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Facebook's Revenues Leaked

Soulskill posted more than 3 years ago | from the all-about-the-benjamins dept.

Businesses 295

eldavojohn writes "Think that Goldman Sachs spent too much on Facebook with the $450 million investment? Well, a very wealthy customer of theirs decided to leak Facebook's financials yesterday after receiving it over lunch: '... during the first nine months of 2010, Facebook generated $1.2 billion in revenue. Net income at the firm was $355 million. The financial statements were not audited and offered little detail about how Facebook generates its revenue, said the source, who did not want to be identified because he had signed a non-disclosure agreement.' Expanding this nine-month period to a year yields $1.6 billion in revenue and under half a billion in income. Given that, should Facebook be valuated at $50 billion?" Reader frontwave adds news that other social tech companies are hurriedly considering IPOs of their own.

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Is Facebook a viable long term business model ? (2)

ls671 (1122017) | more than 3 years ago | (#34793190)

Is Facebook a viable long term business model ?

I have never been using Facebook although I have heard a lot about it. Obviously some people, mostly mainstream from what I can understand, seem to enjoy it a lot.

What would be the percentage of "Facebook penetration" amongst the /. users ?

Re:Is Facebook a viable long term business model ? (5, Funny)

MightyYar (622222) | more than 3 years ago | (#34793262)

What would be the percentage of "Facebook penetration" amongst the /. users ?

If it's penetration you're after, Craigslist is far superior.

Re:Is Facebook a viable long term business model ? (1)

Anonymous Coward | more than 3 years ago | (#34793320)

What would be the percentage of "Facebook penetration" amongst the /. users ?

If it's penetration you're after, Craigslist is far superior.

Penetration? Not since they stopped the "Adult" services section.

Re:Is Facebook a viable long term business model ? (1, Insightful)

H0p313ss (811249) | more than 3 years ago | (#34793334)

What would be the percentage of "Facebook penetration" amongst the /. users ?

If it's penetration you're after, Craigslist is far superior.

That's what she said?

(Yes, I will go to hell for this...)

Re:Is Facebook a viable long term business model ? (3, Funny)

Quiet_Desperation (858215) | more than 3 years ago | (#34793442)

Nah, that's more of a purgatory offense.

Re:Is Facebook a viable long term business model ? (4, Funny)

DeathFromSomewhere (940915) | more than 3 years ago | (#34793634)

[Citation Needed]

Re:Is Facebook a viable long term business model ? (1)

Yhippa (443967) | more than 3 years ago | (#34793292)

I think Facebook is starting to become the de facto "people management" platform for individuals. If you like RSS it's basically turned into RSS for human beings, corporations, music artists, blogs, and so on. I think there is an incredible amount of data they have there on those groups and potentially stand to make a killing if they try to marry that with ad revenue. It beat Google for the most visited site last year somehow so it seems to be one of the stickier websites around that aren't related to search or email.

Re:Is Facebook a viable long term business model ? (2)

rainmouse (1784278) | more than 3 years ago | (#34793552)

It beat Google for the most visited site last year somehow so it seems to be one of the stickier websites around that aren't related to search or email.

Unless I am mistaken it didn't beat Google for hits, only the time spent on facebook was higher than time spent on Google. But if you include googles other sites like Youtube it may tell a different story. Like I said though I could be very mistaken though this site ranks facebook at 5th for 2010.
http://hubpages.com/hub/Most-visited-Websites-in-the-World-Most-Popular-Websites-in-the-Internet [hubpages.com]

What I find strange in the abstract sense is that a website turned over more profit last year than the entire economy Burundi which has a population of 9 million people. Admittedly one of the ten poorest countries in the world, but this puts into perspective in my mind at least just how poor these people really are.

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal) [wikipedia.org]

Re:Is Facebook a viable long term business model ? (2)

nohelix (1244378) | more than 3 years ago | (#34793994)

Right now it has the pleasure of being the place for the young and the cool. In another 5 or 10 years when all your parents are on Facebook, teenagers will find a new 'cool' online hangout. No teen wants to hangout with their parent and so it will change as it really beings bridging the generational gaps. Its just like real life - 50 years ago it was 'Soda Fountains', 30 years ago it was Bowling alleys, 15 years ago it was the Arcade, 5 years ago it was Myspace, and now it's Facebook.

Re:Is Facebook a viable long term business model ? (3, Insightful)

Kenja (541830) | more than 3 years ago | (#34793322)

Of course. Peoples personal information always has a market value.

Re:Is Facebook a viable long term business model ? (3, Insightful)

arth1 (260657) | more than 3 years ago | (#34793328)

Is Facebook a viable long term business model ?

All internet companies are butterflies. Something newer and hipper will come around.
Facebook too will one day go the way of MySpace and LiveJournal.

