Wallen's

$10bn - Is Facebook overvalued?

RWW’s article on FB’s new financing round shows a valuation of USD 10bn for Facebook. This puts it at a multiple of USD 50 per user (assuming 200m active users, the last figure I heard off). This figure compares to recent (and not so recent) multiples:

• Twitter (February 2009 series C) :  ~40$ per user (or ~75$ per active user with a different number crunching but not comparable to the other figures below)
• Xing (March 2009 market capitalization) : ~25$ per user
• LinkedIn (June 2008 series D): $ ~40 per user
• Beboo (March 2008 trade sale to AOL-TW): $ ~40 per user
• YouTube (2006 trade sale to Google): $ ~30 per user
• My Space (2005 trade sale to Newscorp): $ ~35 per user

These multiples are pretty stable across transactions and over time in the range of $30 to $40 per user. Demographics and geographics user mix differences should translate into multiple's differences as pointed out in TechCrunch’s post on the topic. In this light, Facebook’s valuation seems on the high range but not completely out of order compared to those benchmark multiples, especially knowing that it’s the market leader and the past months impressive growth.

 The question is whether these multiples make sense or not from an “operational ” perspective. Mark MacLeod had made some back of the envelop calculation here on Twitter and triggered an interesting discussion. On the other hand as long as there is a market for it…

Facebook and control

While reading the Techcrunch article on Facebook refusing a $8 bn termsheet, I was telling myself that in Mark Zuckerberg's shoes I would probably do the same: board control is really just as important (if not more) than valuation for an entrepreneur that wants to build a lasting company ! Then I saw Mark's post (MacLeod not Zuckerberg but he's almost as talented) making a similar point...  and the need for a longer post disappeared: go here to read it.

Overview and tips on due diligence

After my posts on VC funding overall approach and termsheets, I thought I would close up with a post on due diligence. Again instead of repeating what others have said, I have built a map on the topic. Just click on the pearl below and then the play button and the arrows.

A map on advertising business model

After my last post on freemium, here is a map on the advertising business model. There are so many angles and views on the topic that it's impossible to cover everything. I don't know if it's a "good" revenue model but here is the way I look at it (simplified): ads brings benefits to their buyers so it must be a recurring source of revenues... though only sufficiently high under certain conditions, the most important of which today being "massive scale"... The web is not very different in that sense than most other media sectors, e.g. the most successful TV channels are free and live mainly of advertising - size is king with ad, small niche is difficult.

Why do I think this ? Just click on the pearl below then on the play button and the arrows.

NB: if you have some relevant posts to complement this map, don't hesitate to post them in the comments.