Facebook valuation

Yet more speculation today about what Facebook is really valued at led me to look at the numbers behind the latest valuation by investment bank Orkritie.

Since my last stab at valuation it’s obvious Facebook are finding ways to increase advertising revenue per user, but there is a real limit to how far they can push this before it pisses users off – a line they may already have crossed.

As one comment on the BBC blog put it:

Has anyone ever seen these adverts? Talk about the last refuse of the snake oil salesman! I am sick to death of constantly being bombarded with adverts telling me that there are certain ‘miracle’ foods that will help me with weight loss or credit cards ‘guaranteed’ to restore my credit rating and so on and so forth.

So i’ve done the maths and made three key changes to Orkritie’s assumptions:

  1. Facebook users will peak this year at 650m and decline and users drift away when advertising increasees
  2. Advertising revenue per user will grow from $2 to $6 a year by 2015
  3. ‘Valued Added Services’ such as charging a % of in-game revenues will double to $1.2 a year
    • The net result, assuming a 2015 valuation on the same multiples as Google currently, is $10bn.

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