How Can You Make Money off Facebook?
If you haven’t heard of Facebook, then you’re obviously behind on the times. Facebook is the second most popular social networking site - next to MySpace - in America with over 30 million registered users. Of course, Facebook seems to offer much more potential than MySpace for the following reasons:
- Clean user interface
- Middle to upper class user base (as opposed to MySpace’s lower to middle class user base)
- Facebook application platform
- Parakey acquisition
In recent news, Facebook could be sold for as much as $10 billion. Potential companies looking to acquire Facebook include Google (GOOG), Microsoft (MSFT), and Yahoo (YHOO). I don’t think that this valuation is as ridiculous as it sounds. It might be on the high end, but I definitely think that a $5-7 billion buyout is very possible. Last year, Yahoo made a bid for Facebook for $1 billion and was turned down by the aspiring founders.
It seems like they’re placing themselves back on the trading block with more money in mind. I wouldn’t be surprised, however, for companies to continue to underestimate the power that Facebook will offer in the future. Facebook recently acquired Parakey, which has yet to launch their “web operating system.” Combined with their new application platform, Facebook is attempting to be THE destination of the web. It is not inconceivable for Facebook to be the next Microsoft. Many are already comparing Facebook founder Mark Zuckerberg to Apple’s Steve Jobs.
There has been much hype and talk about over-valuation of social networking companies, but they have proved time and time again that analysts and naysayers are wrong. MySpace recently has been estimated to generate $1 billion in revenue for 2007. This more than compensates for News Corp’s $580 million purchase price for MySpace. In fact, at the time of purchase, most of Wall Street could not believe the price tag. Now, it seems that the purchase was a steal for News Corp (NWS).
Stock Market Implications
So what does this all mean for you? Well, if Facebook is purchased by a Google, Microsoft, or Yahoo for a near $10 billion price tag, then it’s very likely that Wall Street will cry out again in outrage just like it did in the News Corp deal. This could likely bring the purchasing company’s stock down temporarily. That will be the perfect opportunity for you to come in and snatch up shares on the cheap. You can then expect Facebook to prove the naysayers wrong again when they prove to the world that they could potentially become the world’s next Microsoft.
Of course, if Facebook doesn’t like any of the offers they get, you might just see a Facebook IPO (you can actually see on their website that they’re looking for a stock administration’s manager)!
I’m not sure I believe that Facebook is really worth $7 to $10 billion, but maybe I’m just jealous of Mark Zuckerberg. Honestly, I’m inclined to believe that he did in fact steal the idea from ConnectU. Having had a few friends at Harvard during the time that the two social networks were launching, the story goes that he was originally part of the coding team, dragged his feet while he launched his own site, then left ConnectU reeling. But, that’s beyond the point.
Let’s look at the facts, MySpace boasts somewhere around 100 million accounts while Facebook only records 30 million. MySpace is garbage and Facebook includes ownership of a terrific platform “the Facebook API” which some rumor could lead to an eventual webOS. The big difference is that with only 3ish times the number of recorded account, MySpace seems to legitimately lay claim to $1 billion in revenue while Facebook is struggling to turn its users into cash. The $150 million in revenue that Facebook claims is heavily supported by a deal with Microsoft to serve their ads and that contract runs up in 2009. With people reporting click through rates as low as .04% from Facebook while MySpace can boast upwards of .10% for its campaigns, it would stand to follow that Microsoft will at least want to restructure the ad service deal in 2009 if not pull it completely. Don’t get me wrong, I’m not discounting the importance of a strong technological platform as well as access to 30 million in a terrific demographic, but Facebook thus far has not proven that it can bring in the cashola anywhere near as well MySpace and, as a result, I believe that any smart investor would know not to value it at a premium as high as $7 to $10 billion.