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Why is Facebook’s Valuation so High?

As we get closer to the IPO for Facebook, many are wondering if the valuation is too high. Indeed with a lot of people seeing this as a must have stock, it may be pushed high, however lets look at the numbers.

In six short years, the company has come to amass almost 1,000,000,000 users. I think it is important to look at a billion with all the zeros. I would say that in the next two years, it will be at 2 billion with ease as the company penetrates further into new markets such as Asia and South America. Yes those markets have thier own successful social media networks, but only Facebook is truly global at this point and it is not showing any sign of weakening.

So is the value too high? Maybe. You might make the argument that many are wanting the stock from an emotional quotient. Much like those who seek the Apple stock because of the way the products work, perform etc. But then again is that not what makes a successful company? Is caramel flavoured sugar carbonated water really so great that it is popular all over the world in one recognizable can? Again the emotional connection people have with Coke is not so much the taste (there are many comparable colas I would argue) but about the whole brand experience that is espoused.

Facebook is more than a brand experience. It is a tool. A place. A reason to connect. And to not connect. It enriches lives, and yes in some cases destroys them. It is not for just the rich, or the poor. It can define agendas – be it a local push or a national change in government. Good or bad, it has unequivocally changed the landscape of this century. Zuckerburg is going to continue to run this company on his terms and has stated that Wall Street will not define his company as they do not know what is best for Facebook and ultimately the investors. This man has continued to push his vision.

Just look at how the timeline has come about. We decried (come on admit it РI did) the changes in a haphazard way. And that was warranted at the time. What was not communicated and should have been as we look back at all the user experience and page admin changes over the past year or so is that it was working the system in a stepped way to implement the Timeline, Insights, Page Apps, contesting  etc that have strengthened the platform and made connections stronger.

It is today’s cotton loom.

And that is why, valuation overload or not, it will continue.

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