Goldman Sachs Invests $450 Million Into Facebook Making Its Valuation $50 Billion
2011 January 3
On the 1st business day of 2011, Facebook has a $50 Billion dollar Valuation thanks to an investment of $450 Million dollars by Goldman Sachs.
According to mulitple reports, Goldman’s investment of $450 Million was paired with another $50 Million dollar investment by Digital Sky Technologies, a Russian investment company that already invested $500 Million into Facebook.
Therefore this round of financing was $500 Million invested based on at a $50 Billion Valuation.
Facebook shares split 5 for 1 in the past year and the price of the shares as traded on Sharespost.com have tripled in the past year as well.
Last week Groupon reportedly received $500 Million in investment as well, meaning the year is off to a big start.
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Mind-bogglingly overvalued.
This is an insane valuation.
People should consider how fast Myspace fell. And Facebook’s business model is a little lacking.
://dealbook.nytimes.com/2011/01/03/why-facebook-is-such-an-important-friend-for-goldman-sachs/
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“In 1956, Goldman advised a prominent Detroit family named Ford on the I.P.O. of its car company.”
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“When Ralph Lauren sold $1 billion of stock last year to cash out a quarter of his stake in his company, Goldman sold it for him.”
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“Then there is Meg Whitman and eBay, the online auction site. Goldman put the bear hug on eBay as it was becoming one of the hottest Internet companies…”
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“the Facebook investment represents a negligible percentage of the firm’s roughly $900 billion balance sheet”
~75% of Tech-Investments fail. That’s why they are called investments.
“People should consider how fast Myspace fell. And Facebook’s business model is a little lacking.”
Proof that domainers should never discuss modern tech.
“…based on at a $50 Billion Valuation.”
I don’t understand why people are pumping money into Facebook at such a rate, Is that valuation based on a multiple of actual profits or just a wing and a prayer for what “might be” ?
How much real profit did they make in 2009, 2010?
I don’t know much about Facebook but reading this article it does’nt seem as if he cares whether he makes a profit or not.
“Mark Zuckerberg: Facebook doesn’t make real profits, and that’s okay”
“There’s no point right now in having a massive profit,” Zuckerberg said.”
“His initial indifference toward revenue is almost legendary at this point, at least in the startup world. Even now, Zuckerberg said he’s not that interested in making money.”
venturebeat.com/2010/10/16/facebook-mark-zuckerberg-profits/
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Pretty weired comments considering people are investing so much of their money in them.
Can someone explain to dumb old me why the big attraction to invest ?
“~75% of Tech-Investments fail. That’s why they are called investments.”
Nowadays its hard to tell the difference between an Investment and a Ponzi scheme
Anyone ever watch the Keiser Report ?
At the same time there´s rumour Google may come out with an iTunes rival and is already in talks with publishers.
“he’s not that interested in making money… Pretty weired comments considering people are investing so much of their money in them. Can someone explain to dumb old me why the big attraction to invest ?”
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“he’s not that interested in making money…”
That is part of the Silicon Valley Shtick
All the big players take $1 salary per year and ride the equity wave (and loans)
The East Coast (New York) Cocktail.Party investor crowd loves the Silicon Valley Shtick – It is easy to leverage that in their pump and pump world
It all drives eyeballs and traffic which is how some measure success…
It’s O K
Mark Snookerburg always comes out on top
you can ask the Twin brothers …
“All the big players take $1 salary per year and ride the equity wave (and loans)”
Hahahahaha…. Listen for that all-too-familiar clicking noise, signifying the ratcheting up of salaries and equity stakes, and the sucking sound on the other end once the delusion kicks into full swing and the divestment begins.
Your entire post was dead on. It’s 1998 all over again.
Talking about being snookered
Mason Jar COLE for Moniker/Oversee …
Just released a statement over on ricks blog Jan,03 12:03pm
They are going to fully hide behind the human resource cloak…
In short …this is none of your business! …
://www.ricksblog.com/my_weblog/2010/12/the-privacy-issuewho-has-access-to-that-info-what-they-can-do-with-it.html#comments
@ Shaun
Maybe you weren’t born yet when Friendster was around.
The Achilles Heel of Facebook, Google and many others is of course the Thin-Client/Server architecture compared to true Peer-2-Peer.
