Is Facebook’s Valuation Justified? A Comparison of Key Financial Metrics to Apple and Google

The recent release of Facebook's S-1, the financial filings that are required to be publicly available prior to filing an IPO, has created a media frenzy. The report has been dissected and analyzed extensively, financial news networks can’t seem to stop talking about it and it seems that people who have never heard of an IPO are discussing it, fittingly, on their Facebook pages.   The most controversial issue, of course, is whether Facebook is actually worth $100 Billion. 

Although Facebook is unique in its global reach and ubiquity, the starting point for any valuation is to compare it with similar businesses.  I have chosen Apple and Google, given the similarity of their business models and their respective global dominance, to compare certain key metrics:

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Why the Critics are Wrong about "The Social Network"

As someone who has been wanting to see “The Social Network”, I was sceptical that it was going to be able to live up to it’s 97% rating on Rotten Tomatoes – the bar seemed way too high.   Also, I wasn't convinced that Aaron Sorkin, with his rapid fire, wisecracky, yet somewhat unrealistic dialogue, was going to be able to make the movie seem natural.  On the other hand, I was encouraged by the fact that Nine Inch Nails was scoring the movie and David Fincher was directing, (Fight Club is one of my favourite book adaptations). 

The movie’s opening scene, a conversation between Zuckerberg and his girlfriend, is immediately gripping.   The dialogue is fast paced and wisecrack heavy, but it actually seems completely credible and realistic.  You get an immediate sense of what drives Zuckerberg – he wants to prove himself and be recognized - without having to resort to clumsy or ham-fisted narration.   From then on, the narrative unfolds through a  series of flashbacks invoked by questions posed in  two separate depositions.  Jesse Eisenberg’s performance is understated and nuanced. He is able to communicate a great deal without any apparent change in his facial expression.  The Winklevosses are the quintessential Harvard “crew” – handsome, fit, entitled and slightly douchey.  Their encounter with Larry Summers (who knew that  he was the Dean of Harvard) is an illuminating (although probably embellished) detail. Justin Timberlake is totally convincing as Sean Parker, the co-founder of Napster, who helped Facebook get it's first round of VC funding, although he comes across as being a bit of a dick.

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3 Great Resources For Your Facebook Business Page

 

Every small business should consider setting up a facebook business page.  Except for your time (which is an opportunity cost), there are no explicit costs to setting up a page, and the rewards can be significant.  Keep in mind that, after you have set up your page and have found 25 people to like it, you are entitled to a "vanity" url (mine is http://www.facebook.com/montrealfinancial) This, in addition to being kind of exciting, is akin to reserving a domain name for your business.

Below are three articles that provide essential guidance and resources to anyone looking to either setup a business page for the first time, or enhance their existing page.  It is important to note that a facebook page does require regular updates, and  interaction to act as an effective marketing tool.

 

 

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