Is Facebook Worth A Billion Dollars?

Filed as Uncategorized on September 22, 2006 11:20 am

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Over the past week there has been talk around the news (as well as the blogosphere) about Yahoo!’s interest in purchasing Facebook for about a billion dollars.

Although Yahoo! has offered up to $900 million towards Mark Zuckerberg (CEO and founder of Facebook), he seems to be motivated more by passion than by those dollar bills.

(SeatllePI.com) By all accounts, Zuckerberg is motivated by his passion for his invention, which he created less then three years ago as a Harvard undergraduate. The site quickly became an electronic bumblebee, pollinating many American colleges with gossip, flirtation and news of the next fraternity party.

Money, at least so far, does not seem to draw him. He lives in a barren apartment in Palo Alto, Calif., a short walk from the office. He bought a stereo only recently, at the request of his girlfriend.

Zuckerberg previously spurned away Viacom’s offer of $750 million in January, and it seems that Yahoo! is looking to top that offer as well as leave Zuckerberg in the drivers seat.

But with Facebook boasting only nine million users, is it even worth a billion dollars?

Although some may argue that according to comScore Facebook is in seventh place, comScore is based soley upon pageviews which does not always translate to dollars. And to make matters even more interesting, Microsoft has secured its position as the main ad provider for Facebook, which means Yahoo! (or any other interested parties) may have little room to negotiate for a larger slice of ad revenues.

Last year, Newscorp purchased MySpace for $580 million when the social networking king boasted around 22 million members. Newscorp in essence paid a little over $26 per MySpace user, a deal which has probably paid off seeing how the site now boasts 100 million.

Yahoo! on the other hand will be paying about $100 per Facebook user, and that is if they stay below a billion dollars (as they are currently around the $900 million mark).

Although Facebook is planning on opening their doors to the rest of the world (despite the complaints), purchasing them at an inflated price may come to haunt Yahoo! later, especially if profits from Facebook do not compensate Yahoo! in the next five years.

Update: Corrected some grammatical errors.

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