16 Comments

Summary:

Kara Swisher of AllThingsD takes a contrarian point of view on Facebook and does a pretty good job of deconstructing the social-networking company, its potential and all the hype around it. What set her off: Facebook has apparently indicated that it might hold out for a […]

Kara Swisher of AllThingsD takes a contrarian point of view on Facebook and does a pretty good job of deconstructing the social-networking company, its potential and all the hype around it. What set her off: Facebook has apparently indicated that it might hold out for a valuation of as much as $15 billion rather than the $10 billion valuation the Microsoft investment currently being discussed would give it.

… there is always another fool in line to pass on the buck. A sky-rocketing IPO could wipe clean this round of insanity. But that does not take away the fact that Facebook is not worth this ridiculous price now. It might be in time, or it might not.

In order to put her post into visual context, we have come up with a Silicon Valley Funding Advisory inspired by the Dept. of Homeland Security. And just as the federal agency does, whenever we detect an instance of valuation insanity, we’ll be sure to keep you informed so you can plan accordingly.

[qi:__funding_3]

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  1. Not a comment on the analysis but, I really like the Silicon Valley Funding Advisory graphic!

    I would probably argue that the FB valuation is closer to WTF?! than Delusional.

    cheers,
    Roger

  2. Hilarious!

    If anyone develops a plugin with the Silicon Valley Funding Advisory Warning I will definitely add it to Firefox. It’s an absolutely must have. Now anyone can rank a company based on perceived and real valuations.

    As far as the FB valuation, maybe they have something up their sleeve that demands that $15B valuation…

  3. Hey mcfads can you make a firefox plugin. i will buy you dinner if you do that.

  4. Richard Bennett Tuesday, September 25, 2007

    I like that your funding advisory categories are arranged on a scale as incomprehensible as those of DHS. Good move.

  5. Part of the problem is Microsoft is agreeing to a valuation that is intentionally sky high so as to keep others out:

    http://smoothspan.wordpress.com/2007/09/25/this-facebook-deal-is-too-big-this-parakey-deal-is-too-small-maybe-theyre-both-just-right/

  6. Funding advisor hilarity aside.

    Part of me feels that they have a point with there evaluation, I mean every one is on that thing now and when you have a war chest like MS’s who cares about a couple billion or even several billion. Frankly I’m surprised Microsoft doesn’t just pay 20 billion and get the whole thing.

    The other part of me feels that its only a matter of time before google makes the right moves, Nov. 5th being the start.

    Should be interesting.

  7. I’ve been talking about this for a while. I liked Kara’s article — she rightly points out that Facebook’s revenues are nowhere near Google’s. What she doesn’t say is why. The why is intentionality of users. Many of Google’s users are on the site while in the purchase funnel– they are looking to buy something. That has enormous value. Facebook’s (and Digg, YouTube, etc.) users are their to waste time, read news etc. No purchases = no value. They will be lucky to eak $1 CPMs from their traffic from brand advertisers. That’s a small fraction of what Google sees.

    What’s really amusing is that the 10BN puts their value about 1/3 of Yahoo which has the 2nd largest share of paid search. The piece of Yahoo alone is worth 10-50x what Facebook is.

  8. Alexander van Elsas Tuesday, September 25, 2007

    @John, I agree with you totally. The possible over the top investment of Microsoft will increase ad pressure in the personal space of Facebook users. They won’t like it a bit. If you are searching for something advertisement is fine (that’s the power of Google). if you are pimping up your profile to make it look better than yourself advertisement is, well, a harrasment I think. Wrote a post about it yesterday if you’re interested:
    http://vanelsas.wordpress.com/2007/09/25/high-risk-investment-microsoft-wants-a-piece-of-facebook/

  9. I agree with everyone here. I’ve heard through the grapevine that Facebook has annual revenues of about $200M-$250M and profitable. That’s amazing and I applaud them for their success. However, to say they are worth $15B seems a little out of whack. This puts them at essentially 60X top line. Even if they are at $500M top line, that’s still 30X top line.

    But hey, if they can get a $15B valuation maybe they are much smarter than we think…

  10. I’m actually a little excited at the idea of somebody actually looking at Facebook with another set of glasses. Very necessary.

  11. I am worth $5 trillion dollars. My best friend (now, BFF) agreed to buy a 0.0000000010% stake in anshublog.com for $50.

    I will hold an IPO in December and the shares will be priced at $85 (of course, there will 58,823,529,411 shares outstanding).

    You can obtain a prospectus by sending me $25 by PayPal. ;)

  12. AnshuBlog.com valuation hits $5 TRILLION after private placement round

    AnshuBlog.com to be worth $5 TrillionMy blog is now worth $5 trillion dollars. My best friend (now, BFF) agreed to buy a 0.0000000010% stake in anshublog.com for $50.I will hold an IPO in December and…

  13. Insider Chatter by Donna Bogatin » Mark Zuckerberg: WHO Are You Calling Delusional? Wednesday, September 26, 2007

    [...] Om Malik and Kara Swisher once again rain on valuation parades, the billion dollar plus kind. [...]

  14. How about “Off Your Rocker?”

  15. ummm, I guess I have too much time in my hand.

    Here’s the Facebook app for Silicon Valley Funding Advisory. http://apps.facebook.com/svadvisory/
    :)

    You’ll only be able to see the advisory level for now. The voting part is done in the backend, but I haven’t had the time to attach to the front-end.

    I do have the frontend for resetting the advisory level. Om, if you want I can send you the link.

  16. All Night Coder – Today’s Top Blog Posts on Programming – Powered by SocialRank Monday, October 1, 2007

    [...] Kara Swisher Deconstructs Facebook « GigaOM [...]

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