What is Facebook Worth?

I'm a serious investor. In fact, in just a few short weeks, I will give up a paycheck to live on those investments (with a little help from a pension and social security.) I've seen the internet upshots come and go. I've seen the bubbles blow up and burst. It is very hard to make predictions, especially about the future. I've bought stock high and sold it low. I can read a P/E ratio with the best of them and a Value Line beta graph is like mother's milk. I've missed the market on many investments, and made a killing on a few. The climb is slow and steady, with a few drops back. I never put my eggs all in one basket, but just what basket do you put your eggs?  Ahhh, that is the question. Are eggs a good investment? — a better question.

So, did you read the news about FB going public? (Is it redundant to write about Facebook on Facebook?)

Now that Facebook has raised a $1.5 billion financing round, led by Goldman Sachs, its new investors are waiting for their fortunes to multiply. While some critics remain skeptical that Facebook — which is said to have made about $2 billion in revenue last year — is worth the round's $50 billion valuation, momentum is certainly on the company's side. (You have seen the movie, haven't you?)

Shares of Facebook are still soaring in the secondary market.The company's shares are trading at an implied valuation of $76 billion, according to Sharespost. For the biggest Facebook bulls, the next number to contemplate is $100 billion.

According to a new report by the financial research firm Trefis, that is certainly possible. So what do you get for your $100 billion? Answer: eyeballs. That's the new currency of the internet — and you thought flashers were begging for attention.

Recent estimates place Facebook's worth at a (relatively) modest $45 billion, but the prognosticators say there are four likely developments that could push the social network's value to $125 billion: 1) a doubling of ad revenue per page; 2) page views increase by 50 percent; 3) Facebook's share of the search market hits 10 percent; and 4) a doubling of game revenue per user.

Recent moves by the company are advancing the needle on user interaction.  It's introducing more ads on its pages, changing the profile page design to emphasize photos that can lead to more page views and integrating Web search results within Facebook search results. These are changes that improve the likelihood that these predictions on page views per user and search market share are plausible.

Not bad for a start-up company that went from the dorm room to billion-dollar funding rounds in seven short years.

Do you have your own theory?

Why does this remind me of the buzz that appears in the press at the time of each bubble? Articles that praised the potential of AOL, groceries bought online, how housing prices will always go up, peak oil at $500 a barrel, bioethanol, etc., etc., wow! Will this nonsense of a "Company" go the way of AOL in short order? Yes, that is the question. Who is the next Facebook? Wait, THAT is the question.

What are they selling? Why they're selling us!

Does anyone remember how much MySpace used to be worth? Does anyone even remember MySpace? Don't be the last shareholder through the exit … Bubble 2.0: "History Does Not Repeat Itself — But It Rhymes" — Mark Twain

I don't see anybody touting Facebook's heights willing to sell puts. I'd like to predict the price that Facebook will be acquired at: $5 billion, in 2013, by Microsoft or Intel (the latter is always making nonsensical acquisitions, and the former is desperate). Of course, if the world ends in 2013, that prediction doesn't count.

How many friends does your money have on Facebook?

On the other hand, Facebook, being "virtual," has the potential to "scale" exponentially horizontally, vertically, up, down, left, right, all around, all over. It's kind of like Amazon, which is just renting space to platforms, but in this case Facebook's future is renting people's internal real estate, to said people, a vicious circle. The entire product of Facebook is us talking to us, showing us pictures of ourselves, and we are just eating it up like popcorn at the movies.

Put your hand over your wallet, turn around, now walk slowly out the door.

No folks, I'm not putting any money into Facebook. (I'm sure I'll regret that later.) I'm not afraid to invest in technology, but I really want there to be a there, there. Facebook is a little too virtual for me.

I think I will just put the money back in the mattress for now. Put your money where your mouth … err … words are. No thank you. I'll just sit here and watch.

Originally written on February 25, 2011.