Classmates.com Goes Public, Is Facebook Next?
Posted by Nick O'Neill on August 14th, 2007 8:00 AMAccording to Mashable, Classmates.com is filing for an IPO. Their reported offering will be worth $125 million. They currently have 50 million registered users with over 5 percent of those members having paid subscriptions. One thing I get from this is that Classmates either has a horrendous monetization strategy or Facebook really does have way too much hype. Next year Facebook will cross the 100 million user threshold and will continue to grow.
Based on a comparable company (Classmates.com), this would value Facebook at somewhere around $250 million. We all know that Yahoo offered $1 billion, but we should view this from the perspective of a comparable company when giving consideration. Their momentum is the sole reason that their valuation is so high. Even so, it seems like the $6 billion number that many in the industry have been throwing around is completely ridiculous. That number is based on Facebook going head on with Google by entering the people search market. At this point it is all speculation. Additionally, Facebook is going to have to launch their own application ad network soon because they now already have 5 or 6 serious competitors.
One thing is for sure: Facebook has some serious work ahead in the coming years. If they plan on taking Google on (which many are predicting), they are going to have to acquire significant resources. While many of us love to provide support to Facebook, a little bit of reality is nice once in a while. I think the offering price for Classmates.com should be one of the things that provide it.
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11 Responses to “Classmates.com Goes Public, Is Facebook Next?”
Nick,
There is a HUGE difference in value for these two companies. I mean classmates.com’s traffic is probably around 1% of facebook’s. Classmates may have 50mil registered, but I for one have not gone back to that site since 1997 when I first signed up. 10 years with no activity from some of their members. Not to mention their 1 million paid subscribers are probably over inflated, and not generating near facebooks 120Mil+ in yearly revenue. classmates.com missed the boat here.
Nick,
There is a HUGE difference in value for these two companies. I mean classmates.com’s traffic is probably around 1% of facebook’s. Classmates may have 50mil registered, but I for one have not gone back to that site since 1997 when I first signed up. 10 years with no activity from some of their members. Not to mention their 1 million paid subscribers are probably over inflated, and not generating near facebooks 120Mil+ in yearly revenue. classmates.com missed the boat here.
I will not even comment on CM.com, seriously!… As for FBs valuation, MySpace is generating 1b in rev a year. Most people think FB will eclipse MySpace. 1b in rev can easily fetch 10b at ipo especially considering the revolution of the social OS, the depth of marketable user data, and the quality of FBs employees…
I will not even comment on CM.com, seriously!… As for FBs valuation, MySpace is generating 1b in rev a year. Most people think FB will eclipse MySpace. 1b in rev can easily fetch 10b at ipo especially considering the revolution of the social OS, the depth of marketable user data, and the quality of FBs employees…
I enjoy your coverage of Facebook developoments, but I’d steer clear of financial analysis until you grasp some basics. First, when a company announces it will have an IPO “worth $125 million,” that does not mean the company is worth that amount. It means the percentage of the company they are releasing to the public market will be valued at $125 million. A company can “go public” by selling only a small percentage of their total shares. The value of that percentage of the company is then applied to all shares to extrapolate the total “market capitalization.”
I enjoy your coverage of Facebook developoments, but I’d steer clear of financial analysis until you grasp some basics. First, when a company announces it will have an IPO “worth $125 million,” that does not mean the company is worth that amount. It means the percentage of the company they are releasing to the public market will be valued at $125 million. A company can “go public” by selling only a small percentage of their total shares. The value of that percentage of the company is then applied to all shares to extrapolate the total “market capitalization.”
Hi Rex,
That’s a very good point and something that I just glossed over in this case. Do you know what these numbers work out to? It’s funny that this didn’t cross my mind even though I majored in finance.
Oops!
Hi Rex,
That’s a very good point and something that I just glossed over in this case. Do you know what these numbers work out to? It’s funny that this didn’t cross my mind even though I majored in finance.
Oops!
Classmates.com coulda been a contender. They would make an excellent Harvard Business School case study in how NOT to run a social networking site.
They started off with such promise back in the late nineties, then made some incredible gaffes along the way: they set up a nascent bulletin board for just about every high school in America, then one day decided only “premium” members could post on them. Result: you can almost tell the day that this policy was enacted because these bulletin boards became a ghost town. You’d see the same 20-30 posts from 7 years ago and virtually nothing since.
Secondly, they restricted viewing of pictures to “premium” members as well. Half the fun of Facebook is the ease of use in seeing your friends pictures, Classmates opted to charge for this privledge and wonders why traffic disappears.
Thirdly is the insistence that all users fill out a questionnaire detailing their political beliefs, number of pets, etc. Great for selling advertising demographics, I suppose, but what’s in it for ME?
Facebook simply too classmate’s “good idea” and made it work.
Classmates.com coulda been a contender. They would make an excellent Harvard Business School case study in how NOT to run a social networking site.
They started off with such promise back in the late nineties, then made some incredible gaffes along the way: they set up a nascent bulletin board for just about every high school in America, then one day decided only “premium” members could post on them. Result: you can almost tell the day that this policy was enacted because these bulletin boards became a ghost town. You’d see the same 20-30 posts from 7 years ago and virtually nothing since.
Secondly, they restricted viewing of pictures to “premium” members as well. Half the fun of Facebook is the ease of use in seeing your friends pictures, Classmates opted to charge for this privledge and wonders why traffic disappears.
Thirdly is the insistence that all users fill out a questionnaire detailing their political beliefs, number of pets, etc. Great for selling advertising demographics, I suppose, but what’s in it for ME?
Facebook simply too classmate’s “good idea” and made it work.
[...] more thoughts, check out ZDNet. As well, allfacebook talks about how the impact of Classmates’ IPO on a possible Facebook IPO, although his math [...]
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