Facebook: Losing money, but so what?

by Mathew on January 31, 2008 · 5 comments

My friend Kara Swisher at All Things D has some juicy details from a recent all-hands meeting at a theatre near Facebook headquarters in Palo Alto. Apparently the shyness that Scoble remarked on when he met Mark Zuckerberg in Davos must have been a temporary thing, because it sounds like Marky Mark was more than happy to chatter about the dollars flowing through Facebook’s bank account.

Apparently the site is expecting to have revenue of about $150-million for last year, which was widely expected. But Mark said Facebook is looking for twice that this year, if not more. And he’s going to need all that revenue, because he also said capital expenditures are going to be about $200-million. For what? Maybe some more telephone operators to handle all the switchboard calls when they unveil the next Beacon. In any case, as Kara notes that will leave the site in the hole cash-flow wise.

But what does Mark care? He got $300-million or so from Microsoft and Li Ka-shing and people like that, and his company is valued at %15-billion, which means he’s worth a few billion at least. Good times.

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  • George

    Facebook is “valued” at $15B simply because of the Microsoft investment, which was simply a play to keep Google away. Social networking is here to stay, but there are already signs that it is waning, and it has yet to find a successful monetization model like Google Adwords. If it can't turn it around in a year or two, or if Microsoft stops seeing it as a critical wedge in its fight against Google, the value if of the company will drop significantly.

    It will be hard to monetize all those page views for Facebook. Adwords works best when there is purchase intent demonstrated by the user who enter a query into Google, there is no such intent in Facebook – people go there to waste time. Only a radical new advertising (read: user tracking and profiling) scheme will do, and it's not Beacon.

    Microsoft is probably overvaluing the strategic significance of Facebook anyway. With Facebook's recent decision give outside developers access to the social graph, it is no longer the walled garden Google couldn't penetrate.

    And what on Earth are they planning to do with a 1000 employees? Google can afford the luxury of brainstorming and trying out new things, it has the Adwords cashcow to float it. Facebook's VC money is not exactly a reliable source of revenue.

  • http://www.mathewingram.com/work mathewi

    All good points, George. Thanks for the comment.

  • George

    Facebook is “valued” at $15B simply because of the Microsoft investment, which was simply a play to keep Google away. Social networking is here to stay, but there are already signs that it is waning, and it has yet to find a successful monetization model like Google Adwords. If it can't turn it around in a year or two, or if Microsoft stops seeing it as a critical wedge in its fight against Google, the value if of the company will drop significantly.

    It will be hard to monetize all those page views for Facebook. Adwords works best when there is purchase intent demonstrated by the user who enter a query into Google, there is no such intent in Facebook – people go there to waste time. Only a radical new advertising (read: user tracking and profiling) scheme will do, and it's not Beacon.

    Microsoft is probably overvaluing the strategic significance of Facebook anyway. With Facebook's recent decision give outside developers access to the social graph, it is no longer the walled garden Google couldn't penetrate.

    And what on Earth are they planning to do with a 1000 employees? Google can afford the luxury of brainstorming and trying out new things, it has the Adwords cashcow to float it. Facebook's VC money is not exactly a reliable source of revenue.

  • http://www.mathewingram.com/work mathewi

    All good points, George. Thanks for the comment.

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