We took into consideration the following when we evaluated Facebook:
- Advertising trends
- Online vs Offline
- Decomposition of Online advertising spend by channel
- Decomposition of Online advertising by major providers
- Member growth trends for Facebook
- Time spent on site (Facebook Vs. Google)
- Unique visitor growth (Facebook Vs. competitive set)
- Growth in Facebook Business Pages
- The traditional advertising model as it relates to Facebook and the competitive set
- Business growth related to apps, games, and virtual eCommerce
- Potential new sources of revenue
- Mobile ads
- Social Reader Fees
- Initiation of fees for Business Pages
- Recent acquisitions of Instagram and Tagtile
- Currently Facebook is under monetized. This was probably a strategic decision on the part of Facebook management. It is clear that the priorities for the organization were first to ensure their infrastructure was solid, and secondly to monetize the business to the fullest.
- Facebook’s user base is very large, active, and loyal. Their growth into new areas cannot be judged by their current business activities. No one could have predicted that Google, a dominant search engine at the start of the Internet boom, would have developed into the empire it is today.
- As database experts, we see Facebook’s biggest, and perhaps most under-reported asset, as their database. Facebook possess a database of 900 million users, with virtually every piece of information about an individual from relationships, to political affiliation, leisure time, vacation preferences, entertainment interests, brand preferences and more, all given freely by users. Facebook sits as the gatekeeper, but can monetize this enormous asset by charging a fee to target marketing communications for advertisers. One metric of a database business is the value relative to the database size. By this metric, at $115.55 per user, we feel that Facebook is a relative bargain since on average, there should be at least this much value, on average, per user to be gained.
We hope you enjoy,
Rhonda Knehans Drake & Perry D. Drake