[viscanti]

The current data sales business model doesn't support their sky-high valuation. Most investors assume that Facebook will "figure out" a better way to monazite their audience. Facebook commerce and credits sales for the Facebook platform look to be their most promising options. Facebook isn't all-in on data mining. They're certainly hedging their bets.

Obviously nothing is guaranteed, and I personally believe that they'll have trouble finding anything that justifies their valuation. But a lot of smart people think they'll figure it out, and are putting their money where their mouths are. They have some options, but we'll just have to wait and see how those actually progress.

[samstave]

$.99/month per user.

$6 Billion per year revenue

[dredmorbius]

Look up cost of revenue.

The billing systems (and customer support) you'd have to put in place for something like this would likely make it prohibitive. It's the flipside of "there's no such thing as a free lunch": there's no such thing as a free lunch payment (or pricing) system. Billing, collections, currency conversion, and end-user hand-holding ... it doesn't hold up. Advertisers are far fewer, find far higher value in the system, and on a per-unit basis are much more economical to tap.

Network effects are another huge factor. A large part of FB's value is that everyone's on it, and everyone's on it because everyone's on it and it's free.

You could conceivably come up with an end run around some of this, but it would take some creative thinking. I don't believe it's feasible to have the end users be the direct customers of such a product directly, though with a concentrating middleman, possibly.

[1010100101]

Sounds simple enough. It's probably far more revenue than they're making now. So why haven't they tried it? What's to lose?

[pyoung]

I am sure google+ would love it if FB started charging for accounts.

[1010100101]

I think we have an answer.

[samstave]

I am surprised they have not rolled out premium features for which users pay.

[101010010101]

In your opinion, do you think they should proceed with an IPO even if they have yet to "figure out a better way to monetise their audience"?

Perhaps the key word is "better".

[viscanti]

Better for whom? They'll have trouble justifying their valuation indefinitely, which normally would mean that they're better off going public sooner rather than later. But Facebook stock seems to be a rather liquid investment right now on the Secondary Market. So for the average employee or investor, they can pretty much get out whenever they'd like, mitigating one of the big benefits of going public.

For FB as a company, they're probably better off delaying their IPO as long as they can. As a private company, they don't have to make their books public, and can continue to "figure it out" without extra scrutiny. Delaying the IPO also lets them promote themselves as a pre-IPO "startup", while I don't personally see the growth potential, and I think they've got a lot to do to even meet their current valuation, it could help sway some developers. They've got a long way to go to justify their valuation, and they can use all the developer talent they can get, so any little thing can help.

[101010010101]

Thanks. Should FB have to justify their pre-IPO valuation(s) or should that be the responsibility of the investment firms and individual investors who have set it?

[viscanti]

FB doesn't need to justify their valuation. They didn't set it. It's unfortunate that it's so high. I think their valuation is a weight around their necks. They're expected to "figure it out", and eventually justify it, and it's a lot of extra noise they'd probably be better off without. What they're looking to do (and what they have the potential to do) is very ambitious. Extra expectations make it even more difficult.