Description: Facebook, the vast online social network, is poised to file for a public stock offering on Wednesday that will ultimately value the company at $75 billion to $100 billion, cashing in on the fuel that powers the engine of Internet commerce: personal data.
Source: nytimes .com
Date: Jan 31, 2012
The company has been busily collecting that data for seven years, compiling the information that its more than 800 million users freely share about themselves and their desires. Facebook’s value will be determined by whether it can leverage this commodity to attract advertisers, and how deftly the company can handle privacy concerns raised by its users and government regulators worldwide.
As the biggest offering of a social networking company, the sale is the clearest evidence yet that investors believe there is a lot of money to be made from the social Web. Facebook’s dominance in this field has left Google, a Web king from an earlier era — less than a decade ago — racing to catch up. Read Rest of Story
Questions for discussion:
- Is the suggested market value an accurate valuation of Facebook? Why or why not?
- What are the assets that Facebook possesses?
Paige Magnussen
In the article it said that Facebook is the new internet. I think that this is an accurate representation of the impact that Facebook has had on our generation. You can post pictures, blog, and send videos, read recommendations; even now you can read the news! Although this is a huge asset for keeping in touch with your friends from your hometown or to get a quick update on your high school class mates, Facebook has become so much more than that. Facebook has become an asset for us keeping in touch with others but it’s also become an asset for advertisers. By Facebook storing all your “likes” they begin to build a profile on you based on your Facebook interests, who you follow on line, and even by your update. For example, this allows a bridal designer to be posted on your side news feed when you change your relationship status to engaged. When you’re online and in the back of your mind you’re thinking about wedding related topics, and all of a sudden a stream of ads appear it influences your purchasing behaviors. Facebook’s net worth has increased all over the world. All business’s want an opportunity to use Facebook to get their product or their brand out there.
Nichelle
“Fifteen years ago, AOL was the Internet to most people, five years ago it was Google, now Facebook is the Internet,” I couldn’t agree with this statement more. Maybe if I read this article before watching the other social media video I may have understood Germany’s argument. (I still personally don’t agree though.) It wasn’t until I read this article that I actually noticed how similar Google and Facebook are. They do of course have their differences yet Facebook can be used for games, uploading, searching, chatting, selling and buying, politics, businesses, among much more. All these tasks still similar to those you can accomplish on goodle but you can do and find majority of your tasks upon Facebook without even having to leave their site. Thus, I can easily see that the current market value is accurate. Google’s drive to catch up to all these advancements Facebook is offering is seen through their constant changes and updates to try to make Google better.
Privacy will definitely be an issue to work around. Storing each “like” and building an individual profile based on your characteristics definitely turns me away from facebook a little, but then again how is it any different than other sites storing your browsing and daily activities.
Lesley
Its kind of disturbing how Facebook has taken over almost everyone’s lives and has such a huge impact on people everyday. The value of Facebook has increased so much over few years. I do think that its popularity will continue to grow, but the privacy issues still need to be addressed. Knowing that Facebook has stored all of its users information seems creepy. Even the private messages aren’t private (as Facebook has warned) and the idea that this information is basically being sold is creepier. I understand that advertisers are using Facebook to make money, but its seems excessive to be able to bombard people with ads simply because they “liked” something. I’m not sure what the distant future holds for Facebook and its users, but hopefully it starts to die off… Or better privacy and security for its users needs to be implemented.
Amber Dashney
I would say that it is very accurate, Facebook is the biggest social networking website, which is proven with the 28% of advertising being on facebook. People view Facebook as the internet which is huge popularity. It has found ways to make money but does not charge its customers. People like anything that is free and when it comes to social networking this is a huge advantage. By charging for advertising alone it made them enough money to keep the company running off of 50 billion users at its earliest stage. Now with them adding features to games with purchasing they are also increasing their profit. The biggest asset Facebook has is that it is free for its users. People don’t have to pay to keep intouch with their friends and family. They don’t have to pay for phone bills, they don’t have to pay to send family photos in the mail and this is huge. Also they are smart to have users logged and helping advertisers strategically place ads on peoples pages, this also helps the users. The person changing their relationship status to engaged and having wedding photographers advertised is a great example.
