January 4th, 2011
03:50 AM GMT
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Can Facebook – a company that turns an estimated $2 billion in annual revenue – have a market value 25 times as high?

Goldman Sachs and a wealthy Russian investor apparently think so. The pair invested $500 million in the social media giant, with a view that the actual worth of the company is $50 billion.

“For Goldman, this is a great strategic play because not only do they have the possibility to be at the front of the line when Facebook eventually IPOs – which many believe to be in 2012 – but they also have this great branding of having these assets and attracting new investors,” Evelyn Rusli, one of the New York Times reporters who broke the story, told CNN.

The report adds to the fear that a Dotcom Bubble 2.0 is forming, an idea that gained ground when Google recently offered to buy online coupon company Groupon for $6 billion – and was turned down.

Rusli said of Facebook: “Even though their revenues are relatively low, compared to their huge valuations … you’re buying into the future of the web.” With an estimated 600 million members worldwide, many think Facebook will increasingly influence – and, at some point, become a player – in how goods and services are bought and sold online.

Yet there remains a waft in the air of 1999, when dotcom companies were being valued by what they are expecting to produce, not what they are producing now.

So where does Facebook now rank? Based on its valuation, it is larger than Yahoo and Ebay, but below Amazon.com (at $82.7 billion) and nearly one-third the size of Coca-Cola ($151 billion). At Monday’s close, Google was worth $193 billion.

Social media journalist Shira Lazar noted the company was valued in June at $25 billion “so that’s a huge jump,” yet in December Facebook had more traffic than Google in the U.S. for the first time. “This is the beginning of their growth … they haven’t even tapped into China yet, which has one-third of the world’s internet users,” Lazar told CNN.

Speculation is rife that may soon change, since Facebook founder Mark Zuckerberg was seen traveling in China last month.

Still, is Facebook really worth $50 billion? Or is this the foamy top of a new dotcom bubble in the making?



soundoff (47 Responses)
  1. John

    Facebook is a dodgy service which most people do not realise exposes peoples personal data to the internet. The company Facebook have no respect for their customers privacy Their feeble attempts last year to improve customer controls of personal data proved it. Developing APIs so third parties can develop software to exploit Facebooks database is appalling. It has already been the victim of numerous spam attacks and this is not going to get any better.

    Facebook has become a tool for governments, private investigators and employers to spy on people. The penny will finally drop. Goldman Sachs investment just adds more fuel to this machine and with advertising and marketing companies loving it for all the data mining they can achieve from it. I guess it is for this reason that it can be worth so much money.

    January 4, 2011 at 5:58 am |
  2. Asiupang

    Why would a Goldman Sachs and the Russian Billionaire NOT invest on this comany? Hell, you they could say this company is worth a trillion dollars, they would do so, just so that they can get more investors on their IPO....

    But my opinion is.........Facebook is only worth that much because of its database. Now, how much of that database can be sold without violating the users privacy? Unlike HOTMAIL that has a large database that is being used for Microsoft's benefit along with selling information to tons of spammers.....

    Most importantly, I would never rank that company ABOVE Ebay for several reasons....

    1) Facebook is marketed for people to go in and gossip, share and connect and "reconnect" it is a place to come together to "look what she or he did".....NOT for buying. Once they start the buy/sell market, ppl will start avoiding facebook because of its "constantly targeted sales ads either from friends or "mutual friends"....

    2) People go into EBAY with a mission. TO TRADE, nothing else.......So if you are up for sales, there is also someone up for purchase. Because simply there is no messing around........you go to buy affordable, rare and most importantly, specific to your needs items – unlike Amazon, you won't find garage items such as "a throttle wire for a 1945 Cadillac...." Guess what? Most likely you will find all the parts needed to build a 1945 Cadillac on EBAY....

