As a kid I used to collect baseball cards. And I loved perusing the monthly card guides (e.g. Beckett) to see how much each one of them was worth. Well, come to find out that these were suggested prices based on a culmination of various statistics aggregated from numerous sources such as trade shows. They were originally designed to help amateur’s barter with professional card dealers — to even the playing field. However, if you’ve ever tried to sell your cards to a dealer you’ll find out a couple of things. First, dealers are usually only looking for specific types of cards and second they have their own subjective evaluation of what a card is worth.
While this topic deserves some professional investigative attention (especially in terms of inflation, scarcity and what Upper Deck “accidentally” did years ago), this is not the reason for the post.
This is about my favorite social networking site, Facebook. Apparently they are up for sale and recently turned down $750 million. They want $2 billion. Now while some pundits may claim that the entity is not worth this, the reality of the situation is, they are only worth as much as someone is willing to buy them for (e.g. Subjective Theory of Value).
A quick history of headline purchases in 2005:
eBay buying Skype for $2.6 billion (plus another $1.5 billion over 3 years).
News Corp buying MySpace for $580 million.
AOL buying Weblogs Inc. for $25 million.
And who could forget Yahoo buying Mark Cuban’s Broadcast.com for $5.7 billion back in 1999?
So the multibillion dollar question is, are these firms worth it? Is there some objective metric for such valuations? Interestingly enough, I know someone who is finishing up a book on this very subject — on adding real substantive value to a business prior to selling it. I’ll keep you posted on that.
And my own personal opinion as an avid user of Facebook, I think they still have time to seperate themselves from other me-too copycats but their time is limited. Many moons ago I noted several features that would certainly keep users logged in throughout the day (such as adding the ability to upload resumes and interact with potential employers), unfortunately they have not been implemented. Ignoring these innovations only leads to leaving money on the table. I don’t think it takes a graduate student to point out that the millions of college users want a job some day and what better place would it be to try and network with companies than a college social networking site?
Nope, instead the managers and directors decided to “branch out� and let highschool students in. This smacks of a desperate attempt to increase unique users rather than increasing the amount of time a user spends on the Facebook — it is a vein attempt to copy sites such as MySpace. I predict it will not only fail to achieve higher numbers than its rival, but that in the process will disenfranchise the core users: one of the draws for me and everyone I know is that it is exclusive to the collegiate realm. No offense to the demographic group, but I don’t have a strong desire to socialize with a bunch of highschool students; hence one of the reasons I do not goto the mall or hang out at Starbucks. And I really have no desire to do so virtually either.