Facebook recently got an investment of $200M from a Russian Internet investor – Digital Sky Technologies. This is based on a valuation of $10B for Facebook which is yet to turn a profit. Including this round, Facebook has raised more than $600M. The last round of investment came from Microsoft in 2007 of $240M which was 1.6%, implying the valuation at $15B then. But Facebook’s own appraisal gave it a market value of $3.7B.
Such astronomical valuation reminds us of the boom days of dot-com. Jeff Bezos of Amazon used to say, “I spell profit as prophet”. Young start-ups were valued higher than household names such as Ford, GM, and Coca Cola. Sun was valued at the peak at $200B when it claimed to be the “dot” in the dot-com movement. We know from history that such boasts are transient. The same Sun is now valued at less than $7B.
Facebook is a private company. Hence it’s hard to know its revenue numbers. It claims to be go cash-positive in 2010. The youthful CEO Mark Zukerberg claims 70% growth in revenue this year. The company claims 200 million users, with 70% from outside the US. Such numbers are very impressive. It becomes very attractive to marketers and one should expect healthy ad dollars to come. But I read somewhere that online ad dollars are declining in the current economy.
Mark Z., the CEO says that IPO is a long way off. A healthy revenue plus profitability would make Facebook an attractive acquisition target. It just feels somehow to loose some steam, given the rise of Twitter with real-time search and a pub/sub model of social interaction. Let’s wait and see how well Facebook monetizes its success with eyeballs.