In case you’re living under a rock, Facebook went public today. It will likely be valued at ~$100 Billion, which is nuts, and expected to double or triple that in a few short years, which is also nuts. Where’s this valuation coming from?
Already, investors are putting a price on those Facebook users. At a market value of $100 billion, investors are estimating that each person with a Facebook page is worth roughly $110. But that’s based on the potential profits — not what Facebook is making off them now. Last year, each Facebook user generated $4 worth of sales for the company
So. In order to meet expectations, Facebook needs to generate 25 times as much revenue from each user as it currently does. Facebook basically makes money three ways:
- Market-based apps (think Farmville… selling users some fake stuff)
- Ads (letting other people sell users some actual stuff based on information Facebook has learned about its users)
- Analytics / Data brokerage (selling user information to other people)
In order to reach that 25x growth in per-user revenue, Facebook is going to have to interfere a lot more significantly with the user experience that it currently does – to gather more user information (to make better targeted ads and pass the data along to partners) and also to integrate more advertising into the architecture of the sight… think pictures, places, and so forth.
Keeping in mind that Facebook’s users are Facebook’s product, will that product still exist when Facebook is 25 times as creepy and intrusive? I doubt it.