Facebook: $6 Billion? Nah. [John Battelle]

And they may not "need" anyone right now, but that doesn't mean they shouldn't sell at that price or that they don't have real risks to their business. There is always risk in moving forward, and in their case, I think there is a whole lot of risk. Their perceived valuation is tied up in (a) continual increases to their traffic; (b) continual dominance in the college age group; and (c) longer-term, in their creation of real earnings. Any perception that they will not deliver on any of that and the offering prices will immediately drop off that ridiculous multiple.

Firms like Google may not care about their earnings, but I think other firms like Microsoft, Viacom, and Yahoo do, and if those firms fall by the wayside, the ultimate sell price is going to go way down. Of course, they could IPO too. But they should do it quickly while they are still hot.

If FB gets sold for $6 billion, that means the new owning company would need to make $500 million a year for 12 years(!) to break even. Frankly, the Internet will probably be drastically different a decade from now. FB doesn't even make $50 million a year, who in their right mind thinks that they will all of a sudden make a profit off Facebook by spending that much money?

I swear some of these big companies just like throwing money at things. Yes, the dot-com bubble is here once again.

Whether the company sells now for $6 billion or tanks and sells for $600 million in a few years, they'll have a lifetime of riches. With money a less important consideration, the question becomes which would be a more interesting activity for the next decade: Building a globally powerful company that fundamentally changes how the internet game is played...or becoming idly rich?

Financial risk/benefit calculations are much different for an individual than they are for a large corporation.

Why google, why now(2002)?

People need to search the internet. Google is far and away the cleanest, fastest, most effective, and easiest to use. It took 15 minutes of using www.google.com to reach that conclusion. Some people didn't realize how incredibly valuable the service was, but it was basically impossible to deny the superiority of the service. Recommend Google to anyone: Grandma, your little sister, your mac-using artist friend, an exchange student and watch them use it.

Facebook isn't so obviously superior. It has lots of great features and is well-designed, but compared to google it's very complicated to use. Restrictions on joining networks, friend confirmation steps, javascript glitches, and tagging are all evidence of a learning curve that is simple nonexistant with google. Furthermore, many of the things that make facebook effective exclude other features. Facebook is not simply a way better version of myspace, there are pros and cons.

If I had to put money on Myspace or Facebook, I'd pick Facebook, but not with the same confidence that I'd have picked google over every other search engine back in 2002.