(And Google will one day go the way of Altavista, Hotbot and ftpsearch.ntnu.no)

Re:Is Facebook a viable long term business model ? (5, Interesting)

ThinkWeak (958195) | more than 3 years ago | (#34793580)

Is Facebook a viable long term business model ?

All internet companies are butterflies. Something newer and hipper will come around. Facebook too will one day go the way of MySpace and LiveJournal.

(And Google will one day go the way of Altavista, Hotbot and ftpsearch.ntnu.no)

Normally I would agree, but I don't think so in this case. Facebook has done one thing well, and it's appealed to the masses across all demographics. MySpace was too quirky, convoluted, etc. Facebook has kept things relatively simple. As long as they don't result in mass bank fraud due to users' personal information being listed, they have a pretty safe model.

Facebook also does not appear to be stagnating the way MySpace did when it thought it was the only option. They have a pretty good partnership with Zynga that supplies gimmicky, addictive games for Joe Public and they continue to add new "features." Whether those features are beneficial to the end-user or Facebook itself, it still comes across as innovating.

I think companies have started to wisen-up after the dot-com burst. Investors are also going to be prone to stay with companies that have shown some resilience in the downed economy.

Re:Is Facebook a viable long term business model ? (1)

arth1 (260657) | more than 3 years ago | (#34793850)

Normally I would agree, but I don't think so in this case. Facebook has done one thing well, and it's appealed to the masses across all demographics. MySpace was too quirky, convoluted, etc. Facebook has kept things relatively simple. As long as they don't result in mass bank fraud due to users' personal information being listed, they have a pretty safe model.

Surely the same could be said for Altavista?
The problem with web apps is that anyone can do the same. If they do it better than you, your customers will migrate. At first just to test it, and then spending more and more time at the new site. This is what happened to LiveJournal, MySpace, Friendster and many others, and nothing Facebook does prevents people from trying out other services.

Re:Is Facebook a viable long term business model ? (1)

Monkeedude1212 (1560403) | more than 3 years ago | (#34793968)

The problem with web apps is that anyone can do the same. If they do it better than you, your customers will migrate. At first just to test it, and then spending more and more time at the new site. This is what happened to LiveJournal, MySpace, Friendster and many others, and nothing Facebook does prevents people from trying out other services.

Besides having a community base that includes more active users than all those you just listed combined?

Good grief you have a short outlook (3, Insightful)

A nonymous Coward (7548) | more than 3 years ago | (#34793912)

How silly! EVERY company loses favor. Styles change, customs change, companies bet on the wrong horse or stay the course and stagnate.

EVERY company loses favor sooner or later. Facebook is not going to be the first immortal company.

Re:Is Facebook a viable long term business model ? (0)

Anonymous Coward | more than 3 years ago | (#34793970)

I think you're not seeing the forest for the trees. Some people, including me, did move from myspace to facebook because it was a little cleaner and nicer, but now the only thing cleaner or nicer about it is the lack of customizable backgrounds. It's essentially the same stinking shithole as myspace, except with a CEO who's popularly thought of as a scumbag rather than everyone's friend (as on myspace). There's nothing at all about facebook that can't be replaced by other services -- no important patented technologies, no awesome unique features, nothing -- and therefore the likelihood is that they too shall be replaced as they replaced their predecessor. When it comes to the tech sector, "this time it's different" is a huge warning flag that you're probably wrong.

Re:Is Facebook a viable long term business model ? (1)

Monkeedude1212 (1560403) | more than 3 years ago | (#34793788)

Is Facebook a viable long term business model ?

All internet companies are butterflies. Something newer and hipper will come around.
Facebook too will one day go the way of MySpace and LiveJournal.

(And Google will one day go the way of Altavista, Hotbot and ftpsearch.ntnu.no)

I respectfully disagree, sir.

Altavista was not much more than a Search Engine. Google has obviously gone beyond that, by penetrating the phone market, email and other web services, its own web browser, operating system, and is rapidly expanding into other markets.

Much in the same way - Facebook has grown much farther than the "This is my profile, this is my journal, msg me plz" teen fanfare sites. Kids as young as you can imagine having facebook profiles, elders nearing their end, and everyone in between. More than one country or nation. The potential only being limitted by web standards. As web applications grow, so does Facebook, and the entourage of applications available within it.

Sure, one day, somewhere, these might falter, have some catastrophic failure, etc etc. I'm sure they won't be around forever.

But for something like say... a 10 year investment period? I'd sign up if I had the money.

Re:Young (1)

TaoPhoenix (980487) | more than 3 years ago | (#34793984)

They have the fetus market too!

