The Value of Facebook: Knowledge and Power in the Age of Online Accountability

Chris_dewolfe_rupert_murdoch_john_bFrom left to right: Chris DeWolfe, Rupert Murdoch, John Battelle (Credit: Rafe Needleman/CNET Networks)

it turns out I’m worth £160.  or to be more precise, what I (and people like me) click on when I’m logged on to Facebook, is worth £160.  a bit of number crunching…

  • Facebook wants to float on the stock-market.
  • Facebook (what with the overheads of servers, bandwidth and 300+ staff) can’t afford to.
  • so they need capital investment.
  • it was today announced that Microsoft have bought a $240m stake in Facebook
  • a stake (which I calculate = 1.6%) that values Facebook at $15bn (£7.3bn).
  • I am one of 47 million Facebook users.
  • I’m worth $15bn valuation / 47m users = $319.
  • or around £160 (based on $2 : £1 ratio)

I’ve made a big assumption: that most of the value of Facebook is locked into it’s user-base, and – more crucially – what it represents.  which seems to be a fair assumption.  the high valuation of Facebook certainly isn’t down to the physical assets of the company.  but nor is it due to the simple aggregation of it’s 47million-strong global audience.

the value of Facebook is information.  not on who or where they are (although thats important).  rather its information on what it’s users click on.  more numbers I’m afraid:

  • if the av. Facebook user gets served 6 ads per day,
  • then each month Facebook serves 47m x 6 x 30 ads.
  • thats 8.5 billion data points every month.

it’s this data that’s so valuable to Facebook, and to Microsoft should they get their hands on it,  because sales operations will use that information to understand who clicks on what, when, and how often.  targeting gets better, which improves response rates and efficiency of ad-serving.  which given the numbers involved (and Google’s head start in this area) isn’t a bad return on a very minor investment in the company.

as a point of comparison, Maxim USA was recently sold for a rumoured $250m.  based on a readership of 16m (source: Dennis publising), that equates to $15.63 (or around £7.80 per user) – around twenty times less the equivelant for my Facebook valuation (£160).

the point of course of all this is that according to a Guardian article Friday October 19th, Facebook is expected to bring in just $150m of revenues, so – assuming all users are equal – I’m generating around £1.60 for the company a year.  the fact that in their valuation I’m worth more than one hundred times that, is testimony to the value of data, and the accountability to advertisers that it affords.

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