Is Facebook Worth $4 Billion?

Image of Hundred Dollar Bills-We couldn’t help but play in the favorite Silicon Valley game of “Name Facebook’s Valuation!” Yesterday Henry Blodget posted that Facebook has officially begun to let employees sell shares at a valuation above $4 billion. He states that “the source recalled a strike price of $9.27 per share, versus a prior round of $8.90.” Regardless of what the valuation is, many employees at Facebook may have a great holiday season with much more cash in the bank.

Henry’s anonymous sources also claimed that revenue will be $265 million this year instead of $300 million. As Eric Eldon points out though, “Facebook’s fiscal year doesn’t close until the end of December, so that number is strangely specific given the present uncertainty about advertising spending and virtual gift revenue the company might bring in during the approaching holiday season.”

Ironically $265 million is exactly “how much eMarketer projected Facebook would make in U.S. advertising”, Eldon writes. We could sit and try to piece together how much Facebook is earning but regardless of exact revenue numbers, a more important sign of the company’s future growth is their sucess (or lack of success) in approaching Madison Avenue.

According to Jessica Vascellaro, “The company says 70 of the U.S.’s 100 largest advertisers have advertised on its site since 2007. But its share of total number of U.S. online display ad views was just 1.1%, according to market research firm comScore Inc., in its most recent report in June.” Compare that with Fox Interactive Media who has attracted “15.9% of display-ad spedning, according to comScore.”

Why does MySpace account for such a large percentage of display ads? That’s pretty easy! A quick look at the site’s design shows how the company is excessively ad heavy. The site is splattered with advertisements which arguably decreases the user experience. That doesn’t matter to MySpace though as they continue to experience solid revenue growth.

On site ads don’t represent the full potential though as the company may soon decide to expand their advertisements to other publishers. Whether or not the company decides to do so, they certainly have time remaining before they begin rolling out alternative monetization solutions. As Mark Zuckerberg tries to consistently emphasize, it is still early for the company.

Speculators aren’t so confident in Zuckerberg’s assertion but then again none of us are running the company, are we?

Image from American Shelf Life