or… another way to value Facebook…
after all Microsoft was the first one to pay $ 400 million to sabeer bhatia for… well… every one knows that… it’s but natural to ask what Mr Bhatia did with his 400 millions, and the answer lies in some failed internet start-ups. but that’s not what am interested in. Have you ever though how many users did Mr Bhatia’s mail service have?
Before you guess, let me remind you that this is 1997 we are talking about. An era when Intel was inside, pentium was the king, dial-up was a privilege, might Google was not yet registered as a company, Wachowski brothers were still writing the script and an era when Dolly was cloned. But then, it was the most famous email provider of its time. Allow me to break the suspense – 8.5 million users. Now that sounds low, doesn’t it. We all know that Apple sold more iPhones than that. But then, as i said, this was 1997. There were hardly 70 million people who could own a PC and top that – browse the net. And then obviously not all of them were “active” users. So, the numbers are$400 million for 8.5 million users. or roughly say $47.5 per user.
Now that we have established what Mr. Gates paid for every mail user, lets extend the logic to facebook. And while we are at it, lets assume (conservatively) that it’s as difficult, or easy if I may, to make money from facebook as from mails. Zuckerburg says that his site had 845 million active users in Dec 2011 (mine had… well never mind). No mind you, this is active user base, and not the whole lot who has a facebook account. Just to make clear how big the general user base could be, compare it to the gym -folks who pay for one and the “active” members among them who religiously pay a visit to the gym. However, i do not have numbers for the total user base. So lets keep it simple and go ahead with 800 million active users (my fortune cookie read today – “keep it simple”).Let u multiply the $47.5 per user to this number to get a value of $40,135 million. keeping it short – $40 billion. That sounds way low than what we saw on facebook’s timeline. But here’s the catch, this is what microsoft would have paid in 1997. That was 3 recessions ago. Since , world GDP has doubled to almost $60 trillions and so has MSFT’s stock price. So if we double our valuation number we get $40×2= $80 billions.
“$ 80 BILLIONS”. This wasn’t much of rocket science, right…. for god save us if rockets were made with this science. Now if you believe this number is small then let me remind you that there weren’t many big web-mail providers in 1997 (just 2 for that matter) while we today have many “social network” players. And if you believe that this number is too big, then let me remind you that this was a “conservative” back of the envelope calculation.
But the question remains, what do we do with this number. How does this benefit us?? The answer, for the lack of $$$ in our accounts, is pretty simple. There is no value addition accrued to us. But then so is the case for facebook, the website. So all you can do is share this post by clicking the like button down here. (or paste the link in facebook, its just 2 extra steps – thanks for that)
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