Facebook Reveals its Ad Revenues: "Wow This is A Massive ad Sales Business." Not at $100B Valuation it isn't - Matthew Kearney

IPO Filing shows ad revenue of 32billion in 2011 representing 69 yearonyear growthAnyone who saw the movie Social Network amp8211 fiction I know but pretty faithful to key facts amp8211 will know that there was an early disagreement between the founders build ad revenues or traffic Mark Zuckerberg didn39t flinch and went for traffic and the other guy whose name I can never remember but nor can anyone else headed to the exit door Traffic exploded amp8211 people39s personal information views and opinions became networked amp8211 investors poured in and now eight years on comes the 100 billion IPOSo goes the saying quotif you build it they will comequot But there39s a saying when attracting investment in business ventures especially startups quotit39s better to travel than arrivequot Facebook has been travelling with its investors and now the IPO is about to arrive And Wall Street is interested in profits and cash flow dividends and capital gainsamp8230amp8230traffic for traffic39s sake not so muchOf course Facebook has also brought us the quotLikequot button and with it comes ad revenue which we can now see from the IPO filing is significant 19 billion in 2010 32 billion in 2011 69 growth YoYWhen Business Insider saw that their comment understandably was quotwow this is a massive ad sales businessquotBut the IPO target valuation is 100 billion that39s a valuation multiple of 30 times revenues There39s a lot of science in business valuation But to make the point please allow me to forgo that and use a good rule of thumb I learnt in my early days out of business school in private equity anything greater than 10 times operating profit is rich for any mature business On that admittedly simplistic basis Facebook needs to get to 10 billion of sustainable profit amp8211 not revenue to justify that 100 billion valuationGiven Facebook39s global reach it39s totally possible they will get there but there will be all the challenges of delivering rapid growth plus unforeseen problems Execution will need to be excellentGoogle did it Performance post IPO has been terrific True and without doubt Facebook is a fantastic social platform and promotional platform and those revenues stats prove the point But Google was and is second to none as a search platform and has executed brilliantly on plan It has also extended beyond search with Android YouTubeamp8230amp8230and social mediaAnd for investors in Facebook at that 100 billion valuation that would be my biggest worry In looking at the quottea leavesquot in media and technology it39s always useful to check in on what younger people are doing You know the sort of thing amp8211 they use cell phones not landlines WiFi based video not cable TV etc And my kids and their friends They use Google PlusMatthew Kearney has been working in the media in London and New York in TV cinema and in online for nearly 20 years He joined the Daily Mail39s leading news site MailOnline last year Matthew can be reached at matthewjkearneygmailcomRead all Matthew39s MediaBizBloggers commentaries at Matthew KearneyCheck us out on Facebook at MediaBizBloggerscomFollow our Twitter updates MediaBizBloggerThe opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaBizBloggerscom management or associated bloggers MediaBizBloggers is an open thought leadership platform and readers may share their comments and opinions in response to all commentaries

Click to Make Your 2025 Contribution to Support the MediaVillage Education Foundation

Facebook Reveals its Ad Revenues: "Wow This is A Massive ad Sales Business." Not at $100B Valuation it isn't - Matthew Kearney

Author

Publish date

Channel

Matthew Kearney

Empowering Women in Media: Insights from Industry Leaders (Video) - By E.B. Moss

More Videos:

Click to Make Your 2025 Contribution to Support the MediaVillage Education Foundation

Facebook Reveals its Ad Revenues: "Wow This is A Massive ad Sales Business." Not at $100B Valuation it isn't - Matthew Kearney

Enjoying This Commentary? There's More to Love

Matthew Kearney

Empowering Women in Media: Insights from Industry Leaders (Video) - By E.B. Moss

The payment was successful

Cookies