You note that $6B is 50 times estimated earnings of $30M. But 6B/30M = 200, FWIW.

• Posted by: midas
• July 11, 2007 6:42 PM

There may be a simple answer, John. Facebook has virally marketed itself and may simply be the peoples' choice. This type of randomness pits itself against the best marketing brains. So the winner is Facebook, as the winner was Google years ago.

• Posted by: Walt
• July 11, 2007 6:54 PM

Oops, fixed the 50 over the 200...

• Posted by: John Battelle
• July 11, 2007 6:57 PM

The Facebook blog suggests that there is a lot of technological depth in the news feeds. These offer every user a personalized rolling update of the activity of their friends, based on what Facebook has learned about the user's interests. This is analogous to PageRank, where relevance, timeliness and large scale data mining require some serious PhD-worthy CS.

Apart from that, I wouldn't underestimate the value of Facebook's general superb execution. The interface is clean and easy to use, the site loads quickly, and they've got the social interface right. Many similar things were significant contributions to Google's success.

• Posted by: Gideon Greenspan
• July 11, 2007 9:40 PM

Pagerank is to Google,

What News Feed is to Facebook

• Posted by: Hashim
• July 11, 2007 11:07 PM

The value isn't in the users, but in the network effect all the connections between the users. Nowhere else has anything remotely close to knowing, explicitly, who your friends are and what they're interested in.

Mix that with the huge lockin that facebook has by its nature it is worth a larger multiplier. If you wanted to leave facebook, you can and take your contacts' information with you, but if they're still using facebook, you either lose their updates and interest connections, or you keep using facebook.

• Posted by: Sam Smith
• July 12, 2007 1:51 AM

it's actually even simpler than that. Google had revenue, and a really strong case why there would be very much more revenue in the future. Where there is lots of revenue, there comes profit, most of the time.

For facebook there is an amazing platform and I have to admit it is probably the only real social network out there. But the news feed on the start page is again just a feature. It does not result in revenue either, neither does PageRank really.

Google didn't get such a big value simply because it was big, but because each added bigness resulted in added revenue and marginal cost was low. That is just not the case for Facebook.

• Posted by: Oliver Thylmann
• July 12, 2007 7:00 AM

The simple answer is social network graph

• Posted by: Ross Mayfield
• July 12, 2007 7:02 AM

Interesting take. My concern is that FaceBook may fall flat on it's face. In the same way that the fickle public has flocked to their door, they may similarly head down a different route next week or next month when the "next big thing" comes along.

The trick they need to pull is to keep their audience captive and keep ahead of their competition (i.e. everyone out there who thinks all this is easy)

• Posted by: Owen
• July 12, 2007 7:02 AM

I agree with Mr. Greenspan's assessment and would add - don't underestimate the power of the 'platform'. The clean execution combined with a growing catalog of apps tied to the platform make it a compelling competitor. The robustness of their platform approach has been lauded by many developers.

• Posted by: Jim Coen
• July 12, 2007 7:21 AM

Gideon, Hashim, & Ross have identified the PageRank equivelent for Facebook: it's The Feed, also The Platform (ie, Facebook Apps).

more detailed navel-gazing here:
http://500hats.typepad.com/500blogs/2007/07/marketing-faceb.html

(note: David Sacks from Geni also had a great guest post on TechCrunch on this subject a few months back, linked from my post )

• Posted by: dave mcclure
• July 12, 2007 7:25 AM

There are a couple things special about facebook..

Remember when AOL was hot? you would log into one place and get email and IMs and meet your friends in a chat room...

what's the problem? AOL played it very wrong AND IM and chat rooms were synchronous, and email got full of spam.

Facebook makes your experience of the internet more socially dynamic (and unlike the blogosphere it's centralized and easy for the masses to digest) it fills it with people. You log in. You have messages, and all manner of interactions with all manner of people. You're bored? You don't have to leave facebook, the open development platform ensures you can find all manner of diversions without going anywhere at all.

[Facebook spam is minimal (does it exist at all?) because it's opt-in .. which means you can now go back to asynchronously messaging your friends with no fear of spam. Yes you can do that with gmail, but that's ALL you can do with gmail.]

Facebook is where AOL could have gone. Facebook is non-stop social interaction along multiple axis---it's the answer to all those people who find the internet cold and empty.

It's also the AntiWeb 2.0 ... because it's centralized.

There are some implementation problems in facebook.. but they're not major:
1. what happens in groups doesn't get integrated in your news feed very well.
2. The Wall is a weird concept that Wall-to-Wall makes a little easier but still, I don't know how long it will last--only the News Feed keeps Walls really going.