+1 Placenta

Re:Is Facebook a viable long term business model ? (1)

mcneely.mike (927221) | more than 3 years ago | (#34793860)

--Bing--
What Microsoft hopes will be the next Google, Alex?

Re:Is Facebook a viable long term business model ? (3, Interesting)

slim (1652) | more than 3 years ago | (#34793364)

Is Facebook a viable long term business model ?

I have never been using Facebook although I have heard a lot about it. Obviously some people, mostly mainstream from what I can understand, seem to enjoy it a lot.

What would be the percentage of "Facebook penetration" amongst the /. users ?

Among /. users, lower than average because we have a lot of privacy nuts here.

However, among the general population, Facebook is huge. Go on, sign up and see how many of your friends are on there (you can always put fake details in and delete the account afterwards). If you're in an English speaking country and younger than 50, I bet it's more than half. ... and it's a medium that lends itself well to ads etc.

My biggest issue is, penetration is so high already, how much bigger can it grow? How can it monetize the existing user base more, without alienating them? Possibly by "replacing" the internet. I already see things like nightclubs choosing to have a Facebook page *instead* of their own dedicated site. There are lots of people who send each other FB messages instead of using email. Will we see an Amazon-like store hosted inside Facebook -- with a cut going to Facebook on every sale?

Re:Is Facebook a viable long term business model ? (1)

Americano (920576) | more than 3 years ago | (#34793688)

penetration is so high already, how much bigger can it grow?

THey have 500 million users. Estimates put the number of humans on earth at ~7 billion.

By my count, they could grow by another 6.5 billion people. This also ignores the potential for business & social organization sites, clubs, one-shot events, and a host of other entities which *could * use Facebook as a platform for keeping connected. Plus, the 7 billion people alive today will *not* be the same 7 billion people alive tomorrow. New births = new profiles, and death is *not necessarily* the end of a person's content on Facebook, either - think memorials and the like, as odd and creepy as that might sound.

They've got a lot of room to grow still, and with the population in constant turnover, they'll always have new people to sign up, even if old data from dead people cycles out of the system eventually.

Re:Is Facebook a viable long term business model ? (1)

BobMcD (601576) | more than 3 years ago | (#34793836)

penetration is so high already, how much bigger can it grow?

THey have 500 million users. Estimates put the number of humans on earth at ~7 billion.

By my count, they could grow by another 6.5 billion people.

Since there are between one and two billion computers presently in use on the entire planet, how do you figure? How much of the third world would place Facebook ahead of not being raped or forced to starve to death?

Re:Is Facebook a viable long term business model ? (4, Funny)

KhabaLox (1906148) | more than 3 years ago | (#34793938)

How much of the third world would place Facebook ahead of not being raped or forced to starve to death?

Dude, have you seen Facebook's new profile page?

Re:Is Facebook a viable long term business model ? (1)

Algorithmnast (1105517) | more than 3 years ago | (#34793706)

How can it monetize the existing user base more, without alienating them? Possibly by "replacing" the internet.

Annnnd we're back to an AOL-style universe.

Re:Is Facebook a viable long term business model ? (1)

n9hmg (548792) | more than 3 years ago | (#34793374)

the source, who did not want to be identified because he had signed a non-disclosure agreement
Perhaps a better wording is "the source, who did not want everybody to find out he can't be trusted."

Re:Is Facebook a viable long term business model ? (2)

SimonTheSoundMan (1012395) | more than 3 years ago | (#34793420)

Their book value is certainly worth more than revenue, where revenue only makes a small part of a companies worth. Their brand value must be massive, which the summary doesn't even cover.

Re:Is Facebook a viable long term business model ? (1)

bsDaemon (87307) | more than 3 years ago | (#34793948)

What good is a brand if your company doesn't make enough in earnings to meet expectations? Just because people know how you are doesn't mean they're buying your shit.

Re:Is Facebook a viable long term business model ? (2)

AvitarX (172628) | more than 3 years ago | (#34793564)

In my circle it's well over 66% (probably closer to 90% honestly).

It's a great way to share activities (such as vacation) with families, and see interesting things to maybe do.

It's a great address book too. Even the people I know that didn't have one over concerns of getting burned by an employer have relented, as any employer that is checking those things will find lack of account odder at this point.

Re:Is Facebook a viable long term business model ? (0)

Anonymous Coward | more than 3 years ago | (#34793574)

I don't let Facebook penetrate me.

Re:Is Facebook a viable long term business model ? (1)

Carewolf (581105) | more than 3 years ago | (#34793670)

In Denmark the facebook penetration is around 90%, just a few percent point short of broadband penetration. If I remember correctly this is also the highest percentage of facebook users in the world, and the statistics about a year old.

I dont think facebook is going to die that easy, it has reached critical mass, and is beyond the normal tech-cycles. Now replacing facebook is more like replacing Google or Internet Explorer, not impossible, but very difficult.

