How Is Facebook Worth $15 Billion?
Posted by Nick O'Neill on January 23rd, 2008 12:59 PMIf you hadn’t noticed, there have been a number of people investing in Facebook since they were given a $15 billion valuation by Facebook. This could potentially include a significant investment by Nokia as was reported earlier this week. So why on earth are all these companies and wealthy individuals trying to invest in Facebook at such ridiculous valuations? Hooman Radfar, CEO of Clearspring, has shared his thoughts on this and a lot of it makes sense.
Part of Hooman’s master plan is for Facebook to purchase Powerset or Hakia, both early-stage search engines that are trying to master the natural language search market. For the most part, the plan appears to be how to build the next Google. Creating the “people search engine” would generate a lot of press but I’m not sure how much value there is for placing ads next to people’s names versus ads next to targeted keywords.
Regardless, of search, I think Facebook is going to really turn up the revenue dial with the launch of their upcoming payment platform. Rather than focusing simply on search, Facebook can put a lot of effort into building the social shopping platform that many have dreamed of. Facebook would get most of their value out of having the most accurate representation of the real-world social graph. I would argue that Facebook and LinkedIn are the current leaders in that space.
While it wouldn’t necessarily increase Facebook’s revenue, one thing I would like to see done in the near future is the addition of a search feature within the Facebook inbox. Right now I have absolutely no way to sort through my messages and it is becoming increasingly ridiculous to manage. In regards to valuation I think Hooman outlines one route that Facebook could take. For the time being, I don’t think acquiring search engine is anywhere on the horizon.
Do you think Facebook will eventually start to rake in billions of dollars?
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January 23rd, 2008 at 12:07 pm
Nick, I like those thoughts as well. This is a fun topic. The e-commerce spin is something FB definitely could bring a unique advantage too as well. Like I said, I think there are a number of ways that they can move to serious revenue generation. Regardless of the strategy they ultimately follow though, it seems that time is of the essence. Hope all is well man.
January 23rd, 2008 at 12:41 pm
I think Facebook is on the right track. I just hope they do not sellout completely and ruin the experience for the user.
January 23rd, 2008 at 1:07 pm
Nick, I like those thoughts as well. This is a fun topic. The e-commerce spin is something FB definitely could bring a unique advantage too as well. Like I said, I think there are a number of ways that they can move to serious revenue generation. Regardless of the strategy they ultimately follow though, it seems that time is of the essence. Hope all is well man.
January 23rd, 2008 at 1:24 pm
But users always prefer open solutions to walled gardens.
Facebook will need to become more open or they will go the way of Friendster.
January 23rd, 2008 at 1:32 pm
I don't quite understand the social shopping experience and all that it might entail. Can you explain?
If, by social shopping FB hopes to get friends to vouch for products such that they all end up buying the same stuff I don't really see that as being what consumers really want. Web 2.0, blogging, MySpace, etc. has been the movement of making it your own, standing out as an individual, having one's own domain (such as you have here). All that seems counter to the holy grail of social shopping. Unless, as I said, I don't really understand the social shopping experience.
January 23rd, 2008 at 1:41 pm
I think Facebook is on the right track. I just hope they do not sellout completely and ruin the experience for the user.
January 23rd, 2008 at 2:23 pm
I think the mega search dollars could come an alliance between FB and one of the major search engines, but not in the way that most people have been talking about. I have posted more about this on my blog but in a nutshell, the integration could be very effective with three ’simple’ features:
1)A tab for results tailored based on your FB profile;
2)A simple button on the Search results page that lets you turn your unresolved queries into questions for (selected members of) your FB network plus anyone who has subscribed to answering questions on that topic;
3)The ability to do web search with the above two features, either directly on the search engines site or within FB.
January 23rd, 2008 at 2:24 pm
But users always prefer open solutions to walled gardens.
Facebook will need to become more open or they will go the way of Friendster.
January 23rd, 2008 at 2:32 pm
I don’t quite understand the social shopping experience and all that it might entail. Can you explain?
If, by social shopping FB hopes to get friends to vouch for products such that they all end up buying the same stuff I don’t really see that as being what consumers really want. Web 2.0, blogging, MySpace, etc. has been the movement of making it your own, standing out as an individual, having one’s own domain (such as you have here). All that seems counter to the holy grail of social shopping. Unless, as I said, I don’t really understand the social shopping experience.
January 23rd, 2008 at 3:23 pm
I think the mega search dollars could come an alliance between FB and one of the major search engines, but not in the way that most people have been talking about. I have posted more about this on my blog but in a nutshell, the integration could be very effective with three ’simple’ features:
1)A tab for results tailored based on your FB profile;
2)A simple button on the Search results page that lets you turn your unresolved queries into questions for (selected members of) your FB network plus anyone who has subscribed to answering questions on that topic;
3)The ability to do web search with the above two features, either directly on the search engines site or within FB.
January 24th, 2008 at 2:55 pm
I don't know if this has been brought up yet, but I think that Facebook should create its own email system that ties in with its inbox message system, so that in addition to being able to send messages internally to your friends on facebook, you can also send messages externally to non-facebook users. that could make it a competitor with gmail
January 24th, 2008 at 3:55 pm
I don’t know if this has been brought up yet, but I think that Facebook should create its own email system that ties in with its inbox message system, so that in addition to being able to send messages internally to your friends on facebook, you can also send messages externally to non-facebook users. that could make it a competitor with gmail
January 26th, 2008 at 3:29 pm
adding 1) Search and 2) E-Commerce / Payments are 2 pretty good bets for how FB could increase monetization.
we'll see…
January 26th, 2008 at 4:29 pm
adding 1) Search and 2) E-Commerce / Payments are 2 pretty good bets for how FB could increase monetization.
we’ll see…