    3) If I were Zuckerberg, I'd start figuring out a way to not just to get more users to sign-up, but to figure out services that may increase revenue by hosting the needs of the actual users of FB. Too much free stuff will just bring in more kids into FB, FB needs Credit Card users, ppl with certain purchase power that still wants to keep connected.
    Recommended service from me to Zuckerberg: Be able to purchase cheap air tickets and hotel reservations to my friend, relative or significant other's (added friend) city by just clicking > "GO VISIT or EXPLORE" and show all the options of travel, fun, nightlife, rental service, everything (matching my likes and dislikes that I already posted on my personal profile) instead of going into "Hotel.com and Expedia, Cheaptickets, Metromix, Yelp and all that"

    Cheers,

    ASiu

    January 4, 2011 at 6:16 am |
  3. iiyoNiC

    In comparison to Google, Facebook does not produce any new content to expand beyond its traditional "see your friends and share information" basis. It may be worth $50 billion to Goldman Sachs, but personally I would not invest in a company that is growing fast vertically but is not doing so horizontally.
    Google and Apple for instance have learned very successfully that if you want to survive in the ibusiness you have to be continuously innovative and creative in the process. Facebook on the other hand has not yet revealed the potential it might unleash in the future, but tapping into the Chinese market is not the strategy that yields the most prospect for healthy growth. Personally I very much doubt that Facebook is able (or willing) to successfully change into a innovative business to the point of dwarfing any future social networking competitors.

    p.s. how much would twitter be worth? Are they able to grow horizontally? I doubt it.

    January 4, 2011 at 6:33 am |
  4. 2 cents

    I guess we never leearn. Dotcom bubble bust, real state bubble bust, wall street bust and now we are moving towards another dotcom bubble. Facebook worth 50 billion, it is all funny money. I hope people realize the risk before investing hard earned money. Companies like Goldman Sachs have nothing to lose, they are too big to fail, Fed will not let them fail, poor tax payers will pay for upcoming (facebook driven) dotcom bust !!

    January 4, 2011 at 6:52 am |
  5. Jules

    I have never spent a cent in or anything facebook has promoted and thats after being on it for 4 years...... I think it is becoming more "in your face" like you can't get away from it sometimes when you are on sites that are not facebook.... i think eventually people will turn against it because people will become sick of it...... google however will be around forever.... I have spent several thousand dollars on things that I have searched for on google.... every week I buy something I search for on google... If i had to bet money on which of the two companies will still be around in ten years I would put all my money on google.

    January 4, 2011 at 7:01 am |
  6. Anil

    It's no surprise that just after a hugely commercial Christmas, the dotcom bauble culture returns. Anyway Goldman Sachs and the Russian Santa are paying nothing. You are.

    January 4, 2011 at 7:05 am |
  7. joe

    its part of our new 'fake' economy..

    January 4, 2011 at 7:27 am |
  8. Jack Sprinkauer

    Investing $500 million for a portion of the stock of a company that would, if others bought all the remaining stock at that price ratio, mean that the company is worth $50 billion, does not mean that the company is projected to be worth that much.

    This is a common conceptual fallacy made by people who don't understand this type of financial issue. There is a "Right Answer" as to how to interpret this, among people in financial circles.

    If there is $500 million invested in a company, it's a $500 million company. It doesn't matter what projections are made about how much stock might eventually be sold at what rate, etc. The cash does not just vanish. The company could be liquidated and the remaining amount given back to the investors if need be. The cash will be used to try to build the company. If the company were liquidated right now, the existing investors will recoup whatever remains of their investment regardless of whether the rest of the stock is eventually sold or not.

    Whether or not other people in the future are going to also buy stock in this company, at a similar rate, is an open question. At the moment, if a company raises $500 million in investments, it's a $500 million company.

    January 4, 2011 at 7:38 am |
  9. jonhny

    facebook rocks

    January 4, 2011 at 8:00 am |
  10. adrian

    no F way

    January 4, 2011 at 8:17 am |
  11. Donabell C. De Apera

    For me, Facebook really matters at it'sbest due to the costly nature of protecting every users world wide. I mean, HEY!!! Wake up!!! There are plenty of spies around it!!! They are being paid to do that for the security of those people who uses Facebook Account like me. Once you lost your account, it is hardly to get back.

    That is the real situation here. Thieves and Identity Thefts will first enter to your email account and next to Facebook, so the original identity is not so easy to get back, unless you will report to the Police Station and Federal Bureau of Investigation that you have a problem about thieves and that is the issue here why Facebook worth a Million Dollar.

    January 4, 2011 at 9:20 am |
  12. Manuel Vilhena

    Very interesting. A two-three years old company worths more than a quarter of Coca-Cola.