News Feeds drive the users to all the other features... even more so than PageRank drove people to pages via google. (that's the appropriate comparison)

How is it not all monetizable? There's nothing locking users into Google... there's something locking users into Facebook. Lots of users who are keeping track of whatever their friends are doing. Talk about an oppurtunity for viral marketing.. you could pay some key popular people to add new apps to their profile and thousands of others will add the apps, these apps can drive all kinds of mash-ups with unlimited monetization potential just as the web is unlimited in its potential for monetization.

It's not a website. Facebook is it's own network.

• Posted by: yitz..
• July 12, 2007 7:31 AM

sorry for the double post, this is short I promise:

With google pageRank meant pages were important to a lot of people--which means maybe they're important to you too.

With facebook, everything that happens in your newsfeed is relevant to you.

• Posted by: yitz..
• July 12, 2007 7:34 AM

The difference (and value) that comes from facebook is the user data. People are used to lying about themselves online, but Facebook has created a platform where people are obliged to tell the truth about themselves to make the app useful to them. So they expose their life, buying habits, and everything there is to know about them. And that as we know it, is money in the bank for facebook partners, ad sponsors and whoever ends up buying them.

• Posted by: Gagan Diesh
• July 12, 2007 9:04 AM

I predict these sites will be sold to a mojor media company

www.facebook.com
www.congoo.com
www.squidoo.com
www.rollyo.com
www.picsearch.com

Facebook has all kinds of users and a huge brand that wont stop growing. Congoo has a growing audience, patented technology, awards from major media and partnerships with major publishers. Picsearch is a must have for all these startups and has cornered the powered by image search partnership model. Squidoo is in bed with webmasters and they seem to all use the alexa toolbar...so thats a great audience. Rollyo was featured with Congoo and picsearch on PC World Cover for June.

• Posted by: Jordan
• July 12, 2007 9:17 AM

John,

I think the fact that Facebook is a "closed" network (closed to search engines, that is) with a lot of traffic & social interactions makes it a credible threat to Google.

• Posted by: Sebastien Provencher
• July 12, 2007 9:27 AM

John you have totally missed the point and not begun to answer the question. Whether or not Mark & co are willing to sell, the question is what is Facebook worth? You have chosen an arbitrary number ($30m in earnings) and made the claim that makes the company expensive. Growth stocks tend not to be valued on earnings. eBay bought Skype for c.$4bn. I am not even sure whether Skype even had any revenues at that point, let alone any earnings!! (OK they had some sales but not much.) The value of Facebook is the speed of growth in the sustainable sub base and the ability to persuade those subs to spend some money or click-through and persuade advertisers to use it to advertise.
Frankly for such a young company to have $30m in earnings already makes it a fairly astonishing achievement in my view.

• Posted by: Nick
• July 12, 2007 9:36 AM

eBay buying Skype is a bad comparison because it isn't clear that was a good deal. After all Yahoo! bought broadcast.com for $6 billion and Microsoft bought LinkExchange for $250 million both of which turned out not so great.

The main problem with Facebook demanding such a premium is that by the time Google decided to go public they'd figured out how to make money [in fact one of the biggest money making schemes of all time] but so far, no such eureka moment has occured with Facebook yet. If I were them, I'd be poaching folks like crazy from the major Web advertising companies to see if they can create their own miracle like AdWords/AdSense.

• Posted by: Dare Obasanjo
• July 12, 2007 9:52 AM

I think the answer is quite simple. They are doing pretty much everything right, and nothing wrong. That is damn hard to do. They are succeeding at being both restrained and innovative. How they do that is another matter all together...

• Posted by: Michael Fagan
• July 12, 2007 9:52 AM

So, John. Does this mean that if Facebook becomes to "online identity" what Google is to search, when you write a book about it called "Identity," you will start it off with an anecdote of how perplexed you once were at why it had so much potential?

• Posted by: Rex Hammock
• July 12, 2007 10:08 AM

My take: http://www.allpeers.com/blog/2007/07/12/john-battelle-on-facebook/

• Posted by: Matthew Gertner
• July 12, 2007 10:23 AM

The answer is critical mass.
As for Google, PageRank is not a barrier to entry anymore, it's a commodity. Google's current barriers are cash, established publicity and established userbase.

• Posted by: Emre Sokullu
• July 12, 2007 10:37 AM

Recommendation to FB: Take the 6 billion and laugh all the way to the bank.

Recommendation to MS: Don't spend this you fools!

Companies with the biggest buzz (YouTube, Facebook) have what appear to be extraordinary buyout valuations that are not consistent with their profitability or what even seems like a realistic, risk adjusted long term analysis.

