I don’t think Mr Z’s critics were questioning his business acumen, more so his ethics. A win in business does not an angle make. Even Mussolini made the trains run on time, as they say.

@Tom
There were blog stories around when FB went from college-think to mainstream-thing that the CIA was an early private investor in FB through the front companies they typically use. The story goes they had been doing lots of research and decided they needed a tool for drawing maps of social networks of all citizens of US and further afield, especially relevant post 9-11 when it was nation-states they were up against. Facebook seemed to be doing it already and would collect a good % of pop. I’m sure Mr Z would have had no qualms about it. Hey they eavesdrop anyhow let’s just give them the keys to the house.

I think it is mainly stupid western journalists who call the Arab Spring the FB Revolution. As Assange has pointed out, in Egypt and other places having uprisings leaders explicitly said don’t post info on FB and twitter since the govt is using it to find (and then torture) people for more intelligence. Conduits of uncensored Govt documents, free and unstoppable by governments, dictators and multinationals are much more responsible for the Arab Spring than FB I believe. It’s the internet itself that’s empowering, not the projects of those who seek to cordon of a private piece of it for their own maniacal ends (haha).

The revenue numbers also show that traditional media companies are far better at monetizing their content. If you control the content, the quality, the subject — then you can get more for it than the low-end user generated stuff. However, it’s not a scalable business model – requires more people to produce more content.

But this is also Facebook’s problem. It need users to generate content to sell ads against. Clearly, FB’s numbers showed people were sharing less and so frictionless sharing was introduced where content is created from what users do online — not what they want to share. It’s essentially taking what advertisers have access to and inverting it and making it “content” – smart. But it also marks the limit of what new content Facebook can dredge up from its users — a good time to IPO…

Last week I talked to the 16 year old nerd, the leading gamer and internet user under my roof. He made me wonder. Here is how the discussion went:

16 “I deleted my Facebook account”

51 “Oh, didn’t you had some 1500 friends on facebook?”

16 “Sure. All gone. Deleted”

51 “Why that? Did they flood you with stuff?”

16 “No. Facebook is out. Deleting your account is hip now”

Guess thats a lonesome datapoint, but what if it turned into a movement? What if other forms of social webs get the attention? Could fall be as steep as rise? And is the IPO just timed perfectly?

Nothing is a exciting as future …

Thank you for the elegant examination of valuating new media vs old media. It is refreshing to read such plain reasoning about the relative values of these companies who create value – arguably – in competitive ways.

I am not sure if this relates, but I was surprised by Jenna Wortham’s explanation in the times that FB have not found a way to earn revenue from its +420 MM mobile customers. http://tinyurl.com/6tg2ere

How would you valuate their ‘rumored’ plans for sponsored stories? And to what extent would that additional source of revenue alter your analysis here, if at all?

Some splitting-hair, though:
1. Estimating per user revenue ($4.39) for the entire year 2011 based on year-end number (845m MAU) doesn’t seem correct.

My estimation: average 726.5m users in 2011 (simple average of 608m and 845m, for EOY 2010 and 2011, respectively, since the growth is very close to linear) leads to Average Revenue per User of $5.11 in 2011 ($4.34 from ads, and $0.77 from payments+fees).

2. US user economics can only be estimated. My estimates: $13.9 per US user ($10.6 for ads + $1.9 for payments+fees)

So – the average US user is approx 2.7X more revenue-generating than the average global user.
And clearly, Payments+fees is a growth option for FB.

This has to be analyzed wrt the mobile monetization of Apple and Google which is pretty spectacular for Apple and par-for-the-course for Google. Facebook wants investors to believe that in the biggest change in the industry (ie. mobile) which got going in 2007, they don’t have a story on this. Effectively, Facebook are saying that they acknowledge that mobile is the future but they don’t have a monetization strategy (5 years after the mobile wave started) but that they want investors to trust them that they will. When asking to be valued at between $80bn and $100bn, isn’t this just plain odd?

> 3) Tim Cook is way over his head and doesn’t know it. He
> thinks he had something to do with the quarter.

The guy has been CEO for most of the past 2 years, parts of some years previous, and was COO since the late 90′s. Of course he had something to do with this recent quarter.