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  • The value of Facebook

    By admin | November 16, 2010 | Add Your Comment

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    Earlier this week, Mashable broached a subject that has been the topic of much tech debate:

    How much is the biggest social network, Facebook, worth?”

    A recent evaluation of the value of Facebook by SecondMarket has set the companies value at around $41 billion.

    SecondMarket is a company that specialises in the exchange of shares for privately held companies.

    Yesterday (16/11/10) according to SecondMarket, Facebook were trading at $16 per share. This value set by SecondMarket establishes Facebook as the third most valuable internet company in U.S.

    This value for Facebook leaves it only standing in the shadow of Google ($192.9 billion) and Amazon ($74.4 billion), taking Ebay ($39.3 billion) out of the top three.

    This current value of Facebook shows exceptional growth from their 2007 value of $15 billion. This rise is even more impressive when you take into consideration that the social network experienced a substantial drop in value during the recession, hitting a low of $3.7 billion, a decrees in value greater than 75%.

    However, it is important to remember that all of these figures and values are hypothetical and heavily based upon speculation and estimation, due to the nature of the companies private offering.

    Criticism could be drawn in Facebook’s valuation surpassing eBay’s though. Despite the fact that Facebook is one of the most highly esteemed internet companies in the World and one that’s made definite progress in financial business terms, it is being compared to eBay, a company expecting a revenue greater than $9 billion by the end of the year.

    This is a harsh contrast to Facebook, who are valued upon expanding their already huge user base and increasing ad sales, with an end of “more than 1 billion users and world dominance.”
    Mashable suggests that despite Facebook’s impressive fight and current market strength, the case of MySpace should not be forgotten. MySpace was the Social Networking powerhouse before Facebook, but it quickly fell from power and despite its rebranding last week looks set in its has-been state.

    This is not to say that Facebook will eventually join the list of Social Network has-beens, just raising the possibility of a rocky future. However, this appears unlikely to happen as Facebook continue to innovate and invent, fighting for a greater market share, as illustrated yesterday with the announcement Facebook Messages.

    One thing is sure however, no one will know the real value of Facebook until it goes through its initial public offering. This will allow the market to determine its value, instead of a speculative estimation.