In case you haven’t heard, Microsoft recently invested $240 million into social networking all-star Facebook at a $15 billion valuation. Just to put things in perspective, that places Facebook as the fifth most valuable internet company, sitting squarely between Amazon at #4 and Interactive Corp (which runs Ask.com, Hotels.com, and a slew of other sites) at #6. Heady stuff for a company that’s estimated to be at a $100-150 million revenue run rate. By point of comparison, Interactive Corp did $6.3 billion in revenue last year. On a much different business model with a much different growth profile. So we’ll see.
In the meantime, a couple of my enterprising entrepreneur friends have put together a Facebook application called, “How Much am I Worth,” that values one’s profile based on the recent investment valuation. It’s not unlike Dane Carlson’s script, “How Much Is Your Blog Worth?,” which he based on the estimated acquisition value of Weblogs Inc in late 2005 and accompanying research. Here’s the valuation methodology for the new Facebook app:
First the average profile value is calculated by dividing Facebook’s valuation by the total number of Facebook users. Then that number is multiplied by your profile score. Your profile score determines how you stack up to other Facebook users. Since Facebook’s value is determined by how much people use the site, your profile value will change the more you do certain things in Facebook like add friends, add notes, create groups, add photos, etc. Adding friends is easy, so it is weighted less than other tasks like uploading photos and adding notes. As a general rule though, a profile score of of 1.0 would mean you are about as active on Facebook as the average user, so your profile will be near the average. Expect your profile value to change on a daily basis.
The average Facebook profile is currently worth about $725 based on the number of Facebook users listed in their “advertisers” section and the $15 billion valuation. I’m currently contributing a paltry $69. But then, I’m not the average Facebook user.
I think some entrepreneurs may look at this app and shrug, thinking it’s got a nice viral component (some of us like to brag and/or pit ourselves against each other) and will benefit from good market timing but otherwise doesn’t hold a lot of interest. To the contrary, I’m fascinated by it’s blatant display of the value user generated content is bringing to companies like Facebook. In fact, the app captures some premium to this value - Facebook’s valuation depends significantly on its team and their ability to execute on a scary growth curve implicit in the $15 billion value. Nevertheless, every profile does actually hold value. And it’s value generated in an extremely scalable way, by users. I wonder if profile valuation shouldn’t weight interests, activities, and other preferential components of our profile much more heavily than our number of friends, photos, etc. After all, if a significant component of Facebook’s value is is the promise of more effectively targeting Facebook users whilst they’re navigating the web outside of Facebook, it is these preferences that will allow it.
If you’re on Facebook, go check out the application.
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Matt, I found Punctuative this week and love it!
Speaking of Facebook, I can’t believe how quickly people release apps. It is truly amazing. This valuation tool will enlighten the millions of people on the site to the amount of work they are putting into it.
As far as it relates to the $15B valuation, I don’t think the number of people divided into the valuation is how Microsoft looks at it.
Certainly Murdoch bought MySpace for the audience. Facebook also has a massive audience, but what I find most impressive is the software. I have a lot of experience on the web and in the world of web programming. I have yet to see a more sophisticated, multi-functional set of tools. Facebook has the advantage of classifying every piece of data at the granular level, giving them the ability to target ads, join like-minded groups and of course; allow programmers to build sophisticated apps on top of it.
I think Facebook will lead the upcoming Web 3.0 revolution, the Semantic Web.
[...] You have to read this blog entry from one of our friends regarding - How Much are You Worth on Facebook?…yes they calculate your worth! Don’t you just love the Internet! You are calculated by # of friends, photos etc….activity basically. [...]
P.S. My profile is worth $353. I wonder if I will get a return on my investment in time. Perhaps a new Facebook Social Ad (just launched today).
John:
Thanks for the kind words. Unfortunately, I wouldn’t hold my breath on profile usage ROI but it’s an enticing thought. Looking forward to seeing you next week.
Best,
Matt