Facebook: 250 million users and counting, $6.5 billion in valuation

Digital Sky Technology’s recent purchase of Facebook Common stock has yet again provided a valuation to Facebook. DST’s purchase at $14.77 a share, values Facebook at $6.5 Billion currently. This valuation emphasizes and underscores the status of Facebook as the fastest-growing Internet social networking site’s and its high rank among technology and media industry heavyweights.
While the latest valuation is below the $10 billion valuation set by Digital Sky’s May investment in Facebook, which was for preferred shares, it is significant because, investors have been valuing the social network’s common stock at less than $5 billion in secondary markets in recent weeks. In the weeks prior to Monday’s pricing, investors in secondary markets had been valuing Facebook common stock between $10 and $10.50 a share, or up to $4.7 billion.
The deal suggests that Facebook has a higher market value than many established media and tech companies which generate significantly more revenue than Facebook, including CBS Corp and Salesforce.com.
CBS, which had $13.95 billion in revenue last year, has a market capitalization of $4.06 billion and Salesforce.com had a $4.72 billion market cap at Monday’s market close.
Facebook is expected to breach $500 million in sales this year, and expects revenue to grow 70 percent this year. At $6.5 billion, DST is valuing Facebook common shares at 13 times expected 2009 revenue well above the 2.2x multiple that is common for online advertising-based businesses and even the nearly 6x multiple of Google Inc, the No.1 Internet search engine in the U.S.
Analysts say that Facebook’s lofty multiple was not completely out of line given the strong growth in sales and users that Facebook is generating amid a tough business environment. Essentially, people’s expectations that this could be the next Google.
Facebook recently surpassed 250 million active users on its social network, up from 100 million users less than a year earlier, and vaulting it ahead of rival social network MySpace which is owned by News Corp. In 2007, Microsoft Corp invested $240 million in Facebook preferred shares, snagging a 1.6 percent stake, though that deal also included other elements such as an advertising partnership. That deal had valued Facebook at $15 billion.