Re:Is Facebook a viable long term business model ? (3, Interesting)

Jugalator (259273) | more than 3 years ago | (#34793678)

Is Facebook a viable long term business model ?

If you ask me, social networks become more viable the longer the exist in a successful form, and the more people adopt it. FB would've been useless to me if only a fifth of my friends and relatives used it, but now even my mom and aunt use it. Suddenly it becomes a *very* strongly founded network. A new social network pops up? Well, ask Google how well Google Buzz went, and that was Google being the challenger. Why switch? We're already on one. We and 500 million others.

Yes, Facebook is a viable long term business model, and it becomes more viable by the day.

I'm not joking when I'm saying that to many, Facebook is already their central website, and the rest of the sites on the web mere "sidetracks".

Internet ID - killer app (3, Interesting)

wjousts (1529427) | more than 3 years ago | (#34793826)

There was an interesting piece on MIT's Technology Review site [technologyreview.com] about how Facebook is doing something that VeriSign, Microsoft, Yahoo, and Google have all tried and mostly fail at, which is providing a single id and single log in for the internet. There are, distressingly, a whole bunch of sites that have jumped on the Facebook Connect service as a way to sign in to their website for, for example, posting comments. And, of course, there's also all those annoying "Like" buttons that keep popping up everywhere. So long-term? I don't know, but I don't think we are getting rid of Facebook any time soon.

Fully disclosure: I briefly played around with Facebook a couple of years ago, but quit after a couple of months after getting sick of seeing spam about which Sex in the City character somebody I barely knew back in high-school is supposed to be. Or how they scored in a "know your one-hit wonders of the '80s" quiz.

Yet Another Leak (0)

Anonymous Coward | more than 3 years ago | (#34793244)

without any trust metric.

Yours In Akademgorodok,
Kilgore Trout

Dotbomb all over again (0)

Anonymous Coward | more than 3 years ago | (#34793332)

Money must be invested, in companies, marketing, whatever, it doesn't matter. In 10 years tops, there will be a third-party effort to archive as much of the Facebook data as possible before the company turns off the servers.

For what is essentially a virtual entity (1)

Snaver (983382) | more than 3 years ago | (#34793344)

.. That's impressive.

Re:For what is essentially a virtual entity (1)

the_humeister (922869) | more than 3 years ago | (#34793828)

Kind of like MS, Google, Redhat, insurance companies, Oracle, etc...

Re:For what is essentially a virtual entity (1)

betterunixthanunix (980855) | more than 3 years ago | (#34793830)

Facebook does have real property: servers, networks, offices, etc. Their business model is virtual though, in the sense that they do not actually produce anything tangible; they just trick people into giving away information to marketers.

50 Billion, really? (5, Interesting)

SoVeryTired (967875) | more than 3 years ago | (#34793360)

Facebook has five hundred million users. Is each user really worth a hundred dollars? Facebook is going public soon. What are the chances that this 'leaked' report is designed to pump up the stock, and therefore Goldman's profit?

Re:50 Billion, really? (4, Insightful)

nedlohs (1335013) | more than 3 years ago | (#34793448)

This report makes the $50 billion look to high - that's a P/E of over 100 - which is really high even for tech stocks.

So exactly the opposite...

Reconsider What That Estimate Represents (5, Interesting)

eldavojohn (898314) | more than 3 years ago | (#34793468)

Facebook has five hundred million users. Is each user really worth a hundred dollars?

I'm not a businessman but I'm not so sure this is the correct way to think about this.

Everything depends on how much the market is penetrated for social in two ways: users and advertisers. Can they grow that revenue/profit? And if so, to what point? If Zuckerberg sneaks it into China [slashdot.org] then I think you're looking at a potential to increase that significantly. Facebook hosts its statistics [facebook.com] so you can guess if it's got a half billion in revenue yearly at half a billion users and it scales perfectly, that's a dollar per year per user. Can it get up to a billion users? It's probably clear that in the long run as the younger generation matures, that penetration will slowly expand ... but there's no guarantee that Facebook remains the de facto standard that far out. You need to consider future growth.

The other factor, advertisers and game publishers, could also be troublesome. Is this a "Honeymoon Period" for advertisers where they're paying an unsustainable amount to Facebook for the time being just to gain exposure? Could the above assumptions about scaling with userbase actually be false if advertisers aren't willing to spend more than they are now once more users join?

Consider that these numbers put Facebook's Net Profit Margin at almost 30%. That's very high for the industry [cnn.com] . They're in the same region as Google and Microsoft but as I stated above can it scale?

One last thing, you seem to think that Facebook's worth is only its users. They are also a large company with almost two thousand employees and are building infrastructure [datacenterknowledge.com] . Include that on your assets sheet.

