1. Why would Facebook users use search inside Facebook when Google already beats them at it? Google doesn’t need a search deal with Facebook either because everyone already uses it.

2. Even IF (a huge IF) Facebook could get users to search, no where near 50% would click on a paid listing. Not even Google attains those kind of results. In fact, if 50% were clicking on a paid listing, it would be an indication that the search functionality is terrible.

3. Using SNAP Interactive, one can see that Facebook apps companies are trading at a P/E ratio of 9. That’s really low. SNAP has heavily leveraged advertising and as more apps do it, people will get turned off.

Please learn logic before applying bogus math (this applies not just to Lee but VCs investing in apps in general). This is all a Ponzi scheme. Until RockYou and Slide can prove that they can generate PROFITS (not just revenue) by selling advertising (not by selling installs), then we’ll know that there’s real money here. Until then, it’s all a joke.

I have valued Facebook at $300 per user based on the $15 billion valuation deduced from Microsoft and two other cash only investors in Facebook when they had 50 million users. This number implies that the Lifetime Value of these users from yet-to-be implementated monetization will be $300. Assuming a lifetime of 5 years for a facebook users inside their system, this means earnings of about $60 per year to Facebook per user or $5 per month per User or $0.16 per day in earnings. Facebook could achieved this today with about 1 web search per user per day with 50% of these leading to a click on a $0.32 Sponsored Link.

The value of a Facebook user to an application is a different matter. My own estimate on a per install basis is around $0.40 to $0.60 depending on whether or not the app is growing and the % of daily active users from the app’s install base. The ultimate metric is really the Revenue Per Year for the app from its install base of users. Once you know this number you can apply a multiplier based on your expectation of how many years that revenue or higher can be achieved.

Most private software companies are sold for between 1x and 3x annual revenues. Most small cap public software companies trade at 5x to 10x annual revenues. So, the analysis provided of $1.40 per active user implies a 5x sales revenue figure for SNAP Interactive which seems reasonable. The equivalent number for a single app private facebook app user would be $0.28 on the low end (1x sales) and $0.84 on the high end (3x sales).

This all dovetails nicely with the $0.50 per install that RockYou and Slide charge to purchase facebook installs.

Thanks,
Lee Lorenzen
CEO, Altura Ventures — the first Facebook-only VC

I have valued Facebook at $300 per user based on the $15 billion valuation deduced from Microsoft and two other cash only investors in Facebook when they had 50 million users. This number implies that the Lifetime Value of these users from yet-to-be implementated monetization will be $300. Assuming a lifetime of 5 years for a facebook users inside their system, this means earnings of about $60 per year to Facebook per user or $5 per month per User or $0.16 per day in earnings. Facebook could achieved this today with about 1 web search per user per day with 50% of these leading to a click on a $0.32 Sponsored Link.

The value of a Facebook user to an application is a different matter. My own estimate on a per install basis is around $0.40 to $0.60 depending on whether or not the app is growing and the % of daily active users from the app's install base. The ultimate metric is really the Revenue Per Year for the app from its install base of users. Once you know this number you can apply a multiplier based on your expectation of how many years that revenue or higher can be achieved.

Most private software companies are sold for between 1x and 3x annual revenues. Most small cap public software companies trade at 5x to 10x annual revenues. So, the analysis provided of $1.40 per active user implies a 5x sales revenue figure for SNAP Interactive which seems reasonable. The equivalent number for a single app private facebook app user would be $0.28 on the low end (1x sales) and $0.84 on the high end (3x sales).

This all dovetails nicely with the $0.50 per install that RockYou and Slide charge to purchase facebook installs.

Thanks,
Lee Lorenzen
CEO, Altura Ventures — the first Facebook-only VC