UPDATED 12:30 EDT / MARCH 08 2012

Two Sides of $100B Facebook Valuation, and Why California’s a Big Winner

Facebook’s valuation since announcing its entrée to the IPO world has gone up to $100 billion. Lightyears before their filing Facebook faced numerous issues, hurldes and monetization demands, all occurring alongside news that Mark Zuckerberg was reluctant to go public in fear of the damage it might bring to his empire. He does not want his employees to work about stock prices, but instead stay focused on innovating and pioneering great products.

The IPO filing revealed $1 billion net income and nearly $4 billion in the bank for the year 2011.

Question on Sustainability

The bullish investors and cautious analysts alike are largely looking at a five-year period of growth (or downfall) and here, they question if Facebook has that enough sustainability energy in its pipeline. This simply means that Facebook’s is by far the largest social networking site in the world with 800 million members, garnering our emotional sensors through billions of “likes.”

But how far will it go? Has Zuckerberg and his vigorous young team already reached the pinnacle, poised to decline? Or, is the world seeing just the tip of the iceberg and there’s more waiting to be unleashed?

Forrester Analyst Jeff Bernoff thinks that Facebook’s continuous search for that technological “holy grail” may derail their social media kingship:

“A few months later, they just blew away a whole bunch of what had been in marketers’ toolboxes and said ‘Now we’ve got something better for you!’. Don’t be surprised if, nine months from now, it’s ‘And now we’ve got a new and better way for you to interact!’”

He added, “Just because Facebook has 800 million users, doesn’t mean it will be the dominant company five years from now.”

Why Facebook is Worth It

By looking at the countless interactions that happen on Facebook with each blink of the eye, you have no reason to withdraw your faith from such an information magnet. Some pundits think that investing in Facebook is not a huge risk at all. The social media titan is generating revenue like crazy, and it is still the hottest property on the internet today.

One of Facebook’s investors, Index’s Rimer would like to stick it out with the social network for now:

“There were opportunities for us to sell (our stake) before the company goes public. Is it conceivable that Facebook could be more valuable than Google? My sense is that’s a distinct possibility long-term. So we’re still holding shares – we think that, with the amount of information people are contributing to Facebook on an hourly basis, Facebook itself could provide pretty incredible search results. You could imagine a world in which you couldn’t live without Facebook but you could live without Google.”

Some may think that Facebook is set to decelerate anytime because it has captured nearly one billion users, we should be reminded that its presence in China is 0%. In countries like Japan, South Korea and Russia, its penetration rate is less than 15%. Strategically going after these geographical difficulties could bring Facebook to a tech superpower like no other.

Facebook is dubbed as a billionaire’s network.  Zuckerberg knows this well, sending a message to the world that he is still in full control of his brainchild wonder. The trust that will be placed on his shoulders are bouldering, especially with this IPO thing.

Facebook Numbers

The market is fairly ebullient with Facebook’s IPO filing in February. Setting up to sell $10 billion in shares, Zuckerberg plans to retain 60% of the power in his hands. His worth could shoot up to $28 billion and the overall company valuation will hit $100 billion—just enough to make history and kick out Google, who currently holds the record for the most stellar IPO debut. Others believe that with the added potential, the company might be worth more than that. According to a Forbes article, 85% of Facebook’s revenue come from advertising and 15% from payments. Facebook offers a strong formula for advertising success: vast reach + precision + social context + engagement.

Investors are not the only ones excited for the full blast of Facebook’s IPO. The state of California is tickled by the idea of the tax windfall from the company’s public offering bid. Wall Street estimated the tax to be at $2.5 billion. That’s a lot of money for a cash-strapped state.

There are six elements that Facebook should safeguard to ensure that the business will not be in any way jeopardized: add new users, retain existing users, attracting and sustaining ads, better integration with mobile devices, information security and increase user engagement. The last being the backbone of the business, Facebook should be able to keep on reinventing the interactions within its platforms. Simply put, more of that timeline and social graph is likely in store as Facebook evolves its platform monetization.

 

 

 


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