Today as I tried to figure out how to turn some new features off in Facebook, I came across an article stating that a Facebook IPO could come in at $100,000,000,000. That is 100 billion dollars… An amount of money that I can’t wrap my mind around for several reasons.
When I look at this story line, I do not see the Facebook saga ending well unless investors have knowledge of a silver bullet that Facebook will deliver to market, changing everything we know about how to use their “social graph”… I think that Facebook has a bright future, but an inflated valuation leads to burning cash which creates the volatility that bubbles are made of; this is what concerns me because a software bubble is bad for business. At some point when investors start pushing for returns and Facebook under-delivers, everything goes south from there. The valuation of Facebook really boils down to the fact that it commands a critical mass of over 800 million people. The stats around Facebook usage are un-real, and something that makes Facebook un-like any other technology.
They always say that you should invest in things that you know… As a Facebook user, potential advertiser, and enterprise software CEO, I have not given a single dollar to Facebook. On the other hand, I have given Google tens of thousands of advertising dollars over the last year. The entire online advertising market is $25B and Facebook commands less than 5% of that market; though it is growing significantly year-over-year.
What are your thoughts? Do you think $100B public offering will be the beginning of the end for Facebook? or do you have confidence that they will overcome serious skepticism and remain a critical hub of our social media experience without burning investors?