Facebook is going public soon. What are the chances that this 'leaked' report is designed to pump up the stock, and therefore Goldman's profit?

I think the SEC would come down pretty hard on GS if they did that [telegraph.co.uk] -- they have before for less [sec.gov] . Misleading investors is very serious.

Re:Reconsider What That Estimate Represents (2)

khallow (566160) | more than 3 years ago | (#34793886)

If Zuckerberg sneaks it into China then I think you're looking at a potential to increase that significantly.

IMHO China is a dead market for such things. It's too easy for Facebook to get officially replaced by a Chinese-owned firm like Baidu.

Re:Reconsider What That Estimate Represents (0)

Anonymous Coward | more than 3 years ago | (#34793896)

Okay, I understand the need for database specialists and technical support for the undoubtedly large number of servers they have, but 2000 employees? I would have pegged them at something near the 600 range.

Re:50 Billion, really? (2)

DogDude (805747) | more than 3 years ago | (#34793490)

"What are the chances that this 'leaked' report is designed to pump up the stock, and therefore Goldman's profit?"

I think that the chances are so good, that I'll be shorting Facebook immediately after the IPO!

Re:50 Billion, really? (1)

SCPaPaJoe (767952) | more than 3 years ago | (#34793808)

I don't know, momentum could propel the stock for a while. I wouldn't consider it a long term play, but it could be a Yahoo type of play. I made a lot of money on that in the 90's.

Re:50 Billion, really? (1)

Khashishi (775369) | more than 3 years ago | (#34793748)

Facebook has improved my life significantly. Looking at the revenue of $1.2 billion, that's $2.40/person/9 months. That's peanuts. I would totally pay for that. I think it's easily worth 100 bucks.

Facebook should sell a subscriber mode with no ads and a don't-sell-your-private-data-to-marketers option to users. Charge a few bucks a month. I'd be down.

Re:50 Billion, really? (0)

Anonymous Coward | more than 3 years ago | (#34793898)

Charge a few bucks a month. I'd be down.

If Facebook started charging a monthly/annual fee for access, I bet you would see their user community evaporate quickly. What essential or life changing service are they providing that users would be willing to pay for?

What's missing from the reports (5, Funny)

DoofusOfDeath (636671) | more than 3 years ago | (#34793400)

The reports fail to disclose that I just deleted my account.

So, I'm just saying, the valuations need to take that into consideration.

Re:What's missing from the reports (2)

VickiM (920888) | more than 3 years ago | (#34793532)

Well, they already have your data, up to when you deleted the account, and can continue to do whatever it is they do to turn information into money, whether you log in any more or not. And if there's some belief you have that deleting your account means they don't have any of your information anymore, I have some pristine wetlands in Florida to sell you.

Re:What's missing from the reports (1)

DoofusOfDeath (636671) | more than 3 years ago | (#34793584)

Actually, I was just making a joke about how important I am.

Re:What's missing from the reports (4, Funny)

MagicM (85041) | more than 3 years ago | (#34793646)

You can't be that important. You don't even have a Facebook account.

Re:What's missing from the reports (1)

DoofusOfDeath (636671) | more than 3 years ago | (#34793944)

You can't be that important. You don't even have a Facebook account.

If I accidentally log in any time in the next 13 days I do.

Re:What's missing from the reports (0)

Anonymous Coward | more than 3 years ago | (#34793740)

They may have the data, but as the account is dead the advertisers FB sold it to cannot present their ads to Doofus. His data is worthless if he doesn't log on.

Re:What's missing from the reports (1)

BobMcD (601576) | more than 3 years ago | (#34793874)

They may have the data, but as the account is dead the advertisers FB sold it to cannot present their ads to Doofus. His data is worthless if he doesn't log on.

This assumes that he had no Facebook friends.

Re:What's missing from the reports (0)

Anonymous Coward | more than 3 years ago | (#34793650)

Eric is that you?

Re:What's missing from the reports (0)

Anonymous Coward | more than 3 years ago | (#34793894)

That's what you think...

Re:What's missing from the reports (0)

Anonymous Coward | more than 3 years ago | (#34793974)

They don't give a shit, they have your data and deleting your profile accomplishes absolutely nothing except make a dumb pseudo-statement that no one cares about but you and other people who do not use Facebook. Just don't post information on facebook that you consider valuable. It's not hard.

OK, let's say (0)

Anonymous Coward | more than 3 years ago | (#34793416)

that Facebook will continue to take in roughly 0.5 billion in revenues year over year. Furthermore, let's assume that money in the future is worth only 90% of its present value. Then, summing up the geometric series, 0.5*(1+.9+.9^2....)=0.5/(1-.9) = 0.5/0.1 = 5 billion dollars. Moreover, even if money was worth more in the future (say 98.5% of its current value (which is absurd)), the sum comes out to 20 billion. So yes, they overpaid. By a LOT.

