signal to noise ratio.
RE: my opinion by Occams
More like a high bit error rate, and the proper thing to do with that is to reject the whole message. If the product is any good you will hear about it in other ways.
OK, you can rely on them telling you when and where, but not much more than that. Sales are usually a con, and best ignored.
I buy almost everything on line now bucause there is no advertising and real competition.
RE: my opinion by VnutZ
Well – it would appear that Day One proved relatively lackluster with a closing equal to its opening. Now, there were some NASDAQ issues that came into play but considering the IPO set a record for trading volume that day one would think the value would have changed more than that. Perhaps that was merely an automated system buying and selling in huge arbitrage situations.
I suppose after a weekend of “cooling off”, we’ll see whether the big investors initiate a dump on the symbol to massively lower its value and then pick it up on the super cheap (and likely a higher share percentage for controlling power).