Facebook Has 20% Value of Newscorp on .33% of the Revenue

Article Submitted by: Mass Market Tech
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According to a recent investment made my Microsoft, Facebook, the popular online site has a valuation of $15b on revenue of several hundred million dollars. News Corp. which owns the larger social networking site MySpace, and which has $30 billion in annual revenue has a market value of $70 billion. Either Facebook is way overvalued or New Corp. is way undervalued.

 

Submitted: Oct 25, 2007    Views: 642    Comments: 2    Likes: 14   


Techcrunch posted an interesting article today on the value of Facebook in light of a recent investment made by Microsoft.  Facebook yesterday announced that Microsoft invested $240 million into Facebook for a less than 2% stake, creating a value of $15 billion for Facebook.  Facebook is estimated to have revenue in the $100 million dollar range and while it is growing quickly, is significantly smaller than the other large social networking site, Myspace.

The chart below is data from Compete, a company used to track web usage trends.  It shows that Facebook is 1/3 the size of MySpace.

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Here's the interesting thing.  MySpace is owned by News Corp, a company that does $30 billion per year in revenue.  So even though News Corp. owns a larger social network than Facebook, has all kinds of broadcast assets such as the Wall Street Journal, Fox News, HarperCollins, etc. its market cap is only $70b.  Let's look at that again.  Facebook has a market cap of $15 billion on maybe $100 million of revenue and News Corp has a market cap of $70 billion on $30 billion in revenue.  And they own the largest social networking site on the planet.

What's wrong here?  Either News Corp. is severaly undervalued or Facebook is severely overvauled.  Of course, Facebook's valuation is being based on what Microsoft is willing to invest.  But Techcrunch also reports that several hedge funds are getting ready to put in money at the same valuation.

So which is it?  Is Facebook a turkey or is News Corp. a huge buy?





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Comments Received:

Thomas Bivens

Overplump turkey :). No, Facebook is real but that valuation is absurd.

Posted: Oct 26, 2007

Joe D'Ambrose
(Unregistered)

It's the power of the technology rather than the revenue level. This technology will lead to insane amounts of future revenue. Kudos to Facebook for their innovation and smart decisions.

Posted: Oct 31, 2007

Author/Submitter Response:

No, there's nothing that special about their technology. It's about their users and growth and that still doesn't warrant the valuation.

Still, I agree with the kudos. If they can pull it off, good for them.



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