Facebook Valuation – Infographic

Full credit due to:  http://mashable.com/2012/01/11/facebook-ipo-infographic-2/

We did NOT make the infographic though I’ll take a moment to comment on some of the propositions.

Facebook valuation analytics

Facebook serves 28% of the ads seen online

Facebook generates 1/6th (16%) of the US’s display ad revenue. Google has about 10%.

28% of display ad impressions vs. 16% of display ad revenue

If 28% of the impressions is resulting in 16% of the revenue, then this translates into a weak overall CPM. Given that CPM is a function of cost per 1000 impressions and given that a large share of FB revenue is CPC, it’s like a function of CTR and CPC weakness relative to the display at market at large.

Some questions:

  1. how much more relevant can display ads become, especially on a platform that has already reached its peak scale (eg, it will not grow 10x, maybe 2x at this point in the long run…but you know what they say about the long run, right?)
  2. what is the overall quality of the attention of people who are viewing photos of other people? [impulse, distraction, etc...]
  3. what % of the revenue is part of a scheme designed to increase the volume of likes a business has within Facebook?
  4. a restatement of 3., what % of the value generated is simply feeding its own metrics? An advertising ecosystem such as Google AdWords exchanges clicks for value insofar as a visitor is brought to browse/buy on the ad buyer’s private website.
facebook valuation compared

Let’s do a quick financial analysis between Google and Facebook:

google vs facebook equity valuation

2011 end of year data:

$1 of Facebook earnings is worth 4.3x that of $1 of Google earnings. Google has a HIGHER net margin according to recent financials. Facebook’s net margin is rumored to be between 20% and 25% (a thorough minute of Google research will tell you the same). There’s a good chance that Google’s revenue from MOBILE ALONE in 2012 will be equal to Facebook GROSS revenue for 2011.

This would be a dangerous stock to buy in the post IPO market. How could anyone justify such a premium? There’s no buyout premium…the acquisition value is simply too great.

Looking Back: (our Linkedin prediction post)

linkedin ticker

I said at $103 it was overvalued back on July 14th.  It’s seen $55.98 in trading so I’ll call it a cool 50% loss though it’s now trading slightly higher.

Still 12x sales and sporting a price earnings multiple in the quadrouple digits! How can you grow into that???? Easy, stock price gets killed!

Zynga – the maker of Farmville, 90% of whose revenue is generated by facebook visitors is also worth over 6 billion on the open market. Down off it’s IPO debut of $10 per share. Zynga’s net margin looks to be around 5-7% so it’s pulling in TONS of revenue to keep a few bucks. Maybe when Facebook raises $10 billion cash during the IPO, if Zynga is trading at 50-75% discount, they’ll grow revenue through acquisition a bit.

Wild world,


Posted under Vizualization by Jeffrey James on 17th January, 2012

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January 17, 2012 at 3:04 pm

Nice post! …but someone gonna sell!

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