Hacker News Reader

Comment by Kequc | Hacker News Reader

Please explain to me in simple terms why a website property is worth so much.

Keeping in mind this has remained a mystery to me ever since Facebook didn't sell for a million dollars an eon ago. Facebook's founder is today worth some ridiculous sum of money. Why is that? I'd have sold Facebook for a million dollars and then just made another website. What am I missing. YouTube sold for some amazing sum ages ago to Google, who has from my understanding still not turned a profit with it.

Since I am clearly so out of touch please make the explanation easy to understand.

View on HN

The value of Facebook and Youtube is their amazing ability to reach huge potential audiences for advertisers as well as their ability (esp Facebook) to collect large sums of valuable personal information.

Reddit being the fourth most visited website in the US has the potential for people and companies to reach huge audiences. I can see where people are stuck in the mentality that places like this are just "another website". But the point is now these places are reaching unprecedented scales on an order of magnitude higher than the traditional webpages of the late 90's early 2000's that they can be huge businesses themselves.

It's simple, eyeballs, ads, and data. They can directly measure the value created through ads posted on those properties - and that scales up with the amount of potential ads. Then you have future value of the data being generated (personal habits, info on Facebook, watching patterns by demographic etc on YouTube).

For Reddit, it's one of the biggest communities online (maybe the world?) - there are many ways to leverage and monetize that even if they haven't figured out all the optimal ways to do that yet, the perceived value is enough to convince investors in its future.

These website properties have (hundreds of) millions of engaged users. Investors are betting on the ability of Facebook, Reddit, et al to monetize those users. Facebook has demonstrated a great proficiency at doing this, mostly through targeted advertising. Reddit, so far at least, has struggled but still has potential to turn their audience into a profit center.

They're not websites. They're social graphs and they are very powerful sources of information that can be used in too many ways to list. Facebook revenues alone are $8B per quarter. You'd sell that for $1M?

Well tra la la.

Excuse me, Facebook revenues were not that high at a 1m valuation. Nobody would sell something that earns $32B/yr for 1m, I'm dubious that it earns that much money and I'm curious about why, if so, that is.

Facebook wasn't first and had all the momentum. MySpace sold for $580M in 2005 and I'm sure Zuckerberg would have seen that as relevant to Facebook's potential value.

To answer your question as to why, Facebook is an advertising company. People pay to publish ads, they pay more for highly targeted ads which is what Facebook offers.

They're one of the most visited websites on the planet and unlike Facebook terribly mismanaged so that the amount of advertising revenue they bring in per visitor is a pittance.

If someone were to straighten out Reddit not only would they be profitable but they'd be Facebook level profitable.

And if you're having a hard time understanding why that is, look at it this way: imagine a newspaper that was read by 10% of the US population as well as a huge amount of people overseas. They'd be the most valuable property in news by far. Especially because they demographics skew heavily towards 18-35-year-old men.

Reply on news.ycombinator.com