Possible Facebook IPO: History reapeating itself?

[Evan]

The funding I was thinking of was apparently 14 months ago. Jesus time flies sometimes. Anyway, that was $25 million and they had previously raised 12.5 mil, so the total is 37.5 over the last couple years. I was mistaken on the time frame. There was a rumor recently that the 25 mil was raised under "duress" because they desperately needed more servers and they had to sell off 10% of the company to get it. Facebook recently denied that rumor, it was originally reported by the London Times, so make of that what you will.

I think a lot of you are misunderstanding my point. I see a lot of people saying, "yea but last time all these stupid companies went public." Well yea, that's the point. Up until now these web 2.0 (or 3.0 or whatever term you like) companies had been staying private with their super high valuations.

Barron, I think you have a rose-colored view of how good the business models of a lot of companies getting VC funding are, but that's just my personal opinion. If you want me to provide evidence of companies raising way more money than makes any sense to me I can, but I don't think that's the point here.

maxtower, with all due respect, how could you possibly know how much facebook makes in ad revenue. All reports I've heard say that their target market (young adults) are actually performing worse than their already low expectations in terms of facebook advertising.

Hawk, I don't really care what term you use. Call it overenthusiastic investing for all I care.


To reiterate, I am NOT NOT NOT NOT NOT saying we're currently in a stock market bubble. I'm just doing a little bit of guesswork/storytelling to see if maybe we could be HEADED to one.

[DcifrThs]

evan,

i have no certain knowledgeof what is good/bad in terms of VC/PE firms investing. just the ones i've seen (the ones you mentioned, facebook/myspace) aren't like the 1998 events.

that was the point i was refuting.

i think we'll have the 'headed toward the bubble' route cut off as liquidity becomes less readily available. it is certainly possible that we are headed towards some market correction, but bubble i dont think so.

we just happen to have a ton of money available and are stretching for places to put it. as global real yields rise, they'rell be less money and those marginable valuations will be the ones that are first ditched.

Barron

[Evan]

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evan,

i have no certain knowledgeof what is good/bad in terms of VC/PE firms investing. just the ones i've seen (the ones you mentioned, facebook/myspace) aren't like the 1998 events.

that was the point i was refuting.

i think we'll have the 'headed toward the bubble' route cut off as liquidity becomes less readily available. it is certainly possible that we are headed towards some market correction, but bubble i dont think so.

we just happen to have a ton of money available and are stretching for places to put it. as global real yields rise, they'rell be less money and those marginable valuations will be the ones that are first ditched.

Barron

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Myspace and Facebook are a pretty select group of private companies. Another big name private company, Amp'd Mobile, recently filed for Chapter 11 after having raise $360 million. Obviously this is all a matter of personal knowledge/preference, but read Venture Beat for a few days and I'm sure you'll find more than a couple stories that makes you scratch your head.

Edit: and again, I'm not saying Facebook and Myspace are "peack of the bubble" type" companies. That's the whole point. I'm saying this might be the VERY VERY early stages of something similar to that.

[talentdeficit]

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OP I dont know why you would think one company valued at 2-3x revenues might be the start of another bubble.

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Because revenues aren't inherently worth anything. If they're cashflow negative with 500 mil in revenue who the hell cares?

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I'm curious how it's even possible to spend $500M operating facebook.

eastbay

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it's easy. you pay freshly minted college grads $90k and hire devs from google/ms/yahoo by offering them ludicrous salaries.

[Evan]

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OP I dont know why you would think one company valued at 2-3x revenues might be the start of another bubble.

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Because revenues aren't inherently worth anything. If they're cashflow negative with 500 mil in revenue who the hell cares?

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I'm curious how it's even possible to spend $500M operating facebook.

eastbay

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it's easy. you pay freshly minted college grads $90k and hire devs from google/ms/yahoo by offering them ludicrous salaries.

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I am positive facebook hasn't spent $500 million.

[technologic]

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OP I dont know why you would think one company valued at 2-3x revenues might be the start of another bubble.

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Because revenues aren't inherently worth anything. If they're cashflow negative with 500 mil in revenue who the hell cares?

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I'm curious how it's even possible to spend $500M operating facebook.

eastbay

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it's easy. you pay freshly minted college grads $90k and hire devs from google/ms/yahoo by offering them ludicrous salaries.

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even with 1000 employees (and i'm sure they have a fraction of this) at these salaries, that still doesn't cover $500m

[Evan]

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OP I dont know why you would think one company valued at 2-3x revenues might be the start of another bubble.

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Because revenues aren't inherently worth anything. If they're cashflow negative with 500 mil in revenue who the hell cares?

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I'm curious how it's even possible to spend $500M operating facebook.

eastbay

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it's easy. you pay freshly minted college grads $90k and hire devs from google/ms/yahoo by offering them ludicrous salaries.

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even with 1000 employees (and i'm sure they have a fraction of this) at these salaries, that still doesn't cover $500m

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They're not spending $500 mil. That's got to be a number based on recent history/projections. There's no way they've made even 10% of that in the last year.

[maxtower]

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maxtower, with all due respect, how could you possibly know how much facebook makes in ad revenue. All reports I've heard say that their target market (young adults) are actually performing worse than their already low expectations in terms of facebook advertising.


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I just know that the guy who runs plentyoffish.com reportedly makes $10,000 per day running google adsense. He runs his site by himself. I know its probably not the same scale as Facebook, but it is the largest free dating website on the internet.

I just looked at Facebook's site and realized there aren't many ads. They just don't show them. I think they are trying to grow right now and not dilute the user experience with advertisements. However, it seems to me they are leaving a ton of money on the table by not running some small ads. I am very familiar with how internet traffic can be monetized, and huge margins are indeed possible when you have Facebook's traffic volume. I guess they are just choosing to sell more of the company than show a few ads to pay the bills.

[El Diablo]

Evan,

You picked just about the worst possible example for this.

Facebook is a cash cow.

They raised VC money when they were scaling super fast and focused on just growing users and page views, and weren't worried about monetizing anything yet.

They have just started that process and initial numbers are pretty staggering. They have been widely reported.

Now with Facebook Platform they instantly have created one of the most locked in and strongest ecosystems in the internet business world to help fuel their growth.

Your whole thesis is so messed up it's barely worth discussing. There are many indicators that point to a possible bubble repeating past mistakes, and many indicators pointing to things being very different this time around. But the starting point of your discussions is just completely backwards and fundamentally flawed.

Your research, analysis, and commentary is very disappointing.

[El Diablo]

Evan,

Read this: http://blog.pmarca.com/2007/06/bubbles_on_the_.html

Then see trackbacks and comments to read blog posts agreeing and disagreeing w/ Marc and related blog posts.

Then you'll be able to make a more informed post, including links to a lot of relevant posts on both sides of this debate.