Shortly, Facebook will rewrite the rule book for IPOs with its oversubscribed offering that values the company – in the terms it has set itself – at north of $100bn. To get to this point, Facebook has become a byword for an activity, a tool that is core to organising people's lives.
Make no mistake, Zuckerberg's achievement is stunning in business and cultural terms: for a startup to go from nothing to more than 900 million users and a stratospheric IPO is astonishing within any timescale. To do it in eight years from a standing start is unprecedented. Today, Facebook is the app or platform equivalent of the mobile phone, the desktop PC, in terms of its global user base.
But away from the ticker-tape parade, what is Facebook's underlying value? The core asset of a social network must be its users, and so it is reasonable to ask what each of those 'assets' is currently worth to the company. The answer is: $1. One hundred cents.
For the sake of argument, let us suppose that Facebook has one billion users – it will soon, according to its own figures – and a theoretical market capitalisation of roughly $100bn – again, according to its own valuation. Of course, a market capitalisation of $100bn divided by one billion users means that each Facebook user is worth $100 to the company's investors. Not bad, you might think.
But now look at Facebook's financial performance. In fiscal 2011, Facebook's net income, it said, was $1bn. If that figure is correct, then in pure profit terms each of those one billion users (again, for the sake of argument) is only worth $1.
Let's spell that out: in the real world, Facebook currently makes roughly $1 per user a year. And falling, according to its most recent 2012 results, which showed a significant drop in profits. Replace the word 'user' with 'customer' and the size of Zuckerberg's problem becomes apparent.
Of course, the exact numbers are different and Facebook had fewer users in 2010-2011, but the principle stands: its market value is many, many times greater than its annual profitability, according to its own figures. That massive chasm needs to be closed for investors to stay onboard.
Users, meanwhile, don't care.
This, then, is the underlying problem for the company. The stock market says that each user is worth $100 to the company's investors, but its financial performance says otherwise. The tough reality is that each user is worth a tiny fraction of that amount in monetary terms – give or take a few real-world cents. And none of them care.
And as Facebook's user base grows past our notional one billion mark, the monetary value per user will actually fall – unless it can drive up its profits and its share price much faster than its user base is growing.
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