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Comment by tafle | Hacker News Reader

"that would be 100x revenue"

They are already expected to make well over 1B this year. Why would that be the same a few years from now?

From what I read last year's revenue was ~$800M and this year is looking like $1.2B. I hit it right in the middle. Regardless, this is revenue and revenue gets you shit on Wall Street. No one knows what their profit is, but even if it's in the $250M range (which I think is about 5x high), it still has to increase ~10x to get into the territory that a $100B valuation would need.

They're also quickly running out of people with money to register, so I doubt we'll continue to see such huge growth. Not saying they won't make a great business out of it, but tantalizing would be hires with a $100B valuation seems pretty shady to me.

Rumor has it, it's more like 2B.

Sweet, so they only have to raise that 50x before it's not a ludicrous statement. All they need to do now is get 25 billion people with as much money as the current 500m do signed up and they are good to go.

No, you are assuming that Facebook have already reached their maximum revenue per user. Facebook's revenue potential is massive and is only going to go up.

Indeed. Advertising is the easy way to make money, but I see a lot more creative ways to sell their social graph.

One would be to sell it to credit-rating agencies and insurance companies. If all your friends have totaled their cars and defaulted on their loans, then you aren't going to get one either. The only problem with this is that it's extremely evil (because even non-users of Facebook can be fucked by this, thanks to the "steal all of your email addresses" import method), and that there aren't very many banks and insurance companies.

Another model I see is using the photo service and the photo graph to help the police solve cold cases. Match the artist's sketch to the Facebook photo database, find some matches, and talk to their friends. Also very scary and evil, but potentially profitable. "Won't someone please think of the children?"

Anyway, once Facebook feels like they have a fairly complete graph and don't need any more users, then the money making can really begin.

Any more unlawful ideas for Facebook revenue?

Yeah. Using the Facebook graph to price health insurance. Has your girlfriend slept with someone who slept with someone who slept with someone who has AIDS? That will be $100,000 per month kthx.

Yes, because they need $100 billion in revenue to be a $100 billion cap company.

Depending on their profit margin, yes they do. Revenue is worthless. They aren't making much money now and will have to make tons to be worth $100B. They're not a huge number of people with money left to register, so it's up to making more with what they have now. We'll see I guess.

s/Facebook/MySpace/ and ask again

s/Facebook/AOL/ may be more appropriate.

MySpace just blew it. AOL was a safe walled garden for people who didn't know what the internet was. As the internet outside AOL increased in value, people had less use for their walled garden.

The same thing could happen to facebook if the rest of the internet gets more inherently social.

  s/Facebook Fan page/AOL Keyword/
  s/Facebook email/AOL email/
  s/Facebook Games/AOL Games/

The people running Facebook clearly know their ass from their face a little better than those running MySpace.

The point is that startups can go either way. Facebook's doing well now, but it would not be shocking if fewer people used it in 5 years.

Seems odd that a 6 year old company with 2000 employees and almost 10% of the planet using its services is still referred to as a startup.

I hesitated before writing that. The reason I thought startup was the appropriate term is because as a business, facebook is still judged by what they might become/achieve.

Facebook's doing well now, but it would not be shocking if fewer people used it in 5 years.

Why wouldn't it be shocking? They've shown that they can ship and see through to maturity several revolutionary products. Stop thinking in the abstract: if a company employs teams who can build stuff, ship it, and bring it to maturity, that's what they'll keep doing. The tech industry isn't exactly lacking in revolutionary ideas to implement.

And Google couldn't fail spectacularly in the same period?

They could. I'm not saying they can't.

But, the chances are probably lower than Facebook failing. The chances of Google failing are much lower than the chances of Facebook growing its revenues (or prospects) 5X.

Price (ie working for shares) is an estimation of probability. I'm not saying Facebook is worthless. It's worth a lot. The reason Facebook's valuation isn't $100b already is because the road from here to there is an uncertain one. The two factors I would consider to be important are: (a) Facebook's revenue model is relatively immature.(b) Facebook might be a trend.

*I think Facebook might even have the potential rival Google in advertising. I'm not a Facebook pessimist.

Google could fail in this same period, but it is unlikely to go through a revenue and valuation growth spurt similar to the one it has had over the past decade. Google is now settled into its middle-age and it is no more likely to come up with another money-printing machine like search advertising than any other company. Facebook has a fraction of Google's revenue and it is possible that they will figure out how to monetize their assets in a manner similar to Google, but it is also possible that they screw up or are blocked by social/legal barriers and are unable to realize the potential that everyone is imagining them to be capable of.

The possibility of Facebook cratering is far greater than the possibility that Google will crater, but the possibility of Facebook reaching Google-like revenues is much more likely than the possibility that Google will double their revenue over a similar time period.

It can, but on the other hand they aren't telling new hires that Google could be a $2 trillion company and that would make their stock options worth an amazing amount (which would be the same amount of increase for Google that Facebook is suggesting). They're just handing out stock that's already worth a lot.

How much did Tom Anderson walk away with in cash from Fox?

The point is that, in a scenario where their market cap reached 100B, we would not expect their revenue to remain stagnant between now and then.

At a point where their market cap reached 100B we'd expect their profits to be between 2-3B a year. (P/E between 33-50)

Considering that's 2-3x their current revenues can you understand the skepticism?

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