Facebookonomics - what are you worth?

[calumscott]

So they floated at $38 per share which valued Facebook at £66bn

The current price of $33.92 makes that just shy of £59bn.

Now, given that the only thing that Facebook has of any value is the ability to flog stuff to its users and that it has 845million of those...

...if you use Facebook "the city" currently reckons you are worth £69.72...

...and falling...

 

[Dieseljockey]

I can see a crash & burn coming...

 

[theboytony]

Although I'm not a fan I am wondering what facebook has up its sleeve to make more money for the shareholders, some sort of facebook marketplace/online payment thing maybe :hmm: or just carry on with the annoying advertisements

 

[Aleman]

They are trialling Pay to Post

 

[james1988]

Without dragging the thread off topic, Facebook - and other forms of social media - are massively complex. A lot of research has been undertaken in trying to understand how it works and can be exploited (I've just finished a year long study into it myself). As such I don't believe £66 is an accurate figure of how much each profile is worth (due to the complexities surrounding it). I'll post a better answer tomorrow when I'm more awake.

James

 

[calumscott]

I'm all ears!

When I started dicking around with the numbers I really wasn't expecting such a high value per user. I guess that there's a load of IP and a load of hardware that could be deducted from the total valuation but even still.

I have a feeling that this one won't go POP but will deflate slowly over the coming weeks and months...

 

[alanywiseman.]

THe thing that facebook is very good at it targeted marketing and this is where they will make a lot of money (plus introducing charges for certain features and apps). As an example I was lloking as some stuff on the John Lewis website. I then logged into my facebook and there down the side of my page were the EXACT same things I had looked at on the John Lewis website.

I will be in serious trouble if homebrewing supplies starts getting advertised down the side of the page as I know my will power will cave!!

 

[Swift Pint]

I get that knowing about the users means that ads can be more targetted etc, so advertising space is more valuable, BUT I cant really remember ever having clicked on an ad online, and definetaly havent clicked on an ad and ended up buying something. (oh, apart from our fabulous sponsors above of course! :thumb: )

Am I the exception to the rule? :wha:

 

[graysalchemy]

No I have never bought anything through targeted advertising.

However i was well anoyed when I ordered a new pc from PCspecialist (and paid for it I may add). No sooner had I clicked off the site and on to another there was targeted advertising offering me a promo code which would have saved me £30. I never saw that when I was researching buying the damn thing :evil: :evil:

 

[calumscott]

Ironic really that I work in the web analytics industry...

...I'm pretty much impervious to marketing. I like a good campaign (compare the Meerkat is genius, the original "The future's bright, the future's Orange" and many more) but does it have much influence over my purchasing behaviour?

Hell yeah! If you treat me like a d**k in your advertising, I'll actively avoid your product. Come up with a decent believable ad and you stay at a nice level zero.

 

[Aleman]

I run Adblocker so I don't see targeted ads

 

[Shug]

General Motors have just dropped their facebook advertising.
Means facebook miss out on millions. Others will follow if/when they dont the return they expect.

 

[graysalchemy]

I run Adblocker so I don't see targeted ads

Thanks for that Just installed it :thumb:

 

[SE10PAT]

Tech Bubble part II anyone?

I have a feeling that this one won't go POP but will deflate slowly over the coming weeks and months...

Yep I agree

http://m.ctv.ca/topstories/20120521/facebook-stock-IPO-down-120521.html

 

[james1988]

The clever thing about Facebook is it's an elaborate for of word of mouth advertising. Basically your friends 'like' something and then you automatically find out about. Much the same as you would if your friends / relatives introduced you to something in the real world. Facebook doesn't need to rely on advertising to make money because it has everything it needs; your details. It's your information, posts, photos and friendship networks that are worth billions not how many people they can advertise to.

Think of it this way, you have infected (those who know about a product) and clean (those who don't) people. The clean people are susceptible to infection. As time goes on more and more people become 'infected' with the knowledge. Frank (I think that was his name) Bass did some interesting research on early adopters vs imitators of a product over time (Bass Diffusion Model) and it produced some interesting results. The number of adopters rose sharply at the beginning of advertising but slowly fizzled out over time which also happens with social networking websites (Bebo, Myspace etc).

I have come up with my own model based on a quantitative and qualitative approach and thought up some strategies using SSM. When I get feedback from my dissertation I'll let you know if my findings were rubbish or on the right lines.

Anyway back to revision for me...

James

 

[calumscott]

The clever thing about Facebook is it's an elaborate for of word of mouth advertising. Basically your friends 'like' something and then you automatically find out about. Much the same as you would if your friends / relatives introduced you to something in the real world. Facebook doesn't need to rely on advertising to make money because it has everything it needs; your details. It's your information, posts, photos and friendship networks that are worth billions not how many people they can advertise to.

That's the point though - the valuation is not of the company's product (there is none) or any tangible assets (there are very few - a server farm or two and some IP), so on what is it based? It's potential earnings - and those are driven by the reach and market penetration it has and that is defined by its subscribers. You and me. Ergo its valuation is based on how much money it can make directly or indirectly through exploiting the people who use it.

Someone described it quite neatly. "If you pay to use it, you're the customer. If you are paid to use it you're the staff. If neither applies - you're the product."