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What does $50 billion look like?

January 3, 2011

Today the NYT  reported Goldman Sachs values Facebook at $50b and it has reached out to its wealthy clients to offer them a chance to invest.  NPR’s Newshour ran an interesting story on ‘the story’ tonight interviewing NYT journalist, Andrew Ross Sorkin, about the valuation.   NPR asked if this investment might turn sour pointing to the decline of MySpace.com and referencing failed social media ventures.  The inquiry was interesting, but I would not lose sleep over the current valuation of FB and would jump at the chance if I were a high net worth Goldman Sachs client to invest early.  Actually, I believe the valuation to be too low.

As advertising metrics become more sophisticated networks like FB that can offer more customizable and targeted search to key demographics will increase in value.  Additionally, there seems to be no stopping people (at least in the near future) joining Facebook and devoting endless hours to their online scrapbooks (that’s how I think of FB).   As people continue to invest more time and devote more of themselves on FB, I can also envision a time when FB has membership levels for individual users.  I know the idea seems blasphemous now, but there’s money to be made there as well if Zuckerman and others decide.  There are other revenue options / potential in the form of joint business ventures which are probably helping to feed the firm’s bottom line today, but will likely grow as FB does.  In short, there does not seem to be any downside to FB’s financial future (at least in the near term).

What do you think FB’s valuation will be when it finally goes public?  Do you think we’ll look back at the $50 billion valuation today as quaint? I do.

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