That's impressive, but they will have to double their profit several more times to warrant a 100b price tag.
Google has a PE ratio of 20. If you extend that to FB, they'll need to make 5b in revenue to get to 100b. Assuming that last year they banked 20mm, they would have to double their earnings eight times to get to 5b.
Not saying that Facebook deserves a $100b valuation, but, in all fairness, a PE ratio of 20 isn't realistic either. Facebook is perceived as the growth company that Google used to be. Investors will be willing to pay a premium for that.
Amazon is $59B. (http://www.google.com/finance?client=ob&q=NASDAQ:AMZN) Amazon's user base is probably comparable to Facebook, and they're monetarizing the hell out of it. How is Facebook supposed to almost double that?
I'm not sure Amazon's userbase really is comparable (I'm not even sure how to measure, since Facebook users vists Facebook every day, whereas Amazon users don't).
I think the difference is in potential. Facebook has more potential than any other company to make huge amounts of cash. What it's making now is (probably) just the beginning.
Any other company? Really? Name a sufficiently large petroleum company: they automatically have more "users" than Facebook for something those "users" are automatically guaranteed to pay for. (Do anything and you use petroleum, directly or indirectly. Even getting out of bed in the morning requires energy, i.e. food, and that food was shipped using petroleum products and likely harvested with petroleum-consuming tractors as well.)
You can even get more potential from having a lot fewer users, but monetizing each user by a greater amount. Having tons of unmonetized users and looking for a way to monetize them is questionable at best.
Yes, if Fb finds a strong monetization engine for its huge user base then $100b seems possible.
However, as I remember, Google had found their monetization engine before their IPO. Fb hasn't and the IPO is supposed to be just around the corner. Plenty of other large sites didn't work out like Google. I mean, Fb could wind-up like Yahoo, lots of users but no great monetization from them. In fact, Fb looks a lot like a better Yahoo since it more or less provides what Yahoo provides in a more integrated format.
Consider, if a brick-and-mortor company somehow offered free storage of real-world goods anywhere in the world, they could easily grow to millions of users too. The monetization question would loom large as well.
Yes but what about long-term value? I may be wrong but I thought options given to employees don't allow them to sell for some amount of time after an IPO.
Hmm, let's see. Facebook claims to have an active userbase of 500 million people. If they can find a way to show $46 worth of ads to every one of 'em every year, they can make $23 billion.
It does sound a little high, but not as insane as it initially might.
At 500 million active users, they're sweeping up some pretty non-trivial percentage of all of humanity. Unless they figure out something that'll grow their revenue by 100x...I hope that any investor isn't banking on the continued exponential growth curve of the human species as a market for targeted adverts in the near term.
Basically they're going to need to start selling "stuff" for that valuation to make any sense at all.
