It looks like Facebook will become a public company listed on the Wall Street Stock Exchange in 2012. The company will be required to reports its financials in April of next year due to it passing the 500 shareholder mark when it acquired the investment of Goldman Sachs.
It looks like Facebook will become a public company listed on the Wall Street Stock Exchange in 2012. The company will be required to reports its financials in April of next year due to it passing the 500 shareholder mark when it acquired the investment of Goldman Sachs.
A valuation of a whopping $70 billion has been remoured. This is quite an outstanding figure and it will be interesting to see what revenues the company actually generate. There are some highly respected and powerful institutional investors who have taken shares in Facebook but as has been seen in the past institional investors can get things wrong, they’re mere mortals afterall with a tendency to get as over-excited as the rest of us, more so perhaps owing to the fact that they’re likely to make shed loads of cash from the wares they tout. Obviously there’s nothing quite like Facebook, almost a billion people have poured their lives, personal information, photos, social gatherings and online lives into what is arguably the greatest social project of all time, so yes it it incredible but there are other incredible companies out there operating in this space, it’s a powerful platform but it does beg the questions as to whether this sky high valuation can be justified.
Only time will tell but in the meantime a comparison between Facebook and another internet giant Google gives some interesting statistics. If you look at this treemap of internet usage taken from the BBC website which has been derived from data that Nielsen collates to build usage statistics of a variety of internet brands, the Top 100 sites treemap shows that Google has almost 350 million users and Facebook has 218 million. Google has a market capitalisation of £140 billion, this market cap makes it the 17th biggest company in the USA and the 28th biggest company in the world and when Google floated in 2004 it’s initial public offering and the subsequent share sale valued it at $25 billion. The proposed market capitalisation of Facebook would make it the 95th biggest company in the world and the 38th biggest in the USA, when its relative size is thus considered in comparison to other companies then the valuation might seem slightly more reasonable.
- Treemap of Internet Usage – taken from the BBC website
However, it’s possible to understand how Google makes the 9 billion dollars worth of profits that it generated in 2010 which raises its share prices and creates its market cap; after all their search is everywhere, if you want to find something on the internet, you use their search engine and there are obvious marketing benefits for advertisers that want to stick their internet adverts on the organisation’s ubiquitous search results pages. People come to Google to find results to information, trivia, news and they also go to it to buy stuff, so companies with something to sell go there too and it works well. People do advertise their wares on Facebook but is it at the same level of magnitude that paid search earns? Doing a basic calculation on the back of a paper napkin, for Facebook to justify its proposed market cap which is 50% of Google’s, 100% of Facebook’s revenues would need to equal aorund 45% of Google’s. Is that really possible? It is reported that Facebook’s total profits were $600 million for 2010 and Facebook does have other revenue streams such as it’s platform and the 30% it earns from sales of every application sold on it’s platform but in 2009 this was hypothesised to be just $500 million. So when you look at those figures, it’s hard to make the valuation stack up, no matter how much Mark Zuckerberg will be trying to tell the best and brightest of Wall Street that the contrary is true.