Pros and cons. People are removing their profiles because they don't find the microlives of their friends that interesting, but it's still highly addictive. It is over valued but there are plenty of other houses of cards on the internet. It's in danger of outsmarting itself but so many other businesses now depend on it.
The site won't cost that much to run. Hosted server disk space costs very little nowadays. Users do their own data entry. The site's back end code wouldn't be that tough to recreate. They don't actually need that much computing power. Biggest cost will probably be bandwidth, but that probably won't even reach far into the tens of millions per year, never mind hundreds of millions.
But you're right... at the moment no one even knows if Facebook have any earnings at all, and they're talking about a 25 revenue multiple if the rumors I hear are correct (they don't actually publish anything as a private company.) Some of the World's biggest and most solid tech companies such as IBM currently actually trade about 2* revenue and at a earnings multiplier of 13. Never mind 25* revenue and some even sillier earnings multiple!
Goldman aren't daft. They'll probably be hoping for a fat fee for running an IPO in return for making this investment, so they can make their money back and then some.
Seems like the Internet Tech bubble all over again.
As a trained financial analyst,I just don't see it. Facebook is Myspace without all the intrusive ads. If people left Myspace because they were sick of the ads (and most of the people I know say that's why) where are the clickthroughs to the small amount of advertisers shown on your Facebook page? Has anyone actually made any purchases from the ads that do show up on Facebook? How much does it cost for the hard drive space to house those 500 million profiles? Even if it's only $1.00 per year per profile,that's $500 MILLION just for the drive space,and we haven't paid anyone yet! Exactly how much is Facebook generating in ad space? Until they have to file some financials with the S.E.C., only the I.R.S. knows exactly how much Facebook's income and expenses are. The public won't know until there's an I.P.O. ,and I'm seriously beginning to doubt there's going to be one. The potential to market to those Billion eyeballs may be great, but have any of the advertisers discussed their R.O.I? I just don't see where the profits are coming from. I think Facebook is Myspace with better P.R.
The valuation is far to high. I sense that at some point in the near future we will see a social.com crash for the same reasons that we saw the .coms tumble in value - euphoria -vs- reality. Advertising channels are continuing to increase and "virtual" anything has "virtually" no lasting value.
How can Facebook be worth 50 billion? What utter nonsense! Where's the technology advantage? Where's the intellectual property? Where's the barrier to entry for competitors? What's to stop the "next great Internet thing" stealing all of Facebook's user base almost overnight by offering existing Facebook users a $100 cash sign up bonus to switch? Even if 500 million users took up the offer that'd still work out cash positive.
As far as the traditional bell curve goes, Facebook has already crossed the climax. It's getting ready to "jump the shark" so to speak. I predict in the next year or two we will see a great drop in users mainly due to a couple of reasons. First, there are too many people on the social site (everyone from the neighbor kid to grandma & grandpa.) It was cool when it was exclusive and gaining momentum therefore highly marketable. Second, privacy settings are constantly changing and Facebook is trying to do too many things. Because of all of this I think the recent valuation of Facebook is off target.
To the creators, probably not worth that much, just what they've invested so far. But when it comes to advertising and reaching a lot of people, it's worth the $50 billions and then some.