6 comments

• 

  Lee Lorenzen

  7 months ago

  Matthew,
  
  We don't mean to be coy but straightforward. The following post outlines how we come up with the valuation:
  
  http://blog.adonomics.com/2007/09/24/an-adonomi...
  
  Facebook's $15 billion valuation is not hypothetical -- because Microsoft and and individual investor put money in at this price. I actually think it is worth $100 billion (see blog.adonomics.com for the details as to why).
  
  WRT FunWall, an app that has 1/5 to 1/4 of the entire facebook audience has a valuation premium because Google, Yahoo, IAC, AOL and others would pay a lot to have an app that would allow them to harvest out a big chunk of facebook users over time to a competitive social network.
  
  Thanks,
  Lee Lorenzen
  CEO, Altura Ventures -- the first Facebook-only VC
  cell: 831-595-7501
  reply
• 

  mathewi

  7 months ago

  Thanks for the comment, Lee. I still don't think it's all that clear
  how you arrived at the specific numbers for the apps on your list, but
  I realize that it's a combination of a number of different factors.
  And I would argue that the assumptions around many of those factors --
  such as an app's future growth rate, Facebook's future growth rate,
  the rise in advertising rates, etc. -- are either flawed, or
  ridiculously optimistic, or both.
  
  As far as Facebook's "valuation" is concerned, it is completely
  hypothetical. Microsoft bought less than 2 per cent of the company,
  and paid a price that was based on a whole range of factors,
  competitive and otherwise. To extrapolate from that to the value of
  the entire entity or to the value of individual apps like FunWall is
  ridiculous -- and I think the same goes for your $100-billion
  estimate.
  
  In any case, thanks for the comment.
  reply
• 

  John Minnihan

  7 months ago

  If the app developers are actually making money (this isn't clear, so we'll assume not), then each user is worth zero.
  
  Seriously, valuing numbers of users is pointless unless there is a demonstrable, market-driven correlation (i.e. more users => more revenue). Even Dave McClure, who has vigorously defended Facebook recently, is beginning to ask about monetization (http://500hats.typepad.com/500blogs/2008/01/fac... )
  reply
• 

  mathewi

  7 months ago

  Thanks for the comment, John. I'm not sure that they are worth zero
  -- Greg Thomson, whose video I linked to, seems to be pulling in a
  fair bit of revenue from his apps, from what I can gather -- but your
  point is well taken. Even if they are making some amount of money,
  extrapolating from that out into the future and then coming up with a
  "value" for every app is unwise at best.
  reply
• 

  John Minnihan

  7 months ago

  Sure - the assumption above was that the apps were not currently gen'ing any revenue. For those that are, the math remains basic: total revenue / total users = rev per user.
  
  Now that facebook is considering (it may be reality, I've lost track) allowing users to hide some apps from their profile pages, this could greatly reduce any contrived value those apps had, if "viewability" was part of the equation.
  
  This is evolving, to be sure, and remains an interesting topic. But don't discount the overall faddish nature of it. Look at how quickly Twitter emerged and engaged folks. Something else is always around the corner.
  reply
• 

  mathewi

  7 months ago

  agreed
  reply