Facebook Valuation – How *YOU* can make a ballpark estimate

And I don’t mean fictional valuation, I am going to tell you how you can make a pretty accurate educated estimation of Facebook’s value.

First of all users.

How many users does Facebook have?

Facebook claim they have 800 million “active users”. What active means, who knows, probably any user that has not cancelled their account.

Anyway, let’s go with 800 million.

Valuing companies in general.

Lets go with 10 times yearly profit.

So now we have the ball park figures.

800 million users, over 10 years. How much revenue do you think Facebook will get in ad revenues from each user over a space of 10 years?

Go with what you know, how many times have you clicked on a Facebook ad in the past year?

Assuming Facebook makes around 30 cents a click, multiply the number of clicks you made by 30 cents, multiply by 10 (for 10 years) and the multiply by 800 million (the number of active “users”).

Now you have a pretty go idea of how much revenue Facebook will have over the next 10 years.

Assume Facebook’s profit margin is 99% and you can make a pretty good estimate as to Facebook’s value.

If you think you use Facebook more than other people, use less clicks in you calculations, if you think you use Facebook less than most people put a bigger figure.

So now you have 2 valuations, how much the company should be valued at if you are the average user and how much you think the company should be worth if every user is what you believe is average.

If you think Facebook will have more users in the next 10 years, use what you think will be the average number of active users over the next 10 years.

So to recap, this is the formula that will let you calculate the value of Facebook

(a x c x d x e)/100

a=number of “active” users
b=net profit margin (eg 0.95 for 95%)
c=average number of ad clicks per user, per year
d=average gross revenue to Facebook per click in cents/pence ( I suggest a figure of 30 cents)
e=years of profit you base your valuation on

I’m not saying it is precise but if you use Facebook, I believe with this simple formula you should be able to make a pretty good educated guess.

Leave a comment below and let me know what your valuation works out at using the above formula!

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