frankly speaking

1 week ago

Undervaluing Facebook

Facebook went public last week and to people outside tech and finance, it appeared to be a flop. The share price ended the day at nearly the exact same price as the price it ipo’d at. Further, there’s plenty of evidence that the banks that brought the company public were buying tons of shares towards the close of the trading day to bring support to the price of $38/share.

Lots of people are still saying that Facebook is still overvalued at its current price. In fact, my friend Brandon said the following:

Here’s the problem with that analysis - Facebook has nearly 900mm users. Assuming the company is worth $100B, and using Brandon’s logic, that would value the personal data of every user at $111. I think most people would value their personal information at a much, much higher dollar figure than that.

Further, influential Tech Blogger, Sarah Lacy was on CNN this morning and I felt made a much more compelling point. She said that Facebook went public way too late (in comparison to companies such as Zynga and Groupon). To a certain extent, Sarah’s right - Facebook has nearly 900mm users and it’s been widely reported that their user acquisition has slowed somewhat.

Here’s the point that I think is being overlooked by most people, Facebook’s core business, advertising, is really only 4 years old. Re-read that last sentence again. That means that Facebook has yet to really scale it’s ability to make money. Remember when Google’s Adwords program was only 4 years old when it went public - and look at the behemoth that it’s become today - most companies can’t live without it. Facebook has yet to really tap into most of the ad dollars that are out there. Further, there are other business models that could have a huge impact on their bottom line (Facebook Credits being one of them). Once advertisers figure out how to properly leverage facebook the way they leverage Adwords and when etailers finally figure out F-Commerce, the possibilities for Facebook’s stock price are endless.

8 months ago

Crazy graph showing the amount of time spent on Facebook vs. some other major web services. Who says it’s a dumb idea to advertise on facebook??

9 months ago

“There doesn’t necessarily have to be more. You know? I mean, like, a lot of people are focused on taking over the world, or doing, like, the biggest thing — getting the most users.”

-MarkZ