Every Facebook user has a price on his head

David Heath
Monday, 05 December 2011 10:57

Opinion and Analysis

For some considerable time there have been nay-sayers who remind us that Facebook users are not 'customers,' they are the 'product.'  With plans for an IPO, we now know what they are likely to be worth.

We reported recently of strong rumours that Facebook will execute an IPO in the new year attempting to sell 10% of the company for $US10B, thus valuing the entire company at $US100B.

Obviously such a pricing exercise will depend entirely on the market's appetite for the stock (far from certain) and assuming there is interest, at what price they wish to buy-in.

The recent Groupon IPO (along with the LinkedIn event even earlier) found plenty of interest in the stock along with a quick peak, but both followed that early interest with a steady decline, but perhaps that was a result of the heavy sales effort on the part of the underwriters and other supporting consultants, the cheery glow waning once their attention turned elsewhere.

One might opine (history is on our side here) that whatever price the Facebook IPO lists at, there will be a brief and rapid rise, followed by a less brief but steady decline down to what everyone hopes is a fair value for the company.

But, what is it that makes Facebook worth so much money?

Is it the assets and infrastructure?  Hardly, those have been purchased with early investment money and with early trading income and would be worth a few billions at most.

Is it the staff?  Probably not.  With no disparagement intended to anyone there, amongst the various tech companies, there's nothing particularly special about the Facebook team.

So, what's left?  Pretty-much the only thing left is the user base.