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?
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I think that this is more like a zero-sum game: the higher the valuation of Facebook, the lower the valuation of MySpace.
Comment by Deja Vidor — October 26, 2007 @ 1:19 pm
I think that this is more like a zero-sum game: the higher the valuation of Facebook, the lower the valuation of MySpace.
Comment by Deja Vidor — October 26, 2007 @ 5:19 pm
This is the kind of valuation math that got everyone in trouble during the bubble.
Comment by Chad — October 27, 2007 @ 5:42 am
This is the kind of valuation math that got everyone in trouble during the bubble.
Comment by Chad — October 27, 2007 @ 9:42 am