Why? Market movers as players combine with speculative frenzy and lead many to assume they'll get out before things change. It's more like casino thinking than Warren Buffet thinking. Big players like Google and MS can afford to make what I think they'd see as "strategic" high offers but what a reasoned analysis suggests are foolish bets.

Lots of this happened in late 90s and only a handful of the players are left standing, most at a small fraction of their values at the pinnacle of *that* irrational exhuberance.

• Posted by: Joe Duck
• July 12, 2007 11:12 AM

"What PageRank is to Google, Newsfeed is to Facebook."

I like that. Its true. In one place, I can see who has posted new photos, who's planning a party, who broke up with who, and basically what is going on in all of my friend's lives. Its incredibly easy to stay in touch and still feel like I'm connected to my friends still in college, even though I recently graduated and moved away.

Its an almost effortless, one-stop place to feel connected.

• Posted by: Kowieski
• July 12, 2007 11:17 AM

I think Facebook at the moment is great! I use it a lot to keep in touch with friends, etc. Almost all of my friends that are in a social network, use Facebook, vs. another site.
The biggest issue here is that if Facebook does in deed get bought lets say by Microsoft for $6 bil or any other company for a similar $$$ amount, they’ll very soon try to transform Facebook so that they can get a return on their investment. To do that they’ll try to get more advertisers to advertise there, etc. which will really turn off and drive users away. Users like Facebook now because it’s not filled with ads and spam, but if it gets bought that will most likely happen, which in my opinion will be the downturn of Facebook.

• Posted by: Di Di
• July 12, 2007 11:55 AM

What's the value of FaceBook? 1/3 of my entire city is on FaceBook. 95% of my high school. 80% of the people I've worked with over the years. 100% of my ex-girlfriends.

It's the network. Here in Torono it's larger than anything else in history.

We're planning an event. We invited the key people in our networks, and 1 hour later had 100 RSVP's as yes.

FaceBook makes new things possible. I'm not saying it's worth 6B, or that the Applications thing will succeed. Only that this is fundamentally different than anything Toronto has seen before.

• Posted by: Jeremy Wright
• July 12, 2007 12:05 PM

Jeremy - but if 100% of your Ex's were from Texas, then I think only about 10% of them would be on Facebook. You should consider this a statistical anomoly and save your $6,000,000,000 for more Valentines.

• Posted by: Joe Duck
• July 12, 2007 12:40 PM

Though I'll not attempt to answer the question of "why Facebook, why now?" at a meta-level, I can speak to its value for me personally.

Facebook is enabling me to simplify my digital life. Not only does it amalgamate both my professional and personal life (and, thus, presents a much more fully-orbed picture of who I am), through apps like Zoho it is beginning to fulfill some utility functions, in addition to the social ones.

I would hope this would continue as I'd like to be able to put more of my digital eggs in one centralized basket. Afterall, isn't that the Nirvana the coming Web 3.0 envisions...turning all these digital archipelagos into a Pangaea.

• Posted by: Paul Chaney
• July 12, 2007 1:40 PM

and the real answer is...bankers need some new stock to sell!

• Posted by: wag
• July 12, 2007 2:08 PM

I've got to agree with some here that question where they're going to find a revenue stream that will scale with all the theoretical potential the tech media loves to wax so eloquently about. I read these stories everyday and it feels like I'm back in 1999 again.

Google's growth from the consumer end was easy to understand - they delivered a good product (at just the right time when the web was exploding) that was well executed and scaled wonderfully. I have no doubts Facebook could see similar growth based on their solid platform. But Google also had access to a proven revenue stream that could also scale wonderfully with their growth. Facebook currently doesn't have anything REMOTELY close to that. Content and behavior-targeted advertising can bring big money but still offers somewhat limited potential, even with a MASSIVE user base (see Yahoo which excels in this area.) Viral marketing is a great buzzword but is a crapshoot at best and will not consistently bring the mega advertising dollars required to justify such a high acquisition price.

Being dependent upon any ad-based revenue stream for that matter will actually cut against the grain of the core audience of the site. I think their best bet is to sell to somebody like Google or Microsoft which has the resources to eat any potential losses simply to gain a dominant marketshare (which Facebook still doesn't have yet despite all the media attention.)

• Posted by: RustyS
• July 12, 2007 2:35 PM

I believe Facebook will crack the code for social recommendation search/advertising. Yes, it's Google 2.0!

• Posted by: Dimitar Vesselinov
• July 12, 2007 3:26 PM

Well, Google's current market cap is $169B -- So, actually $6B would be a comparative bargain. At $10B, they'd probably take the money, and MSFT would be a player in the online space -- priceless :-)

• Posted by: tolles
• July 12, 2007 5:46 PM

I'd be a little surprised if Microsoft really bought them. Facebook isn't Google 2.0 - it's a whole different ballgame. As such, they're totally in the driver's seat. Microsoft has a lot more need for this than Facebook.

