Facebook didn't start yesterday. It's years and years old, with massive amounts of engineering resources and resources of every other kind poured into it. The fact that they have the numbers you say they have, which they do, and that after all these man-millenia of work, are essentially doing just better than break-even, is an enormous flashing red sign to me. Revenue in this sort of area typically has a low-hanging fruit pattern, where getting the next bit out of the same customer gets progressively harder, not easier. If Facebook is going to be this raging success in the future, it should already be doing radically better than it is in terms of monetizing that attention, because it gets harder from here on out, not easier. (Or they need to get into a space where revenues work the other way around, like consulting (i.e., once you got the customer to pay you once it's easier to do it again) but what would that be?)
I see Facebook at this point as a nice business, nice revenue, certainly not a guaranteed failure, but to get to the point where it justifies 100 P/E today is a Hail Mary pass. I think that not only is there not any evidence that is possible, there is significant evidence against it. If there's this brilliant pivot lying in their future where suddenly they're making twenty times the money, how come they haven't managed to come up with it in the aforementioned man-millenia already? It's not like they're sitting on some brilliant idea but refused to deploy it until after they go public for some weird reason.
On the flip side though, isn't this a matter of scale?
What if: Facebook is not building a website - it's building a sub-section of the internet; a private walled garden for it's enormous userbase; an ecosystem of subscribers to rival the viewer-ship normally attributed to mass media outlets.
Yes, the infrastructure investment is enormous. But if this is true, revenue comes through efficiencies and leverage further down the track. The 'low hanging fruit' problem that applies to the players who feed off ecosystems doesn't apply to the player who operates it.
100 P/E today? That's almost certainly wrong, I think, but it'll be interesting to see what they do with what they've created, now that earnings pressure will start to really screw down.
I see Facebook at this point as a nice business, nice revenue, certainly not a guaranteed failure, but to get to the point where it justifies 100 P/E today is a Hail Mary pass. I think that not only is there not any evidence that is possible, there is significant evidence against it. If there's this brilliant pivot lying in their future where suddenly they're making twenty times the money, how come they haven't managed to come up with it in the aforementioned man-millenia already? It's not like they're sitting on some brilliant idea but refused to deploy it until after they go public for some weird reason.