    January 4, 2011 at 9:34 am |
  13. Leon Johnson

    Of course not! (is it worth 50 billion dollars) "Facebook" will be "hot" until the next global internet craze. Just like "Myspace" that has petered out considerably – despite offering very similar services to "Facebook". Internet use and global popularity is a matter of changing tastes and communication modes - no sane businessman or woman will divert funding they cannot stand to lose into Facebook shares....

    January 4, 2011 at 10:07 am |
  14. The Albatross

    I fear that Internet companies such as these are based more on trend then on actual business commonsense. Remember, this is 'technology' and the second someone thinks of a new angle then its game over for FB. Does anyone remember that other super social networking phenomenon, which everyone said would rule the world? Yes, I talking about MySpace.

    Like I said, Internet companies (specifically those that are social services/networking based) rely heavily on word of mouth and trends. We all know what happens to trends over time.

    Unless there is viable revenue generation from an Internet company, investing into future potential growth within this sector is very risky.

    January 4, 2011 at 10:15 am |
  15. antonio camargo

    No chance because it adds nothing new. Like trendy restaurants facebook (vanitybook) has a short life because it is not relevant to people like Google, for instance, is. The permissive character, lack of privacy and size of facebook will be its demise factors. It is simply a new relationship website and, as such, will fade rapidly surpassed by a new one with more “premium admission strategies”.

    January 4, 2011 at 10:26 am |
  16. Vincent

    The cost of facebook is intrinsic. For any commodity whose value is intrinsic it is difficult to place a value on it. In most cases valuation of the commodity is way beyond its actual value. The fact remains that facebook is the best social network in the world and it helps satisfy a major force eating our generation which is the difficulty of meeting people of diverse backgrounds. On line social networking which eventually becomes a basis for commercial indulgence is highly inevitable.
    In my opinion facebook is worth every penney.

    January 4, 2011 at 10:36 am |
  17. hans

    China? Are you kidding? Access to Facebook isn't even allowed there!!!

    January 4, 2011 at 10:36 am |
  18. GUAM_GUY

    ALL I HAVE TO SAY IS THAT I LOVE LOVE LOVE LOVE FACEBOOK!

    BECAUSE OF FACEBOOK I ABLE TO SHARE WITH AND GET SO MUCH INFORMATION FROM MY FRIENDS AND FAMILY WHO DO NOT LIVE ON MY TINY TROPICAL PARDISE ISLAND OF GUAM (A U.S. TERRITORY) BUT IN THE U.S. MAINLAND AND HAWAII!

    FACEBOOK IS GREAT!

    FACEBOOK FROM GUAM, USA!

    YEAH!

    January 4, 2011 at 10:42 am |
  19. taipeir

    Jack, well explained, it's a pretty ignorant concept to just multiply all the rest of the shares by the same amount.

    The quote about China is dumb, Facebook is not allowed to operate in China, even if it was it will be put at an advantage the same way as all the other American internet giants are...because the Chinese will make sure their own companies win the most market share.

    January 4, 2011 at 10:58 am |
  20. DC

    Of course it's worth $50 billion, just like all those dot coms that went bust years ago.

    January 4, 2011 at 11:02 am |
  21. Alex

    You read everywhere that Facebook made 2000 billion in revenues. How about net profits? Must be at least 50% of that, given low costs as an internet based business. However, looked up for it in Yahoo finance and no financial info appears given it hasn’t come public yet.
    Now, in order for a company to be worth a specific value, it must raise cash in proportion to its valuation. I still don’t understand Facebook’s business model if any at all. I would guess it is publicity but its founders and managers dislike it given it would drive away users. So what other business is there involved?
    After the dotcom crash, some business models have come out as proven cash producers such as Google, E Bay , Amazon. But Facebook still hasn’t proven it is a 50 billion company. Max, I’d say 15 billion, taken a net cash flow of 1,000 million /year multiplied by fifteen if believed it can raise 2000 million in revenues per year.

    Now, a company is worth what someone is willing to pay for it. If the Russians and Goldman consider it is worth 50 billion, either it’s just an inlfationary campaign or they project that in the future it can produce enough cash flow to reach such a valuation.

    January 4, 2011 at 11:33 am |
  22. Pat

    3... 2... 1... POP!!!!!!!!!!

