Monday, July 20, 2009

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.

Indian Telecom Story (Part XII): Projection of Indian Telecom growth

India could have 500 million internet users, 100 million broadband connections and 100 million connected devices by 2012, provided infrastructural bottlenecks are removed and 3G and Wi Max networks are rolled out early according to Indian industry body representing the IT hardware MAIT.
MAIT has set for itself an ambitious target–Goal 511– for achieving 500 million internet user, 100 million broadband connection and 100 million connected devices by 2012.This calls for strengthening of the national IT infrastructure along with the physical infrastructure on a priority basis
At present, there are 60 million internet users, three million broadband subscribers and about 1-2 million connected devices in the country.
The numbers indicate a 9X increase in internet connections, 33% increase in broadband access and 50% increase in internet connection devices (including smartphones and other connectivity based devices).This would also require early roll-out of 3G and Wi-Max networks.
The Indian political scene and economic deficits would impact the spread and reach of internet across the country