4 Comments »With Facebook receiving a $15 billion valuation, Peter Lauria suggests that MySpace would be worth $65 billion based on the fact that they have 185 million users. As I said yesterday, the present value of Facebook is nowhere near $15 billion. If Facebook was worth $15 billion today, Myspace still wouldn’t be worth $65 billion. Why?
The value of a MySpace user is much less than a Facebook user. MySpace has a less efficient method of tracking user activities whereas Facebook is clearly effectively tracking user interactions as news items. Additionally, a large portion of MySpace users are not actual users. Facebook is pretty stringent about about ensuring that each user profile is a real person. On MySpace there are a large number of commercial profiles as well as fake profiles. Additionally, a large number of MySpace users are not active anymore. This is a similar thing that occured with the Friendster wasteland.
While MySpace is trying to build their value through becoming more of a media entity rather than a social platform, they have yet to prove a highly effective business model (they supposedly have $500 million a year in revenue but that would definitely not justify a $65 billion valuation). How much do you think MySpace is worth?
I think that this is more like a zero-sum game: the higher the valuation of Facebook, the lower the valuation of MySpace.
I think that this is more like a zero-sum game: the higher the valuation of Facebook, the lower the valuation of MySpace.
This is the kind of valuation math that got everyone in trouble during the bubble.
This is the kind of valuation math that got everyone in trouble during the bubble.