By the numbers: Is Facebook worth $2 billion?

Last week, Facebook made headlines throughout the blogosphere by attempting to value itself at $2 billion.

The blogosphere quickly took over with a debate about whether or not it was worth it. Most of the posts have been light on data (see: SiliconBeat or Umair's Bubblegeneration) with Om Malik using just a little bit of data in his assessment. Yesterday, Kevin Efrusy -- the Facebook VC -- stood by their $2b valuation in the WSJ.

I wanted to take a closer look at the valuation, by the numbers. More just because I thought it'd be fun than for any other reason. :-P

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Overview: My goal was to decide whether the Facebook valuation at $2b is justifiable based on the MySpace valuation (at the time of sale) of $580m (or, at least, just to compare the two valuations). Every number I took was the closest number to the time of valuation (for Facebook this was the most recent number I could find and for MySpace this was the closest number to July, 2005 I could find). I also attempted to get numbers from either the same source (i.e. comScore Media Metrix), the site itself (e.g. spokesmen, etc.), or a very reliable source (e.g. BusinessWeek, Newsweek, etc.).

Disclaimer: I still don't claim these data are very good, so take everything with a grain of salt. Also, there are no growth stats involved here, which is clearly dumb. :) I also clearly made up the CPM costs -- if anyone has better data on that, let me know.

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Assumptions:

• Total Number of Users:
• Facebook: 7 million (Source: Newsweek, March, 2006)
• MySpace: 22 million (Source: BusinessWeek, July, 2005)
• Valuation:
• Facebook: $2 billion (Source: BusinessWeek)
• MySpace: $580 million (Source: sale price to News Corp)
• Page Views / Month:
• Facebook: 5.5 billion (Source: WSJ, April, 2006)
• MySpace: 7.8 billion - for all Intermix online properties in May, 2005 (Source: Intermix SEC Filing)
• Cost / CPM:
• Facebook: $2 (estimated)
• MySpace: $2 (estimated)

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Analysis:

• Acquisition Cost / User [Valuation / # of users]:
• Facebook: $285.71
• MySpace: $26.36
• (Page Views / Month) / User:
• Facebook: 785.7
• MySpace: 354.55
• Time For Average User (in months) To View 1000 pages [1000 / (Page Views / Month / User)]:
• Facebook: 1.27
• MySpace: 2.82
• (Page Views / User) Required To Recover Acquisition Cost [($CPM/1000pv) = ($Acq. Cost/Xpv)]
• Facebook: 142,855
• MySpace: 13,180
• Time (in months) For Average User To View Required Number Of Pages [(1000pv/#months for user to make 1000pv) = (#pv to recover cost/Xmonths)]
• Facebook: 181.43
• MySpace: 37.17

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Conclusion:
Wow. First, it really surprised me how many more pages a Facebook user views per month compared to a MySpace user (the average Facebook user is 2.2x as addicted to Facebook than the average MySpace user is to MySpace). Honestly, I expected the opposite.

Second, I couldn't believe my numbers (and I still don't, so someone please check them!) that Facebook would legitimately ask for $285.71 per user, especially given that MySpace only received $26.36 per user (10.8x the cost!).

At those prices, it would take Facebook 4.9x as many months to recover the acquisition costs as it did for MySpace. And in real terms, that's over 15 years of use per user (compared to MySpace's 3 years and change)! This is on a site that many, including Paul Kedrosky, think has a huge turnover rate because of the whole 'graduation' pest.

All in all, I think it's fairly clear to see that 1) Facebook is absurdly valued, and 2) this analysis is probably just as absurd given the lack of growth, constant CPM, etc. :)