Thursday, January 6, 2011

$50 Billion.

Boeing makes planes, well most of the time. GM makes cars, well most of the time. EBay sells stuff, well, all of the time. These 3 companies now have something in common with Facebook on a large scale financial platform in that one, GM, is worth slightly more and the other two are worth slightly less than Facebook after Goldman Sachs took a significant share holding of $500 million, valuing Facebook at $50 billion.

So Boeing make planes, almost 75% of them globally and GM make cars, enough said about that and eBay is in retail. All traditional ventures in one sense but Facebook is harder to pin down with many people saying all it does is connect you to others. What's that worth? Far be it from me to denigrate the worth of a true relationship but to make money from that without compromising the relationship will be the big trick.

With staff of 2,000 and earning $2 billion a year compared to Boeing's 159,000 staff and $65 billion in earnings, it seems incongruous that Facebook could be worth so much but Goldman Sachs won't be happy with just $50 billion as it's an investment giant betting on even more potential from a "Facebook Future".

Potential is the power word in this equation. Just as parents are willing to spend money they can't really afford, to turn little Johnny into the next Roger Federer, (I had Tiger Woods in there originally but only a select set of parents would be aiming for that ) companies are willing to take investment risks if the potential upside will double or quadruple their money. Goldman Sachs is a savvy company and amid talks of a Facebook IPO worth over $100 billion they are likely thinking of $200 billion.

For Facebook to get to those dizzying heights it needs to harness the power of the people and show the market they have control. For 500 million members this will mean changes to the way they interact with the site and perhaps even buying something. Will Facebook be pressured by its shareholders to turn into the "social supermarket"?

Internet marketing spend in 2011 is slated at $117 billion and is still only 15% of total marketing dollars spent globally, giving Facebook potential to grab a significant percentage if they can work their members into a buying frenzy. Even a small market share shift in advertising dollars could reap Facebook billions in revenue.

The problem with all this is, I like a lot of "Facebookers" don't expect to be sold things on the site. It's for connecting, profiling, preening, gawking, poking and spending inordinate amounts of time away from the real world. If I want to buy things, Amazon, eBay and the rest of the Internet has me covered. Yet potentially, 500 million members are just too juicy to ignore for the Goldman Sachs' of the world.

So Mark Zuckerberg has some decisions to make on his "baby" and whether he sees potential other than just making more money???

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