Re:OK, let's say (1)

MrMarket (983874) | more than 3 years ago | (#34793504)

Now assume, like GS is telling their marks erm... clients, that net income will grow 40% a year.

The assumption... (4, Insightful)

metrometro (1092237) | more than 3 years ago | (#34793418)

The only explanation for the valuation is the belief that Facebook will be more valuable over the long term than it is now. Unless you think Facebook will still be a wise investment in 15 years, the valuation is a little bonkers. In the technology space, this seems to contradict observed experiences -- a decade is a very, very long time.

This is particularly so with something as ephemeral as a community-powered product. Diaspora was a disappointment, true. But do you really think no credible Facebook alternative will come along in ten years? And once that crowd leaves, exactly what is Facebook's value? Some PHP? Server farms? Yeah, ok.

Re:The assumption... (1)

Anonymous Coward | more than 3 years ago | (#34793446)

Let me give you a hint, culled from many sites I used to visit:
"You must log in with your Facebook account before you can comment on this article."

This is the future they are investing in. By the end of 2011, you will see that message above a lot more.

Re:The assumption... (0)

Anonymous Coward | more than 3 years ago | (#34793610)

Facebook has the benefit of the network effect. No one I know really cares about Facebook, per se, they care about keeping up with their friends. Their friends all use Facebook. If they leave, they lose connectivity to their friends unless everyone leave en mass.

An alternative will have to fight this network effect.

Re:The assumption... (2)

metrometro (1092237) | more than 3 years ago | (#34793668)

Tell it to MySpace.

Re:The assumption... (1)

neoform (551705) | more than 3 years ago | (#34793844)

You could ask whether google is a wise investment? Also, who invests in tech companies for 10-15 years? Your premise is a little strange.

Yes, competitors might come along, but right now facebook owns social media much the same way google owns search. I don't a lot of talk about google slipping up.. even though all their revenue comes from the ads on their search.

Can someone explain to me... (1)

golden age villain (1607173) | more than 3 years ago | (#34793426)

Can someone explain to me how they manage to make $1.6 billion in revenue a year? Who is paying and for what? Because I just went to my FB page for the first time after months and I could not see any ads, not a single one.

Re:Can someone explain to me... (1)

McTickles (1812316) | more than 3 years ago | (#34793466)

They sell your data...

Re:Can someone explain to me... (1)

McNihil (612243) | more than 3 years ago | (#34793578)

Yup and start seeding your data with bogus stuff that will end up costing the corporations using it draw the wrong conclusions. Really simple... same goes with all market research... game them... game them hard.

Re:Can someone explain to me... (1)

BobMcD (601576) | more than 3 years ago | (#34793904)

Yup and start seeding your data with bogus stuff that will end up costing the corporations using it draw the wrong conclusions. Really simple... same goes with all market research... game them... game them hard.

You'd have to game them on the aggregate with the participation of your peers. Or did you really think that they've never considered the concept of a 'filter'?

Re:Can someone explain to me... (1)

pmontra (738736) | more than 3 years ago | (#34793494)

Did you install AdBlock? My facebook never had any ads :-)

But yes, it would be interesting to know how they're making those money.

Re:Can someone explain to me... (5, Insightful)

metrometro (1092237) | more than 3 years ago | (#34793500)

You're not the customer. You're the product.

Re:Can someone explain to me... (1)

mikaelwbergene (1944966) | more than 3 years ago | (#34793700)

Technically, you're both.

As well as the user, consumer, content creator etc etc.

Bar the infrastructure, it runs itself for it's target audience.

Re:Can someone explain to me... (1)

DriedClexler (814907) | more than 3 years ago | (#34793736)

True, but people have to be making money from the sales through facebook ads (not likely) or buying demographic data (a little more plausible) to justify that. Where does the money ultimately come from?

Re:Can someone explain to me... (1)

Peeteriz (821290) | more than 3 years ago | (#34793922)

A significant chunk of money (100-200 million/year) would come from facebook's cut of the money (30% IIRC) people are paying to online game companies - farmville & friends.

Re:Can someone explain to me... (0)

Anonymous Coward | more than 3 years ago | (#34793932)

You already answered your own question: advertisers. Facebook can generate specific details about any given demographic by using the data that people provide themselves. Seeing the things that people have in common couldn't possibly be easier.

