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"Investing site The Motley Fool has an interesting debate today between three of their reporters, who all take different arguments in the debate over Facebook\u2019s valuation.  Of course, technically speaking, we already know the answer is $15 billion, since Microsoft and several other investors have purchased small percentages of the company that value it as such.  However, as I recently noted, that valuation represents more than 100x annual revenue, a multiple that even some of the fastest growing publicly traded Web companies don\u2019t come close to reaching.  \nRick Aristole Munarriz agrees with my argument, and concludes that Facebook is currently worth around $3 billion based on the revenue multiples assigned by Wall Street to high growth Web stocks like Google and Bank Rate.  While he says that Facebook deserves a slight premium because \u201Ctraffic continues to grow at Facebook, and the company's innovative move of opening up its platform to developers,\u201D he notes the challenges Google is facing with its MySpace ad deal, and the general fickle nature of social networks.  His conclusion: \u201Ctake my $3 billion and run.\u201D\nMeanwhile, the bearish Anders Bylund concludes Facebook is worth only a few hundred million dollars, because despite Mark Zuckberg projecting $300 million in revenue this year, profits are going to be next to nil, since the kid CEO has already announced an aggressive spending and hiring plan.  If Facebook were a publicly traded company, I\u2019d be compelled to agree with Bylund, but, as a private company, Facebook has no real obligation to generate meaty profits, and spending aggressively is a necessity to ensure they outlast the bevy of competitors who would love to take their spot at the top of the social networking food chain.  \nFinally, the Fool brought one super bull into the debate to argue that the $15 billion valuation is justified.  Tim Beyers calls the number a \u201Cwalk in the park,\u201D noting the company\u2019s ability to eventually become a portal, and generate portal-like revenue.  He concludes that at a $15 billion valuation, each Facebook user needs to bring in $23.50 a year in revenue, and thinks that number is not unattainable, considering Yahoo and eBay bring in north of $27 annually per user.   While I agree that Facebook is only scratching the surface of its revenue making potential, imagining that type of revenue per user on a social network seems far-fetched.  That said, if they can grow their user base 4x over the next few years, it means their ARPU only has to come in around $6-7 for the numbers to add up.  \nThis debate leads me to conclude that a Facebook IPO is nowhere in sight, because without significant profits, Facebook will not receive its $15 billion valuation on Wall Street.  Note that while Google trades at around 10x revenue, it also trades at 40x profits - $3 billion in real, tangible, cash in the bank every year.  If Facebook were to receive a valuation of $15 billion on a multiple of 40x earnings, they need to be making $375 million in income, not revenue.  That is not going to happen for several years, even at the company\u2019s current revenue growth rates.  But, that\u2019s fine \u2013 the company has raised $300 million, in addition to the healthily growing revenue and userbase.  While us bloggers and journalists would love a juicy Facebook IPO story, it seems highly unlikely before 2010.  \n\nn\n{democracy:89}\n"^^<http://www.w3.org/2001/XMLSchema#string>
<http://mashable.com/2008/02/14/facebook-valuation-2/>