Will Facebook applications make it a Myspace clone? And a guess at Facebook’s current valuation

Much has been made of Facebook‘s new reverse open API that allows developers to piggy back off the social networking site’s incredible popularity – 3% growth a month and more than 20 million users.

Netscape found Marc Andreesson has a very long, thoughtful and insightful post about just this that you should definitely read, but I have some more thoughts to share, both from a user and as a marketer.

Where Facebook could be headed

At the end of last year, we were in discussions with a potential client to put up a sponsored profile on Myspace. It didn’t pan out but what did stick with me was just how bloated and spammy Myspace is.

Seriously. I signed up for a profile to play around and almost immediately was offered sex, investment advice and real estate. Not necessarily in that order; that was just how they came to mind.

Not only are there a billion and one fake profiles on Myspace, but the adverts, oh my god the adverts. There are ads on top of ads that run ads.

No wonder people are making the move to Facebook.

Where Facebook is at

But look at what’s happening on Facebook.

There are so many new and, I have to admit, cool applications that people are falling all over themselves to add them and to personalize their own profiles. The downside is that everytime one of my friends adds a new application, I get told about it.

And I don’t want to know about it. On Facebook, I want to see when people add pictures, when they post items, when my friends are having conversations, when they add new friends. Not when they add an application.

I certainly don’t want to be invited to add every single application that my friends have added – a feature which some applications have baked into them.

One of the great things about widgets, especially on Facebook, is that if they’re good, they spread like crazy. Case in point – iLike.

However, one of the bad things about widgets on Facebook is that they can spread like crazy and there’s a fine line between viral marketing and spam.

Will it even get the chance to get there?

One more thought about Facebook. To get a sponsored group page, such as this Molson Canadian page pointed out to me by Dave Jones, (disclosure: Molson is a competitor to various FH clients), the client needs to commit to a $50k (U.S.) ad-buy on the site per month for three months.

I can see 124 sponsored groups, which would mean a quarterly revenue of $18.6m from sponsored groups. If we presume this accounts of half of the advertising revenue, we come up with quarterly revenues of around $37.2m and annual revenues of $148.8m.

(FH client) Yahoo! famously offered founder Mark Zuckerberg $1bn for Facebook. An offer that would work out at multiple of 6.7 (based on my very rough back-of-the-napkin-maths). Yahoo! Finance projects Google to be trading at a price:earnings ration of 26 by the end of 2008.

If we presume Facebook can carry on its amazing growth and subsequently use this multiple to work out its value based on my earnings presumption, we get an estimated value of

$3.87bn.

That’s a shed load of cash and if someone offered that to me for a company that may be reaching its zenith, I’d bite their hand off.

**Sexy Update via Paul Kedrosky – apparently Facebook’s revenues are north of $100m a year and growing. Someone give me an analyst’s  job at an investment bank or VC…on second thoughts, we may want to wait until the IPO to see where Facebook starts trading**

3 Responses to Will Facebook applications make it a Myspace clone? And a guess at Facebook’s current valuation

  1. Kathleen says:

    I have to agree that I would take the money and run. I used to love the clean design of facebook and I think the applications are making it a bit junky, but until today I hadn’t found the time to check them out (travelling!). People sure do seem to love them, I know because of all those so-and-so has added such-and-such messages! I think the group will have a greater value for Molson than the advertising they’re being forced to buy… but I don’t know if it’s worth 150 000.

  2. […] Facebook is headed. Personally, we have no clue. All I do know is once my mom joins, it’s headed to the list of […]

  3. Ian from www.thenewsroom.com says:

    This application is one of that’s actually useful and differentiates Facebook from Myspace…http://apps.facebook.com/thenewsroom

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