    January 4, 2011 at 11:52 am |
  23. deGaulle

    Another bubble...who blieve in goldman sachs? gezzz

    January 4, 2011 at 12:14 pm |
  24. Joe Natoli, Miami Florida

    Yes Facebook is worth $50 billion . . . it's just that $50 billion isn't worth anything

    January 4, 2011 at 12:56 pm |
  25. tutuvabene

    Facebook worth $50 million? In a word, no.

    January 4, 2011 at 12:57 pm |
  26. tutuvabene

    Made a mistake. Worth $50 billion? A thousand times no.

    January 4, 2011 at 1:00 pm |
  27. Mike

    mark z and his team who originally architected thefacebook are great people equipped with fantastic luck....its the "law of domino effect" that made facebook the best social network site on its era. The next thing to look now is http://www.wassup.org a unique social networking site that offer the best member security (remeber its org) without the crap of unwanted spam of ad....its a site for serious people who like a change, investor? anyone? just let me know as seat are limited :) LOL wassup !!!

    January 4, 2011 at 1:17 pm |
  28. Phillip Tembu

    So Facebook is worth $50 billion!!! – that adds up to US$100 per facebook account!!!! Facebook is now worth more than companies like eBay, Yahoo and Time Warner. Heres whats sneaky about this deal. They dont make anything. They dont do anything. They arent anything but a website providing a forum for persons to send inane messages to each other about tying their shoes, hanging out their laundry to dry,., eating Thai food... we waste all our time flirting with each other for no apparent reason other than the thrill of talking to a new person without ever meeting them. When will facebook make a real contribution to humanity–like Google books or Google language tools?

    Can facebook eradicate malaria, generate clean sustainable energy, cure alzheimer's, build earthquake proof homes and purify drinking water in Haiti? The america taxpayer bailed out Goldman Sachs (just invested us$500M) so it could speculate on this digital narcissism?

    Goldman is making money and money rules out of thin air – Facebook shares get chopped up into derivatives as "value Soars". By law, as a private company, facebook shares are limited to 499 investors. By creating derivatives, Goldman and other investment firms are helping facebook keep its shareholder count to just under the law requirement. What makes this case stink even more is that rich folk, will own a piece of facebook under Goldman investment while the real big crooks keep their single investor portfolio. Once the big fat cats have split and shared the pie, they will float the company, further enriching their investors as the IPO increases the value of their private shares. The cards are stacked to ensure that only the wealthiest individuals have access to this kind of opportunity.

    Smells like the year 2000 all over again. Do you remember Napster and the other Internet bubble companies? What are they worth now? Remember when MySpace was a big deal? Facebook is a passing fad with no product or any true ground breaking technology. $50 billion hype = hold on to your wallets. Just saying.

    January 4, 2011 at 1:27 pm |
  29. Gil

    Fecebook Rocks, but in the other hand Facebook is dangerous!!!!

    January 4, 2011 at 1:37 pm |
  30. William M.

    To whoever said Facebook doesn't produce any content and used Google as a reference you should get your facts straight. Google does not produce ANY content whatsoever. In fact Google has made billions of $$$ by using webmaster's contents on their search systems, by placing their stupid ads in 3rd party contents and so forth. If you're going to use content production as measure, then Wikipedia is worth a trillion U$.

    January 4, 2011 at 1:47 pm |
  31. Manuel

    If you had a company that generates $2B in Revenue, then how much money do you need to store in a bank or money market to generate $2B in Revenue annually? (Thats how much FB is worth...)

    January 4, 2011 at 2:32 pm |
  32. LV_nonanon

    Bubble.

    And anyone remember AOL?

    The best thing FB could do is to buy a real company with real revenue now.

    January 4, 2011 at 3:36 pm |
  33. Alx

    I signed up for Facebook because some friends asked me. It is much less than what I expected. I can see some teenagers enjoying changing gossip and family and friends sharing pictures.

    This is not rocket science and Facebook is odd to use, and poorly made for a company generating so much money. It need some real good competition, hopefully from Apple or something better than the one Google is trying. Somewhere your pictures are surely safe, personal pictures of children available in the internet, can’t be right even if the poor soul tick the wrong box.

    I wouldn’t mind target adverts, but let me choose it , don’t look in my chat, don’t look who are my friends, where they are and stuff like that.

