Goldman Plans to Take Orders for Facebook Shares Today

The WSJ reports there is more interest in Facebook shares than there are shares available, so investors should expect to receive but a fraction of what they ordered.  Still, there is a dearth of financial information.

Jim Edwards ( explored that lack of information, asking some fundamental valuator-esque questions:

  • What are actual revenues and profits? Reuters and the NYT dffer in their estimates. Marc Andreesen, a Facebook board member, said in an interview with Reuters in mid-2009 that Facebook's revenue would exceed $500M in 2009, and that by 2014 it would be in the billions.  eMarketer recently gave a robust estimate of $1.86B in ad revenues in 2010!
  • What is the source of the revenues? How much is ad-based, recurring, etc.?
  • If LinkedIn doesn't make money, Demand Media doesn't make money, and MySpace and GeoCities had a similar models, why is Facebook more than a fascination?
Trefis values Facebook at $45.1B, and divides the company into four divisions, assigning market cap to each, so we can get closer to answering some of Jim’s questions.

Text and Display ads:  60.1%

Credits on Games & Applications (we assume the Farmville fad falls here):  16.8%

eCommerce:  11%

Search Advertising: 8.3%

Cash (net of debt): 3.7%

If you haven’t seen the Trefis analysis, be sure to check it out.  While making sure that readers know Facebook is a private company and analyses are necessarily based on limited data and informed guesstimates, they go into detail on each Division.  For example, value assigned to Text and Display Ads is determined by trends in three key metrics:  revenue per Page View, Page Views per User, and Unique Visitors. Games and Apps Credits is determined by trends in Games & Apps revenue per Registered User times Registered Users. And so on.

What Trefis offers that others haven’t is a look at the forecasted trend lines.  They are interesting, but without hard data, how valuable are they? What's more, and each reviewer sees with unique eyes, are they that impressive?  For example, Search Ad revenues are clearly problematic.  Game credits depend upon third-party developers, and they take the form of what's hot ... fluctuating much like a movie studio's revenues. And the bubble-bursting history of internet advertising (see Doubleclick, AOL, YAHOO, GeoCities, etc.) does not strike much of a vote of confidence. 

Still, Goldman shares are over-subscribed, as undoubtedly will be the IPO.  So what we are looking at, again, is the value of a hot brand.