As the CEO of Google, Eric Schmidt, always asks, “Who is going to pay the electric bill for all the servers/disks/etc. ?”
Migrating domains to Peer-2-Peer and of course Web Hosting is in progress. People do not pay much attention or understand the technology. All they care about is the “Brand” and the traffic and the sizzle, not the steak.
One of the many reasons for this high valuation on FB is the fact that their competition is contracting while they’re expanding. I would not be surprised to see a $100 Billion valuation on FB within 4-5 years.
- TBC (Soc.TV)
For those still scratching their heads at ‘valuation’…this is a prime example of how the investment world works.
Buy high, sell higher
All the early investors will make multiples of their grubstake when it goes IPO.
******
In short the most important lesson the ‘unwashed’ will learn about valuations & the stock market is:
Short term = voting machine
Long term = weighing machine
******
FB is wayyyyyyyy overrrrrrr priced imo.
Early investors will make money while all others will lose imo.
ON A SIDE NOTE, look at the best domain offer I ever got.
This just came in today:
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I am interested in using your URL, LoanHD. Can you make it available? Thank you.
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lol
@TLD,
Maybe you’re too dull to realize that facebook and friendster have very little in common.
Whenever the “private” banking arm of U.S.A., inc. gets involved, you know someone/something is getting scammed at some point in the time-line of the deal.
@CaveMan,
These guys only bet on sure things. Social-Mobile is the future. FB is at the center of it all.
- TBC
So the $500 million investment must have gotten 1% of Facebook, to give a $50 billion valuation.
I don’t find it to hard to believe, Facebook is the de facto meeting place on the web, nothing comes even close. Google and MSN, with all their billions, can’t create a serious competitor.
The beauty of Facebook, the most visited website in the US last year, is that they don’t face competition or keep having to come up with new and innovative products all the time – like Apple or Amazon. And the premise is simple, keep in touch with family and friends, share photos and links, play games, etc. in the biggest virtual community in the world.
No one will ever leave because everyone else they know is on FB. Sure nothing is guaranteed for Facebook to last, but on the other hand there is no serious competition on the horizon – FG would have to do a very serious blunder to lose their position at this point in time.
Oops, my last reference to FG I meant to say FB.
Should also add, you can’t really compare Facebook to MySpace or Friendster.
How many people do you know on Facebook?
Now, how many people did you ever know on MySpace or Friendster?
I would compare Facebook more to other websites that have had longevity, like Google or Ebay.
If you want to compare market caps, Google is at 193B, ebay at 37B, Yahoo 22B, Apple 302B, Microsoft at 239B.
@Virtual World,
So, using the valuations in your post (assuming they’re correct), FB is worth as much as Goog & APPL combined? Wow, just wow…
- TBC
“nothing is guaranteed for Facebook to last, but on the other hand there is no serious competition on the horizon”
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China now has 100 orders for 737-class jets to replace Boeing and Airbus [C919]
Skype is loaded into many motherboards that boot Linux (not BIOS)
True Peer-2-Peer technology is very hard for people to see “on the horizon”
…speaking and reading Chinese helps…
Is Goldman Sachs “holding securities of record is used primarily to circumvent the provisions of Section 12(g) or 15(d) of the [Securities Exchange] Act?” Then, “the beneficial owners of such securities shall be deemed to be the record owners thereof.” That’s what the Securities Exchange Act of 1934 states, in its definition of “Held of Record.” The truth is going to come out. – http://taft.law.uc.edu/CCL/34ActRls/rule12g5-1.html
Louise
Circumvent is one word, get around would be another term anyway the mainstream press is already on this
http://dealbook.nytimes.com/2011/01/03/facebook-and-the-500-person-threshold/
What happens to Google, Apple, and Microsoft if Facebook decides to create its own search engine, mobile phone, and proprietary mobile-OS? Facebook is the hottest company on the planet right now and they’ve got the sizzle to do whatever they want. Should be fun to watch.
I’d love to see a Facebook-Groupon merger.