    It may be worth 50B now, clearly Facebook is all about money and people will figure this out.

    I hope something better come along, quickly......

    January 4, 2011 at 4:01 pm |
  34. SteveH

    When facebook decides to go public, the people of the world should close their accounts. It is at this point that facebook will lose its social value and its imaginary worth inflated by gorilla math.

    January 4, 2011 at 4:33 pm |
  35. Mathijs K.

    If Facebook would charge me 0.01$ for my profile – I would quite Facebook. Hardly 1% of the 600mio us Facebook regularly. Though it is a great bubble to exploit by the likes of Goldman Sachs. A company is only worth what value it can add to society. Facebook's value, in this sense, is very low.

    January 4, 2011 at 4:45 pm |
  36. thailandfarang

    Facebook is pathetic... it's worth nothing more than the 0101010101010101010101a it's coded in. I would never invest in virtual crap like that. Invest in your own business, brick and mortar, and build something you can grow and control. Facebook is a privacy nightmare and your a fool to post all your life's movements on it. And why would Goldman care? They are using part of the 5 trillion the Fed stole from the the citizens of the USA.

    January 4, 2011 at 6:15 pm |
  37. Rich

    If FaceBook doesn't stop violating people's privacy rights, and using a "forgiveness is easier to ask for than permission" methodology they won't be worth 10p, much less something 50 billion.

    January 4, 2011 at 6:43 pm |
  38. so-what...

    Ideally FB not bad at all!! Especially with the ruthless costs of communication via phone and mobile phones, certainly a good business to be in control of however regarding Facebook, technically it is such a nuisance, FB thinks we have all the time in the world... with its limitations, it is discouraging...to me, least , Facebook is far from being worthy 50 billion, you've got to be kidding me, time is of the essence...

    January 4, 2011 at 7:25 pm |
  39. Ronald Handoko

    I think the founder of facebook Marc Zückerberg deserve the value of his
    Company for 50 billion US Dollar,but at least not in the first Ranking.

    January 4, 2011 at 9:00 pm |
  40. kiwilogic

    facebook worth $50 billion today worth $0 tomorrow when the next social networking fad takes over. the whole lot of them are a waste of time

    January 4, 2011 at 9:50 pm |
  41. dmac

    IMO It is because of hypsters that the economy gets into the economic mess such as what we have just gone through. If Facebook is worth 50MMM then my inner-city, two bedroom bungalow shack with a view of a garbage strewn back ally and a concrete/gravel/salvage yard/parking lot is worth 750M.

    In order to maintain stability and real value, the market needs to operate on the basis that there is mostly,. only intrinsic value in anything whether it is a building or service. A small percentage of value can be assigned to trends or dreams or...... and that should be deemed a 'fluff' value, a value that can disappear in a flash and should be discounted accordingly.

    Facebook adds virtually nothing to our society except its real-time cashflow and should be valued accordingly by the market.

    January 4, 2011 at 9:58 pm |
  42. mandy

    okay, so you did not answer the question in the end, instead posted the question back to us...

    January 5, 2011 at 2:39 am |
  43. blasten

    Its only worth something when theres nothing better out there at this stage. I will give it 2 years and face book will be an old book.

    Dont people realize how much 50 BILLION!!! is????

    January 5, 2011 at 5:05 am |
  44. Grant

    Is it worth 50 Billion...currently I would say no! They do not have the product or advertising streams google etc have. At the end of the day you need to provide real $ returns to businesses to be worth anything.

    Funny thing about FB is that it should be worth in excess of 50 Billion however they haven't cashed in on the one major asset they have. Which is not advertising, that is google's domain. The word of mouth and linkages in FB make it prime to make money out of market intelligence, databases etc.....which also fits in nicely with their crap security and privacy!

    January 5, 2011 at 1:15 pm |
  45. alan

    its not worth for me 5billion... i woudnt give no more then 1mil .....coz i dont use FB at all ....

    January 5, 2011 at 2:33 pm |
  46. Benny

    In Monopoly money maybe one tenth of 50B but in real money no.

    January 7, 2011 at 8:36 am |
  47. Metro icone soft for Win8

    Rather amusing opinion

    September 24, 2012 at 9:12 pm |

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