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Why Facebook is worth $50 Billion

byDouglas Ian
January 10, 2011
2 minute read
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The verdict on Facebook’s valuation is finally out and I’m not surprised that the world’s most popular social network commands a mind bogging and whopping worth of $50 Billion Dollars! To be valued at more than Yahoo, eBay and Time Warner is a monster achievement and a massive moral victory for the social media brigade.

Last month, Facebook recently overtook Google as the most visited website in 2010. It’s well known that Google, Microsoft, Yahoo and several other tech heavyweights have time and again spilled their secret desires to acquire Facebook but Zuckerberg and company haven’t obliged.

Is it a fair valuation?

While I’m no expert on industry valuations, I can safely bet that there are fewer better names than Goldman Sachs to determine a company’s true net worth. In a move that augurs well for the overall future of social media, the Wall Street uber-bank Goldman Sachs, just pumped another $450 million in venture capital into Facebook. Apart from GS, a Russian investor is also involved in the latest round of Facebook VC funding.

I, for one, believe that Facebook is worth every cent of its valuation. To reach the coveted 50 million user mark, radio took 38 years, TV took 13 years, the web took 4 years and Facebook and Twitter have managed to do it in less than 6 months. If that doesn’t excite any VCs, nothing else can.

Facebook is already well ahead of several biggies such as Google and Yahoo when it comes to time spent on the web. Further, Facebook users are more loyal as compared to any other social network and nearly half of them login at least once every day.

Facebook critics (and there’s no shortage of them) have been quick to come up with reasons why they believe that the world’s leading social network has been overvalued. However, I strongly believe that those arguments are blown out of proportion for their own business interests.

Several others argue that it’s lofty valuation which is unsustainable. With Facebook getting progressively business-friendly, I think it’s a matter of time before the questions about profitability and sustainability would soon be a thing of the past.

Facebook is the future

Being a veteran social media loyalist and online marketer, I’ve seen the web evolve from a nascent stage to its present form. Yahoo ruled the roost in 90s and Google took over the reins in 2000s. And I have little doubt that year 2011 and next few years would be fondly remembered as the “Facebook Decade”.

Several noted economists have predicted that the world economy is gradually moving to a newer model where services will outpace manufacturing and other traditional business models. IMO, the recent Facebook valuation is a perfect example of that drastic change in global mindset.

I’m convinced that Facebook is worth the $50 Billion valuation that it has received. What about you? Please share your opinion by leaving a comment below this post.

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Douglas Ian
Douglas Ian is the Chief Editor of Smedio Magazine, Bestselling Author, Strategist, Speaker, and Trainer, who helps businesses grow their revenue through specialized business optimization strategies.
77 comments

  1. People live inside the Facebook 🙂 and i guess that 50$ billion is very fair valuation for Facebook
    as the fastest growing website that the internet ever known!!

      1. Doug, great article! I will not take this valuation lightly. As the saying goes, “Find out where the traffic is going and go STAND in front of it.” I’ll leave the debating to others…

    2. Faissal, I have to agree with you…people spend hours on FB. It’s amazing to me but they do!

  2. I am not completely sure on where to stand here.
    A real evaluation is of course something very complicated, and seen the recent performance of financial firms I am not really sure if I want to trust their judgement anymore.
    I am curious to see if this valuation will keep so high should the company go public.

    1. The current valuation is mind bogging but looking at the utility aspect of the platform, one is forced to say the valuation is not that way off. Great point as always Gabriele.

  3. My way of analyzing the value is borrowed from the early days for cellular phones and cable companies: per pop. How much is each member worth? If cell phone and cable subscriptions were worth $1500-2500/subscriber when they were cash flow negative, is it not hard to imagine that with 600 million members at Facebook, you could reach just a $100/member value (i.e. $60Bn)? If we talk growth potential (China and India untapped), active users (50%) and avg time spent, I think that $60B might be far from hefty! Then there are synergistic partners that could be able to extract/create even greater value. If a company like Microsoft were to buy FB, the combination could be very effective for both… Then layer in a jv with a company like Nokia (the current CEO is ex Microsoft) to create a FB mobile, and that would certainly add to the potential. Enough reasons in my mind to warrant the $450m investment by Goldman Sachs.

      1. I probably need to substantiate the per pop revenue stream to be a little more serious. But, I am sure there is an investment banker on the case somewhere!

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