Why Facebook is not worth $ 100 billion (or what is a business)

According to expert opinions, an approximate estimate of the value of Facebook after an IPO is $ 100 billion US dollars. Zuckerberg's brainchild will stand next to such giants as Disney ($ 70 billion), Billiton ($ 72 billion), Amazon ($ 82 billion) and McDonald's ($ 101 billion). All enthusiastically clap their hands and consider the approximate earnings from shares in the first year of trading.

Let's move away from the general euphoria for a while, and think about what is happening. Inside, I will tell you a little story and suggest, using open sources of information, a little to count. And so that it is not boring at all, for comparison with Facebook we will take one company already mentioned above with approximately the same market capitalization.

McDonalds (ticker MCD ) was founded in 1940 by two brothers McDonald's and with small steps gained popularity among the American population. Ray Kroc bought this promising network from them and turned it into one of the greatest franchises in existence today. The company is represented by 26,000 business operators, and in addition to “fast food restaurants” there are 6,000 other types of premises (warehouses, for example). About 1.7 million people around the world work at McDaw. The company sells food for $ 24 billion a year and has a net profit of $ 5 billion from this.
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About 3200 people work on Facebook, and the company generates about $ 1.2 million of income (dirty) per employee (total $ 3.8 billion), of which $ 1 billion of net income remains. The company's assets are mostly represented by intellectual property (aka goodwill), and their value now amounts to the value of all MySpace assets combined, which only a few years ago had a completely different value (now people have lost interest in Myspace, but who cares, right?) .

McDonalds, on the other hand, holds $ 30 billion in cash in bins, factories, newspapers, steamboats , equipment and real estate, and only 2.5 billion of that “goodwill" that includes their brand.

Facebook guys love to tell that 800 million people use their services, and I’m reminded of the news about how McDaw boasted that they served the billionth buyer. 27 million people eat in the MKD networks every day , which gives us a figure of 9.85 billion annual buyers, generating 4 times more income and profits than those who use Facebook.

The McDonald's “value” was discovered by investors over time, and, in my humble opinion, one can safely put the prefix “only” in front of their value of $ 100 billion, but this is a topic for another article. In the meantime, I will not take away your time with unnecessary information.

So.

Think for yourself - when you park at an eatery with a yellow logo, you, in fact, have already decided for yourself to leave there your hard-earned five (or so) dollars, exchanging them for food. And not just food. Food produced, packaged, delivered and cooked by themselves! They will sell you this very food, and carefully put $ 1 dollar into their pocket. And do it 27 million times a day. That's what I understand the business!

And what does Facebook do? They are a free service, which already pleases many, many people. They sell your eyes to advertisers at a rate of $ 3 million per day for 800 million pairs of eyes, which is approximately 0.375 apiece. McDonalds makes 25 times more net profit than those only in income!

Will FB be interested in its service 25 times more people than at the moment? Of course! It remains only to colonize other planets and drive another 20 billion people to the Internet. Ok, we were dreaming, we will ask another question - can Facebook convince advertisers to pay 25 times more for 1 user than they pay now? Difficult, right? Let's assume that the number of users of a social network has doubled. And suppose that, miraculously, Facebook has increased advertising rates, forcing advertisers to pay the company “only” 12 times more than they pay at the moment. In short, 48 cents for people who, in fact, do not even buy anything, and do not give any guarantees that they will buy. So-so alignment, right? Whereas a McDonald’s visitor will personally bring in and give the company his money. And the dishes for a clean (foresee the grin of readers, but we are not about that).

Such are the pies. More precisely, burgers.

Lord habrovchane, I in no way do not advertise the above fast food chain. I just tried using the simplest analysis to point out the difference in the two businesses, the cost of which many (frighteningly many) estimate identically.

In 1999 (where there is no analogy), exactly the same blindness in front of obvious facts caused many to change their place of work from comfortable offices in a company like the one described above, to a place in front of the cashier’s office described above. Obviously, a dozen years is enough to forget a lot.