Facebook turns down $8 billion valuation, projects $550 million in 09 revenue | Hacker News Reader

Facebook turns down $8 billion valuation, projects $550 million in 09 revenue

techcrunch.com

23 pointsbillclerico10 comments

web 2.0 is alive and well...

Contrary to what the title implies:

"Facebook declined the term sheet based on the requirement of a board of directors seat, says our source, and not the valuation."

True (and +1 for putting the actual detail into this discussion rather than the sensationalist headline).

But part of turning it down, at least in Arrington's seemingly informed opinion, is based on Facebook (read: Zuckerberg) believing he has other options which must be in the ballpark of that valuation or above.

What does it mean that Zuck has 3 seats -- one empty, one he holds, one by Andressen -- does Andressen get to vote as Andressen wishes, or does he have to vote Zuck wishes, or does Zuck effectively get to cast all three votes?

How do these board seats relate to the preferred boat seats?

So, if Facebook is going to have between $400 million and $550 million revenue this year, does that put to rest once and for all the idea that they are unable to monetize their users?

I don't think that anyone has denied that they are able to monetize users in some fashion. What is hotly debated though is whether or not they can monetize users sufficiently enough to make those users profitable in the short and/or long term.

Facebook's overhead certainly appears to be quite substantial. They are literally building new datacenters and are running a ton of equipment. Even if you could theoretically fire all the sales, marketing and HR types, you'd still be left with a pretty big bill at the end of each month.

Various online sources say that Facebook has a little over 1,000 employees. Let's say the average employee is $80K fully loaded. That's $80M/year just in payroll. You haven't even talked about real-estate to sit those employees in, PCs for them to work on, or the servers and infrastructure to run the company.

Also, much of that revenue (for all practical purposes, maybe all of it) seems to be advertising related. There is a lot of talk about the declining values of online advertising, and no one seems to have cracked the system on how to do that advertising in a fully effective manner. So, Facebooks revenue is coming from a source that they don't have a strong ability to manage and control (vs., say, user subscription fees).

No, of course it does not. Revenue is NOT profit and I would say that Facebook's burn rate is quite high, so their profits might still be a hugh disappointment.

I assume that is because they are still pursuing growth over immediate profits. I imagine that they could easily be profitable at these revenue levels if they were to just keep enough staff around to keep the servers running, for example. In other words, with that much revenue, I think the only reason not to be profitable is because they think they can be even more profitable by continuing to accelerate growth, for now.

The question is, can they monetize their users to the point of being profitable? I am confident that they can.

Revenue != profits. I wonder what their margins are. They might be losing money for all we know, even with $550m rev.

Agreed. 1,000+ employees, 10,000+ servers, plush offices etc don't come cheap.

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