I’m still waiting to see financials for FB, but when the IPO happened and they were valuated at $104B, it seemed really high.  At the time I was thinking they did like $2b in revenue annually, but I think it’s actually much higher than that, closer to $4b.  That’s still not even close to a good PE ratio.  at $104b, that’s 26x revenues.

My expertise is hardly in stocks and finance, but to assume that FB will grow quickly enough to get revenues to a point where they’re at more of a 10x-12x revenues multiple is a big “if”.  If they aren’t going to grow, I’d argue that companies like Google and Facebook are at an even higher risk of being hurt by market dynamics (i.e. users moving on) than the old brick and mortars.

So the stock has now dipped to around $28 as of this morning, which puts it’s value closer to $61B.  That’s a little more in line at a 15x multiplier, but to me it STILL seems high.  I haven’t used Facebook for two years now (almost to the day) but I don’t believe their revenue model is nearly as solid as Google.  I’d like to take a look at their streams to get an idea of what drives revenue, but I think that scaling whatever revenues they have will be more contingent on finding new ways to monetize and not necessarily optimizing the current.  They have a lot of users, but what percentage are paying for the service in some facet or another?

I think this company will provide a great case study in modern digital businesses, regardless if they grow to be the next leviathan or if they plateau financially and the company stays dormant in price.  Fascinating to watch regardless.