Re:Can someone explain to me... (1)

neoform (551705) | more than 3 years ago | (#34793892)

What a trite (and false) expression. How am I the product? To whom am I being sold? Facebook's revenue is generated via targetted ads. Yes, they use the information from my profile and my viewing habits to show me ads, however it's very clear that facebook's product is their ads, much the same way google's product is adsense/adwords. Facebook does not own me or my information (according to the laws of my country), therefore they have no rights to sell that information. I am not the product.

Re:Can someone explain to me... (1)

inputdev (1252080) | more than 3 years ago | (#34794012)

You're not the customer. You're the product.

Agreed - Facebook will fail once people start realizing that they are not 'getting something for free' but instead are providing content for other people to use to make money.
Unfortunately, Facebook has reached the point where (at least where I live) it is socially unacceptable to not have an account. I look forward to the days of many competitive 'niche' social networking sites, with decent privacy and user control, so that having a facebook account becomes the equivalent of having an aol account today.

Re:Can someone explain to me... (1)

Infiniti2000 (1720222) | more than 3 years ago | (#34793600)

Who is paying and for what?

Other searches [mashable.com] indicate that it's from "brand advertising, Microsoft advertising, virtual goods and performance advertising."

Re:Can someone explain to me... (1)

KhabaLox (1906148) | more than 3 years ago | (#34793722)

Don't they also get a cut from game sales? I think X cents of every Zynga dollar goes to Facebook.

Re:Can someone explain to me... (1)

betterunixthanunix (980855) | more than 3 years ago | (#34793864)

It is not just the ads that are being displayed to you. It is the ads they display to you, your friends, your family, people who view your profile frequently, etc.

Can't determine without more information... (0)

Anonymous Coward | more than 3 years ago | (#34793436)

Spending ~$450m for a 1% stake would yield a company ROI of ~0.75%, which is pretty crappy but not especially bad if the growth angle is there.

That said, I think there is more here than meets the eye. For example, GS loves to do electronic trading. Depending on the employed model, of course, GS needs access to source data in order to supply its systems with the information needed to make decisions. Secretive info that can be mined more quickly than the public is best. I'd be willing to bet that the ~$450m stake they claimed buys them access to mine Facebook user data for purposes such as this...

For example, how killer would it be to have a trading algo based on a feed of public sentiment as expressed on Facebook. Forget about waiting for sales figures from a company every 3 months or so... Facebook could tell GS that 800,000 people bought product X today and loved/hated it.

Risky Business (dun dun dun dun dundundun...) (1)

Kelbear (870538) | more than 3 years ago | (#34793488)

A relatively high net income is nice (albeit unaudited!), there are other factors to weigh into valuation.

While the numbers in the financial statements are important, this is only part of the overall picture of a company's present and future.

I think for a company like Facebook, the risks stemming from competition and legal liability are tremendous. While Facebook is the biggest social media network out there, you can't be sure it'll be the last. It can get slammed by legal conflicts over privacy issues. Facebook benefits tremendously from the network effect of having so many users, but it can't coast on mere size.

Facebook needs to strike a careful balance between monetizing its resources and erosion of the user experience. There is a lot of risk involved when you put money into a company walking on such a fine line.

Re:Risky Business (dun dun dun dun dundundun...) (0)

Anonymous Coward | more than 3 years ago | (#34793570)

You just got your MBA, didn't you?

Nothing admirable here (1)

Andy Smith (55346) | more than 3 years ago | (#34793520)

The source signed a non-disclosure agreement, on the basis that he was trustworthy, and then disclosed the document anyway. What an unsavoury character.

Re:Nothing admirable here (2)

Chapter80 (926879) | more than 3 years ago | (#34793726)

The source signed a non-disclosure agreement, on the basis that he was trustworthy, and then disclosed the document anyway. What an unsavoury character.

Yeah, why would we trust these numbers, since they are provided by a source proven to be untrustworthy, about a company proven to be untrustworthy, led by a guy proven to be untrustworthy?

Re:Nothing admirable here (0)

Anonymous Coward | more than 3 years ago | (#34793756)

The Gold Man Sacks deal is shady. This guy is doing everyone a service.

yeah (1)

Ryanrule (1657199) | more than 3 years ago | (#34793538)

Advertising is only worth so much. That is what fuels this sites. That is pretty much the only thing. Compare the total amount of money spent on online advertising in 2010 (~25 billion across all companies) with the "value" of facebook (50 billion). Even if they controlled the entire online ad market, they wouldn't have nearly that value. Bubble bubble, toil and trouble.

Re:yeah (1)

KhabaLox (1906148) | more than 3 years ago | (#34793840)

Even if they controlled the entire online ad market, they wouldn't have nearly that value.

Google's market cap is $196B [google.com] . And their 2009 revenue of $23.65 B is nearly all (97%) from advertising [google.com] .

Where did you get your online advertising figure? If you're right (and Google's audited financial statement is too), that would imply that Google owns 91.6% of the market.