- TBC (HNN.TV)
There is no profit now. But there could be huge profit if they charge an annual fee, which they should with corporate accounts who advertise their Facebook pages on TV paying their fees based on size of company revenue. If they just provide a living room like MySpace did for people to come in and make money cutting them out, they will fail. If only 10% opt to pay that’s still 50 million at average $10/ month for individual and $500 for corporate. HUGE! Why would someone want to pay? That’s what they said when cable was introduced to TV. The reason is because they are addicted. And like selling cigarettes, that’s the marketing strategy now- “addict em’ and empty their wallets later when they can’t refuse.”
This post prodded me to hand-reg’ VSN.TV (Video Social Network). There remains tremendous profit potential in the social-networking space, even for late-comers. The key is in creating new niches within the social-networking paradigm – I and my partners are working hard on developing multiple projects in this space.
- TBC (VSN.TV – Soc.TV – Together.TV)
“But there could be huge profit if they charge an annual fee, which they should with corporate accounts who advertise their Facebook pages on TV paying their fees based on size of company revenue.”
The corporate pay-to model is one piece, but insignificant, IMO.
Their real goldmine is in their ads and the ability to target demographics down to the subatomic level. Right now, their ad filtering protocols are still pretty broad, relative to what they could (and should) be. I started experimenting with fb ads pretty early on and have found them to convert like fire (better than G), assuming one knows the basics in picking the right audience.
Facebook is an eyeball factory no different than any other “look at me” web app, but with ubiquitousness. That’s where the strength is. Depending on what one sells, $X in facebook ads might be superior to that same amount spent on a superbowl commercial.
I don’t think there’s any over valuation for FB and Goldman Sachs is way much smarter than we average people do. FB is already taking over GOOG as the top Internet traffic destination and most searched over.
It’s not about the FB valuation for Goldman Sachs. GS made the investment in Facebook to secure it’s position as the primary securities brokerage for the future IPO….
IPO valuation at $50B, what do you think GS would make in fees?
“It’s not about the FB valuation for Goldman Sachs. GS made the investment in Facebook to secure it’s position”
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It’s not about the FB valuation for Goldman Sachs. GS made the investment in Facebook to secure it’s [Spin]&[Schtick] position [with the Lame.Stream.Media].
[It is not what you know, it is WHO you know and who you hang.out with...]
[Other people's money - Other people's time - Other people's tweets - YOUR brand]
So that’s about $100 per FB user which is less what Groupon values each subscriber. I had someone in a hot sector tell me that their FB ad results quickly tapered because its a captive audience but my sites produce unique, targeted, visitors each day. FB is not going anywherebut the shine for outside companies will fade.
“So that’s about $100 per FB user…unique, targeted, visitors each day”
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Imagine if you had 75,000+ domain names and could channel all of the “unique, targeted, visitors each day” into YOUR BRAND
What BRAND would you build ?
Disney?
Playboy?
Oprah?
Vegas?
Facebook overtakes Google to become the #1 most visited site on the web:
http://www.dp-news.com/pages/detail.aspx?l=2&articleId=68804
Nice little write-up on what Goldman is up to from the Wall Street Journal:
http://online.wsj.com/article/SB10001424052748704723104576062280540485652.html?mod=WSJ_hp_LEFTTopStories
Fear not, the SEC is all over it – lol.
Remember, never take the other side of Goldman’s trades. If you do trade with (same side) or invest with Goldman, be sure to tithe your 10% every time because your gonna need all the help you can get.
“you don’t tug on superman’s cape…you don’t spit into the wind…”
ComScore: U.S. Online Holiday Shopping Season Reaches Record $32.6 Billion for November-December Period, Up 12 Percent vs. Year Ago
http://www.comscore.com/Press_Events/Press_Releases/2011/1/U.S._Online_Holiday_Shopping_Season_Reaches_Record_32.6_Billion_for_November_December_Period
Looking forward to a great year in 2011 .. Don’t we all!
UPDATE:
Goldman Sachs decided to exclude U.S. clients from the private offering of as much as $1.5 billion in shares of social-networking company Facebook, citing “intense media attention.”
In a statement provided to The Wall Street Journal, Goldman said the move came after officials at the New York securities firm “concluded the level of media attention might not be consistent with the proper completion of a U.S. private placement under U.S. law.”
http://online.wsj.com/article/SB10001424052748703396604576087941210274036.html?mod=djemalertMARKET
So Mike, that reenforces the fact that the government has their back.