Ashley O'Donnell
I don’t think the market value is accurate in the sense that facebook is a social networking site. There are plenty of social networking sites that can do almost the exact same thing that facebook offers. However, the market value of facebook is accurate in the sense that it is considered a marketing researcher in which it is probably the most successful at. The assets that facebook possesses is the large capacity to organize and interpret users interests, profiles and even “likes”. It is also the fact that facebook keeps a lot of this information away from the users. The media is always targeting Apple’s products because it can keep track of where everyone is and tell the world even though these features are shut off. In the world of facebook, however, you can’t tell facebook to stop prowling through your profile. I think that the media should bring attention to the fact on that facebook goes through your information and sell this information to companies so that they put targeted advertising on your profile. It is extremely disturbing that a site that is supposed to be used to connect to people is making millions of dollars selling personal information or “likes” to companies so that they may personalize their advertisement to us.
Brittney Rainforth
The market value of Facebook is more than likely higher than it should be, but is probably not off by that much. Facebook is a company, and the main goal of any company is to make a profit. For a company, the idea is the bigger the profit the better. Facebook is now a global, whether or not they want to be, and because it is a global company it has many different values. In North America it is probably valued higher than it would be in say Africa. I think the market value of Facebook is accurate according to what North Americans value.
The largest asset Facebook possesses is information. Information is the new driver in every industry. The more information a company can acquire the more profits it can make. Because Facebook as information on every single one of its users, as well the people who use its partner websites, Facebook basically has more power than most of the other companies. This power that Facebook has acquired through information gives them a competitive advantage, as well as the ability to partner with multiple successful companies – whether those companies are big or small. Facebook has the ability to pick and choose. Information is the source of their success.
Linli He
The article said that Facebook is the biggest social networking website which impacts people’s daily life, and it is becoming progressively important for my generation. People can contact with friends, share photos, emotions, interests with friends, too. Currently, people even can get News from Facebook, and they also can not stop refreshing Facebook. However, personal privacy protection issue is more serious. Facebook stores all users’ personal information seems unethical, Facebook is getting benefit by putting a tangible value on users’ informations. They probably can sell the information to commercial and advertise. To be honest, I would say personal data could not be valued at any price. It also can not be used for any purpose without obtaining specific permission form concerned person. People has no idea about which company your email address and phone numbers they sell to, that’s why we can collect many spam email everyday. Therefore, it’s time to warn people to protect their privacy and security.
Kelsey Roberts
Facebook’s most obvious asset is its popularity among various generations of individuals through out the world. With over 800 million users today, Facebook truly has become, in a sense, the new internet. It’s used to communicate, share lives, blog, network, and most recently a form of advertising. There likely isn’t someone nowadays who couldn’t find a single use for the social networking site. Its asset really then is its brand, and the name itself. Movies, tv shows, literature, songs- they all reference Facebook repeatably. It has become known world wide as the leader in social networking. A second asset to Facebook is its competitive advantage in the business of marketing. With millions of users visiting the site, the advertising on Facebook has sky rocketed. Companies pay a small fee to have their logo displayed on the sites page, and voila- one mouse click leads to increased sales. Similar to Google’s Adwords, Facebook makes a large portion of its profits from advertising. The advantage Facebook has over Google though, is the various types of users it has. Individuals ranging from all generations and geographical regions, Facebook has opened up an entirely new playing field for marketing.
Tim Anderson
I think the proposed value of Facebook is legitimate. Because there are so many people on Facebook it is hard for anyone not to think about the vast amount of money that can be made through advertising. People are generally not worried about advertisements along the top or down the side of the screen as long as the advertising is not interfering with a persons interaction with the site and as long as the service remains free. People will not pay to be on Facebook so it’s up to Facebook to find a way to make money and add value in creative ways. Facebook has used the advertising model to become profitable and this strategy has proved fruitful. Facebook possess the daily interaction with millions of consumers. This is their primary asset. However, since its inception there has been an accumulating mass of data that also adds value to Facebook. Like Google, Facebook can use that data to reach millions with advertising.
Tim Anderson
Continued…
Facebook can generate marketing information for businesses that want to market their products to people around the world. They will continue to build their database. However, whether they will be able to use it to it’s potential is still in question due to the lack of laws surrounding the internet. As laws become enacted in countries the value of companies like Facebook will fluctuate.
