Facebook worth more than $XX billion, say people with a vested interest in Facebook

Quiz time: Facebook  is worth how many billions of dollars?

  1. 3.7
  2. 9.5
  3. 23
  4. 33

facebook_dollar Different people have given all of the above answers and a lot of other places have published them as fact, even though these numbers are are self-serving and cannot be verified. The first two are by Facebook itself, in February and November of last year. The third is from Forbes and the last one is from the Financial Times – and all of them are totally, completely untrustworthy. Why? Well, let’s look at how Forbes’ Steve Bertoni put it: “Recent private equity investments in Facebook valued the firm at around $23 billion–more than triple its 2009 value of $7 billion.” Now why would anyone who had invested in a company possibly say that company is worth far more than previously reported? Hmmmmm. 

Facebook is a private company, so no one outside of a select few really know how much money – if any – Facebook is making. But even it’s self-reported numbers don’t sustain valuations that give it a market cap of between $23B and $33B. By way of comparison, eBay’s market cap is $32B. As Mashable so ably puts it

Facebook is still a private company that hasn’t completely figured out the profit equation. While it should surpass $1 billion in revenue this year, its infrastructure costs are also high. eBay, while not as sexy, brought in $2.215 billion in revenue during just the second quarter of this year.

What is appalling is that how many business publications are willing collaborators in this absurd deception. I am glad to see that the Wall Street Journal seems to have learned its lesson about this (see Twitter valued at $1 Billion say people with a vested interest in Twitter). H.L. Mencken had a simple rule of thumb for reporting a story like this: “It is hard to believe that a man is telling the truth when you know that you would lie if you were in his place.”

2 thoughts on “Facebook worth more than $XX billion, say people with a vested interest in Facebook

  1. Hmmn…interesting thought. I never actually realised that the profit margins that so many publications give could be wrong, or purposefully stated wrong for self-serving interests.

    I wonder how often this is done.

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