But, hey, if someone threw $6 billion on my desk, I'd probably take it...

• Posted by: ian Lurie
• July 12, 2007 9:18 PM

Sorry, one more comment - this $6 billion would be MUCH better spent than the $6 billion they blew on aQuantive.

• Posted by: ian
• July 12, 2007 9:20 PM

Fully agree,

PageRank is for google
RSS Feed is for Facebook

For detail, have a look at http://www.hwswworld.com

Ed

• Posted by: Edward
• July 12, 2007 11:42 PM

Facebook is your online identity - it is better than a blog for the majority of webusers, it is addictive & allows for consensual voyeurism.

At present facebook isn't making meaningful money, but just imagine if they did a deal with Google or one of the other major players that allowed usered to search the web directly from facebook, & that company then shared the revenue, it could be quite big...

They could also produce an equivalent of the Personalised homepage, containing RSS feeds of all everyones favourite websites - this could then be seen by other users and be a way of facebook pushing from being online identity to online life...

If I were Google I'd pay whatever it takes...

Richard

• Posted by: Richard Barber
• July 13, 2007 4:23 AM

Google's service (i.e. why consumers use it) is search. Pagerank is what differentiated it from the competition and made it become the dominant search engine, and the starting page for everybody.

However it's business today (i.e. what drives 99.9% of its revenue) is adwords. Therefore Google's business is no longer search, that's just the service they provide in order to present ads. And the future of that business is that of consumer profiling. In order to "improve your search" (and advertising) "experience" (and provide more targeted ads), they are compiling and integrating every piece of information they possibly can about you from your search history, entire web history, ads you click on, accounts with them, content of your google mail, and whatever else they can find. With the smartest people in the world analysing this information, they can know you better than you know yourself, build an unparalleled marketing database, and provide targeted leads to advertisers...a gold mine.

Facebook's service (i.e. why consumers use it) is social networking. The Feed is what differentiates it from the competition and is making it become the dominiant social network. It will become not only the starting page for everybody, but unlike Google, becomes the destination where they stay for hours. (Search is just another service for them, easy to wack it on the top line, simple deal with Yahoo.)

It's business? Well they are also an unparalleled consumer profiler, just like Google, only with access to different information. They have access not only to the most detailed intimate personal information that you volunteer about yourself in your profile (likes, dislikes, favourite movies, films, politicial beliefs, age, religion, education,employment etc...(BTW this alone is a marketer's dream)...but they can cross-reference this with that in your networks. And with analysis of your communications with your networks. So they can also build an unparalleled marketing database and provide targeted leads to advertisers. Only they have more scope to be creative with it. This is not a gold mine, it is a platinum mine.

"Yes, I'd happy to pay top dollar to present this ad to right-wing, university educated males who have worked for blue-chip finance industry, whose networks and correspondences are disproportionately weighted with females much younger than them"...Ferrari Ad Manager.

• Posted by: Nicholas
• July 13, 2007 4:35 AM

Joe: I wasn't advocating the price. Simply putting my 2c in there on where the value is. What the value is, M&A; wise, is something I'm not even going to venture a guess on. 2-3B seems within the realm of reasonable. 6-20B though? Dunno. Above my pay grade ;-)

• Posted by: Jeremy Wright
• July 13, 2007 8:07 AM

Nicholas illustrates how Facebook can deliver ads that are better targeted and more relevant to the individual.

However, the problem remains: when someone is on google, they are looking for something and are more receptive to marketing that leads the user to products or information. when someone is on facebook, they are there to catch up on their peers and, as Di Di mentions, most likely do not care to be marketed to.

Of course, there may be other ways for facebook to make money. They just haven't happened yet.

• Posted by: Charles
• July 13, 2007 10:37 AM

Mark's senior team and the next tier of management who have put in 100 hour weeks over the past several years probably want to cash in now. I believe they will be ready to sell soon and probaby to Google in a multi-Billion dollar deal. The corporate cultures and audiences of these companies mesh well.

• Posted by: Ned
• July 13, 2007 1:37 PM

wow, lots of posts here.

The simple answer is that Facebook is executing better than any other networks. That's really all Google does too, they execute better. But in order to be the next Google they need to execute their business model the way Google did. Only time will tell.

• Posted by: dumbfounder
• July 13, 2007 3:35 PM

The answer is Booze Mail.

What was the question?

• Posted by: Booze Bot
• July 14, 2007 9:14 AM

First it was Classmates, then it was MySpace, then it was suddenly Facebook. There's every chance that such things will implode or at the very least become passe.

• Posted by: PKtm
• July 14, 2007 1:25 PM