Laura
The suggested market value of facebook is probably overstated. The value of the information gleaned from the sight is quite large, however, I believe the suggested market value is relying too heavily on the potential of the information, rather than the tangible benefits. However, since so many people will be clamoring to get a piece of the facebook pie, the market price will likely reflect its popularity at least initially. As time passes, I imagine that the prices will drop to a more realistic rate. The assets that facebook possesses are involved in data mining, and essentially sum up to a massive amount of personal information that can be used by businesses to market more accurately, and produce products more specifically geared for certain segments. The power of facebook is that it is used by such a large amount of people, that the sheer amount of data is an asset in itself. However, the accuracy of this data could be suspect. The ‘like’ button in particular is overused by many people, and underused by others. The data could show that only 4% of users aged 22 like chocolate, when that number isn’t an actual representation of the number of people who like chocolate, merely the number that chose to list it as an official ‘like’.
P
Facebooks most important asset is their information database. Facebook is a huge information library with millions of people’s personal information ranging from their birthdates, to interests, to information on where they work or go to school. It is written in the privacy policy of Facebook that once you upload a picture it is owned by them and even if you delete it they still have ownership to it. The amount of information that facebook generates is enormous and I’m sure is desired by different people/ organizations for their personal gain or just self interest. People freely and openly express themselves on facebook without realizing the fact that employers, the government, educational institutions, people and even the police can access all the information shared on the site. I’m sure the police could use facebook to better understand or solve crimes. People don’t filter what they say in their messages to others because they think they are private, however these messages can be accessed and could also be stored as more information for the site. By soley looking at someones Facebook page you find indication of their personality, their likes and maybe even things they dislike. If the government or a prospective employer needed a personality test they could easily access your facebook history and have a clear outline of who you are.
M
Facebook has tons of assets that would be viewed as very valuable to anyone quoting or trying to come up with an estimate of the valuation of facebook. They have ridiculous amounts of personal information including birthdays, previous employers, favourite music, and a million other things collected from its users and any advertising company would obviously have a huge interest in obtaining this information. Facebook also allows you to play virtual games, play music, along with tons of other features which is another asset. There are so many different areas of facebook that can be played with and worked on it leaves room for any company, whether it be gaming or music, to start taking advantage of this and making money. Even by possibly selling music online via facebook. Clearly one of the biggest assets facebook has is the amount of users that are constantly online viewing different people pages, news articles and many others; there extremely high level of traffic is a tremendous asset. This allows for advertisers to take advantage of this and as the article says facebook even receives the most of all ad displays on the web in the United States at 28%, ahead of yahoo.
Lacey Dodds
I think the market valuation of facebook is fairly accurate. Whether people like it or not it has become a part of almost everyone’s daily lives. Some people do abuse it and have become obsessed with it, whereas others use it moderately to keep in touch with family or old friends. However you look it though, facebook is everywhere so it only makes sense for them to want to profit off of this. They would definitely not be as popular if they charged a membership fee so they have to make money somehow, and advertising is a no brainer with any popular website. The assets that facebook possesses would be its unique ability to customize your experience. It has a side bar generated of people you may know based on your mutual friends, it allows you to subscribe to particular people’s pages or unsubscribe to them, it keeps even generates the people listed on your friends list by how much interaction you have had with them on facebook. This obviously raises a question of privacy considering the amount of information that facebook must store, but nonetheless I think people are so drawn to it because they can customize it however they choose and at the end of the day it is fast, effective, and affordable way to keep in touch with others.
Tuan
I think the suggested market value of Facebook is an accurate valuation. In addition, I think it is should be more or even priceless because information is power and sometime you cannot buy it, you have to fight for it. Use the information well and you could take over the world. Information has proven to win war and the failure and success of anything is based on information. For example, Bin Ladin is dead because the US government got intell on his where about. Super rich gets richer because of valuable information are just some example of the richness and value of information and Facebook got it from anyone who use their service. Facebook possess valuable asset like personal information for example which not only business like to use to sell their product or service. I like it and most of us like it because it is information about people. Knowledge of what is going on and having buy in power satisfy the user and only make Facebook more priceless.
Trevor Armstrong
The main asset Facebook possesses is an availability to insane amounts of personal data, which has freely been posted on the internet by its users. This data is of tremendous value to advertisers – as the users of facebook have listed their specific likes and dislikes – which will aid in direct advertising campaigns to these users. As mentioned in the article, this data may be worth approx. $75 billion to $100 billion.
