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

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.

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.

 

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?

Sol Nasisi
Sol Nasisi: Sol Nasisi is the co-founder and a past president of BestCashCow, an online resource for comprehensive bank rate information. In this capacity, he closely followed rate trends for all savings-related and loan products and the impact of rate fluctuations on the economy. He specifically focused on how rates impact consumers' ability to borrow and save. He also has authored a wee

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Comments

  • Thomas Bivens

    October 27, 2007

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

  • Joe D'Ambrose

    October 31, 2007

    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.

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