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by redthrowaway 5164 days ago
Facebook's valuation is based on potential, as opposed to any real metrics. It has a staggering number of active users and frightening amounts of data about them. The bet is that they find a way to capitalize on it.

I'm not bullish on facebook by any stretch of the imagination, and their P/E is ridiculous, but it's also the wrong metric to be looking at when deciding whether it's a good investment.
1 comments
repsilat 5164 days ago
> It has a staggering number of active users and frightening amounts of data about them

The financial value of those users must grow super-linearly. The most recent figures I can find put them at having 901 million active users, which means they're valued at $111 per active user. Crazy stuff.

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jbooth 5164 days ago
If they can sell a $3 CPM, and each user loads 40,000 impressions lifetime, then they've monetized each user at $120 over that time period. That's a lot of impressions per user, but people click a lot on facebook. Plenty of room for them to grow.
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jonknee 5164 days ago
That's a ridiculously high CPM for social media. The page views are very low value, even with all the targeting. Considering their revenue now and their traffic figures (over 1 trillion page views a month), their average is currently very low. $1B / 3T page views = $.33 RPM. They get a decent chunk of revenue through things other than advertising (namely their payments system) and that's a low-ball on the traffic, their traffic is very low value. Further growth is likely to come from international markets that are also very tough to monetize. To get that RPM up 10-20x would be astonishing.
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redthrowaway 5164 days ago
I still don't see their endgame being traditional display advertising. It just can't provide the kind of cash they need. I think we'll see the engineers at facebook find ways to directly exploit the value of their network, but I only have vague notions of how they might do that.
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thezilch 5164 days ago
Honestly (as not a familiar of FB's advert system), can they sell a $3 CPM? On every impression of a user -- inventory typically degrades as session-impressions degrade?

40K impressions would require 110 pageviews/day over 365 days. For comparison, Reddit averages 13 pageviews/visit [0]. I imagine both are largely dependent on their image traffic; can we draw conclusions between the two? Anecdotal evidence would have me believe I load less "ad pageviews" on Facebook than Reddit.

[0] http://blog.reddit.com/2012/01/2-billion-beyond.html

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