250 Million Reasons for Facebook to Go Public

Facebook announced another milestone yesterday. The social-networking site now has 250 million registered users.

It seems like only yesterday when we were discussing the 200 million mile marker. OK, so technically, "yesterday" happened in early April. But you still have to be impressed. How often do you see a company this big grow its user base by 25% in a little more than three months?

Question time: What will be larger by year's end -- Facebook's user base or the U.S. population?

Bonus question time: Who do you think feels the most stupid at this point?

I'm leaving Microsoft (Nasdaq: MSFT  ) out of the walk of shame, because at least it was able to square away an online advertising deal with Facebook, in exchange for paying up for a minority stake in the rapidly growing site.

Since Facebook isn't yet a public company, we don't know how well it's monetizing its traffic. We do know that its throughput is massive. Nielsen data for June finds that Facebook attracted 87.3 million unique stateside visitors last month. Google, Microsoft, Yahoo!, AOL, and News Corp. drew larger crowds, but Facebook's average user spent nearly 4 hours and 40 minutes on the site. None of the other dot-com heavies came even close.

If you multiply the audience by the hours spent per person, only Yahoo! was more magnetic. Facebook is likely to overtake Yahoo! this month, and it's crazy if it doesn't take that crowning achievement as a sign to go public.

Isn't that the best way to make its flawed list of potential suitors eat bucketfuls of crow?

The market has been kind to the recent Web-based IPOs for OpenTable (Nasdaq: OPEN  ) and LogMeIn (Nasdaq: LOGM  ) . It's time for Facebook's close-up now.

Some other Facebook status updates:

Google is a Motley Fool Rule Breakers selection. Microsoft is a Motley Fool Inside Value recommendation. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz remembers when social networks were an offline endeavor. He owns no shares in any of the companies in this story and is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.


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  • Report this Comment On July 16, 2009, at 2:43 PM, dudemonkey wrote:

    We know what the finances of Facebook are like (you can even find a sketch of them on Wikipedia, and a 20 minute google search will turn up glimpses of their recent financials) and they're not good. They've managed to monetize a very small amount of the traffic that hits their site but their CapEx is usually several times larger than their revenue and have survived this long entirely on what are effectively bailouts from potential investors, most of whom don't invest twice. Social media is NOT a good business. It's not even a bad business. It's simply not a business. Marketing cost center ... maybe, but it can't be considered a revenue generator on its own.

    In Oct 2008, Zuckerberg publicly said that no one at Facebook has any real idea of how they could make social media profitable, yet (nontechnical) analysts continue to attempt to assign valuations and projections of future profitability to the company. He also said that he hopes that the company will be profitable by 2011, and even that was said over a year before people openly began speculating as to whether we were in another Great Depression or just the worst recession that any of us will likely see in our lifetimes.

    It's like analysts forgot 1998-2001.

    Technology companies are difficult to understand due to the volatile nature of the industry. I would caution TMF readers from taking analyst advice on tech. As a technical business analyst, I can say with no uncertainty that the conclusion that can be drawn from most of the articles covering tech is that the tech industry is not within the analyst's circle of competence but the analyst has not quite figured that out yet.

  • Report this Comment On July 16, 2009, at 3:31 PM, dudemonkey wrote:

    <i>As a technical business analyst, I can say with no uncertainty that the conclusion that can be drawn from most of the articles covering tech is that the tech industry is not within the analyst's circle of competence but the analyst has not quite figured that out yet.</i>

    To be clear, I'm not trying to single any analyst out, just saying that, in general, analyzing tech companies is very hard because analyzing TECH is hard. The usage metrics and the "stickiness" metrics are nice, but turning this kind of tech into money is not trivial and even the people at "ground zero" of this industry aren't sure whether or how they'll be able to do it.

  • Report this Comment On July 18, 2009, at 10:17 AM, finabuddy wrote:

    dudemonkey- you put my thoughts perfectly into words. techbubble 2.0.

    Lets not mistake impressions and time spent on site for revenue...or the much more distant profitability.

    DST just invested $100 million, but by invested, all they did was cash out current shareholders, in addition to maintaining Zuckerberg's giant ego that he is a billionaire on paper.

    However, as long as VCs keep giving him money he may ultimately be able to do an IPO. Frankly, though, I dont see why he just didnt sell out years ago to Yahoo, much like Mark Cuban a decade ago with broadcast.com. A bird in the hand...

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