Darren Fletcher
I think the suggested market value of Facebook is an true and accurate valuation estimate. Information is power and sometime you cannot buy it but in many cases you can. How much is information worth is all depending on how much information you have and what you are gong to do with it. If the information is going to be used in a highly relevant way with huge financial payoffs for the purchaser than you can only assume that the supplier of the information has allot of power. Facebook is going to be the leader of the social media for many, many years and I would guess that the company will be worth 100 times that figure in 25 years.
Rachael Brown
Facebook (FB) is a website that offers value to users by connecting them with other Facebook users. The price a user pays to keep in touch with others is information. FB is currently valued at approximately $75-100 billion, but I believe it’s collection and compilation of freely shared information is priceless. FB users should be wary that practically anything they do or say on FB is collected, and therefore privacy is a major concern. Presently, there are privacy legislations being created to help protect users, but this is slow to come about.
Some of the assets that FB possesses are that it allows companies advertise to their target market by collecting people’s information online. This information is valuable and is freely shared by most people using the service. In fact, currently FB is the largest platform for displaying advertising on the web in the U.S. FB’s current position in the online advertising gives the company a competitive advantage. One of the challenges FB faces in order to make profit is making use of the vast amount of information shared. I am interested to see how Mark Zuckerberg will react to the stock offering in the future, and I hope that FB will not become a publically traded stock.
Billy Abesdris
The information writing below should not be interpreted as financial advice or even good advice and is simply the author’s biased opinion.
Take a SHORT position on Facebook from the day they launch the initial public offering and you will make millions and billions of dollars. 50 billion-150 billion these are simply arbitrary valuations on what are mostly intangible assets. Yes Facebook has logs of information and knows that you and your best friend Claire just love Jimmy shoes. Yes they can now sell that information to Jimmy which helps him sell Claire $900.00 shoes. Facebook might even know your deepest darkest secrets like how many times you’ve clicked on your ex-girlfriends page in the last month. But none of this matters and none of this is of value when Facebook becomes –uncool-. Although we do have to wait till the IPO for Facebook to open their books to the world, it doesn’t take finance major to guess what we will see. Affiliated marketing (the business model Google has pioneered and succeeded off of) and those stupid games that make you spend real world cash on virtual currency’s. But nobody plays the games, and nobody clicks the ads when FACEBOOK BECOMES UNCOOL (And they most certainly will). Why will they become uncool? Billions of users and social relevance about Facebook might be enough to fool the younger generation but at 21, I’ve seen this a couple times now. Anyone remember their old friend Nexopia, what about Myspace? Many will try to deny it but there is no forgetting on the internet. Nexopia still has volumes of information on their user who simply got up and left for greener pastures. And there’s ALWAYS greener pastures. Twitter, 4Square, LinkedIn everyday a new name, everyday an innovation it’s only a matter of time before something better than Facebook comes along and when it does, all those shareholders who have substantial long positions on FB stock will be out buying rope. Trends always die, it’s a fact of life, and an opportunity to take monetary advantage of this knowledge is here. Go to your brokerage and ask them for a SHORT position of FB, even if you don’t know what a SHORT is, just max your credit cards, remortgage the house, put all you got on shorting Facebook. If you really want to accelerate the speed at which your money comes in, go to grandmas and grandpas, sign em both up for Facebook and watch the tweens disappear. The second a woft of uncool or even information paranoia floats around, Facebook will become the graveyard that Nexopia is today. The day Reuter’s posts “Facebook lost 1 Million users last quarter” you will be laughing as the stock fly’s downward and the money flies into your account.
Dennis Zhong
Is the suggested market value an accurate valuation of Facebook? Why or why not?
“For the last several years, my Realtor friends have been complaining to me about the “Zillow Buyer”. Zillow is one of several free websites where you can find a variety of information about homes in your neighborhood. This cool website features list prices, sale prices, school zone information, population statistics, etc. Some buyers equate it to the “blue book” for home buying. Here’s the problem, there are too many variables to consider when we talk about homes, such as; quality, condition, floor plan, lot size or view, just to name a few. ”
I think it is ok, not really agree