- 22 November 2011
Quis pendit ipsa pretia: facebook valuation and diagnostic of a bubble based on nonlinear demographic dynamics
Peter Cauwels, Didier Sornette
this is really interesting! in my master thesis for my MBA I came up with the exact same valuations! I just took a very different way to calculate it: basically I looked at the online market in the biggest economies worldwide and made the assumption that a certain reach (i.e. number of internet users registered on fb) implies a certain market share. the more users are registered on fb, the more ads will be sold. discount rate: 13,8%, revenues in 2017: $14 bln, profit margin: 31%.
discounted cash flow per december 31, 2010: $26,7 bln
worst case scenario: $15 bln
best case scenario: $39 bln
I put it under a creative commons licence. you can get it from here: http://david.priv.at/blog/?p=239
but anyway, the whole point in the high facebook valuation is not what fb earns now, but what fb MIGHT earn in the future - not with ads, but with the tecniques (and the implied user data) it MAY develop.
another reason for the high fb valuation is based on the partecipants on this price rally: "social media experts", banks, investors... they all do have a lot of interest in pushing fb's valuation. [more]