The Facebook Phenomenon - Let's Talk Business
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Let's Talk Business
Based on research done by comScore on February 2007, Facebook ranked as the sixth most trafficked website in the USA with more than 30 billion page views per month. It's a no-brainer that this has increased over time, hence the popularity surge of the past few months. Another interesting fact is that over half of the users log in each day.
At the time of writing Facebook's primary competitor still remains MySpace, which is the most popular social network with more than 200 million of users. Two years ago in 2005 News Corp. bought MySpace outright for $580 million. The race of social network acquisitions continued with Yahoo in 2006 offering $1 billion for Facebook. Would you believe that Zuckerberg rejected this deal?
Yeah, that's right! He explained that he plans to hold off for another two years at least. It's really amazing that Yahoo offered one billion dollars to purchase an online company that generated only $100 million revenue (estimated in 2006). And yet the young CEO rejected the offer. Now looking back it seems like his decision was an excellent one.
Facebook's growth is still increasing exponentially. As of October 2007, Facebook can count 42 million active members, and is expected by the end of the year to pass the 60 million milestone. Through the years numerous negotiations and deals were rejected due to Zuckerberg's plans to run the company independently.
The blossoming period for Facebook's valuation started in September 2007. It was rumored that Microsoft might buy a stake. These rumors were proven right on October 24, 2007 when Microsoft bought a 1.6% share of the company for $246 million. Now if you do simple second grade mathematics, you realize that the total "worth" of the company equals nothing less than $15 billion! This is where I've derived the data at the beginning of this article stating that Mark's net worth is more than $4 billion.
(Mark Zuckerberg, founder and CEO of Facebook.)
Why did Microsoft invest $246M in a three-year-old decent company that brings in a total of only $150 million annual revenue (estimated in 2007)? Why is Facebook worth $15 billion? Answering these questions is challenging but mostly it's because the online social network promises more than profit. It's an aggressive bet that assumes two things: the continued exponential growth of online advertising, and that Facebook will remain among the most popular social networking sites. It will require a high level of maintenance for Facebook not to lose their position.
Notwithstanding this challenge, let's take a moment to analyze the growth of Facebook, according to the latest comScore statistics. Within the category of unique visitors the increase is 89% from May 2006 to May 2007. The statistics also shown an explosion in Europe; the number of total unique visitors rose 422% up to 10.2M over a year.
Furthermore, it's rumored that Facebook earned another $500M from this frenzy funding spree on the same day the deal with Microsoft was accepted for 1.6% shares. The aforementioned $500M comes apparently from two NYC-based hedge funds; they add up to a total of $750M (~500+243). These were not confirmed at the time of writing, but to us the valuation of $15 billion matters the most.
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