Facebook (0)

Anonymous Coward | more than 3 years ago | (#34793586)

Fuck Facebook !

AND YOU THOUGHT TEH GOOGLE OWNED YOU !! (1)

Anonymous Coward | more than 3 years ago | (#34793614)

Teh facebook owns you, owns your family, owns your next of kin, owns your thoughts, and owns all that you are: past,present, and future!! Best of all, it sells this to anyone willing to pay!! You ARE OWNED by TEH FACEBOOK !! And worst of all, YOU LET THEM !!

You are stupid, stupid mofos, mofos !!

At least 39 accounts are mine (0)

Anonymous Coward | more than 3 years ago | (#34793694)

I made a army of fake accounts when I was big into Farmville. Sad I know, but I did it so to not bug my real friends. I stopped using them so there gone now, but out of my forty accounts thirty nine were fake. I'm sure I'm not the only one who does this. My sister uses one to spy on people. My wife made a joke one. I made a fake one to join a controversial group, etc. HOW MANY REAL PEOPLE LOG IN EACH MONTH AND DO SOMETHING MORE SUBSTANTIAL THEN SEND PRESENTS!?!?!?!111?

Do not invest in this company. Period.

Re:At least 39 accounts are mine (1)

BobMcD (601576) | more than 3 years ago | (#34793946)

You have forty Facebooks but not even one slashdot account?

How weird is that?

more of a $5 billion company (5, Informative)

Anonymous Coward | more than 3 years ago | (#34793710)

a rocksolid stable company like Walmart pays 2.24% dividend out of profits ($4.5 Billion on a valuation of $200 billion). A less stable company like AT&T pays 6% ($10 billion OUT OF PROFITS on a marketcap of $170 billion). Growth companies have the same sort of profits or larger, but they tend to reinvest all of the profits in expansion so they don't pay dividends.

If you think Facebook has as solid a future as AT&T, then at $50 Billion valuation Facebook would need to see $3 billion in excess PROFIT. So, they are tremendously overvalued by today's alleged revenues of $0.5 billion. The only outstanding question is whether they can grow to much greater than $3 billion profits in the next year. I don't see that happening, you are free to smoke whatever crack you can find.

SEC (1)

ericdano (113424) | more than 3 years ago | (#34793754)

Explain why facebook and goldman sachs are going to get away with their bypass of reporting this income to the SEC? With that sort of revenue, they should be playing by the rules like apple, google, and other companies are.

Re:SEC (2)

nedlohs (1335013) | more than 3 years ago | (#34793806)

because facebook is a private company and hence doesn't have to meet all the requirements of a public company.

I smell a lawsuit or a fraud (2)

jtnix (173853) | more than 3 years ago | (#34793766)

Let's see... very wealthy customer receives NDA covered financial document over a recent lunch and decides to violate the NDA he/she signed and publicly disclose it.

I can't imagine it will be very hard for Facebook to track down this customer and use their $500 million profits from this year to sue this customer out of their 'very wealthy' status, perhaps permanently and or sue Goldman Sachs for disclosing the information publicly.

IF that does not happen, I would be very suspicious of the validity of the document for both the lack of details (how the money was spent) and lack of lawsuit.

I am going with the latter option. Sounds like a planted document, if you ask me.

Obviously... (1)

Burnhard (1031106) | more than 3 years ago | (#34793782)

Superfluous article. Obviously Goldman are in on just another pump and dump scam. They'll talk up the IPO, make a few billion on it and then dump their stock.

Re:Obviously... (1)

GodfatherofSoul (174979) | more than 3 years ago | (#34793832)

Great observation. With Goldman's track record there's no coincidence in their making a huge investment with private information, followed by exaggerated claims of fast money for the unwashed masses to consume.

BTW, I found this *great* penny stock called TTLBS that you should invest in!

Faceleaks (1)

gmuslera (3436) | more than 3 years ago | (#34793812)

Looks like an appropiate name for everything that comes out from facebook

Not surprising they're in love (2)

trollertron3000 (1940942) | more than 3 years ago | (#34793866)

It's really no surprise Facebook is the prom queen in Goldman Sachs' eyes. Both companies don't produce anything and make money from being the middle man, connecting people. They basically are both in the "transaction" game, just a different one. A traditional market will trade money or commodities, this one trades eyeballs.

Pathetic. (1)

blair1q (305137) | more than 3 years ago | (#34793902)

I was expecting 5-10X the revs and double the margin given the extrapolation from Goldman's price.

Facebook is worth $10B market cap, tops.

It will go the way of AOHell (0)

Anonymous Coward | more than 3 years ago | (#34793924)

Well, AOL was sold the suckers^Winvestors at Time Warner for how much?

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