Monday, January 03, 2011

No way is Facebook worth $50 billion... except, perhaps, to those who truly believe suckers are born every minute.

With 2010 revenue reportedly at $2 billion, the company would have to be valued at 25 times revenue. That's revenue, mind you, not earnings, a more traditional barometer of measuring valuations.

For Facebook to be worth that much money, someone has to be figuring that Facebook will eventually find a way of monetizing their supposed 500 million users (I know for a fact that a bunch of people are running multiple user accounts).

Sure, Facebook is making money from people playing virtual reality games that run through the site.... but how many people do they think really want to play such silly time-consuming games? Enough to generate billions of dollars of profit? Unlikely.

As for ads, while the number of ads posted on Facebook continue to rise, more and more are finding that such ads pretty much suck for generating revenue for the advertiser. Unlike Google, where users go looking for a links, nobody logs on to Facebook looking to click on the ads that pop up on the right side of the page. Like display ads in newspapers and banner sites on other web sites, users are conditioning their minds to filter out that clutter. And no clicks soon turn into no ads and no ads don't add up to a lot of revenue.

Me thinks the investors are figuring the public is too dumb to realize that there is no there there, at least as far as profits are concerned, and will jump at the chance to own a piece of such a hot property. As is often the case, the first investors will get bailed out by the stupidity of the public... which will get stuck with owning a piece of a company that will never provide a positive return on their investment.