Novice Investing - Facing the $ 800 Million Truth

Date: Monday 01st 2008f December 2008 03:52:21 PM

Facing the $ 800 Million Truth - 11/01/2006

By: Novice Investing Staff

We have talked about Facebook in the past and we are going to talk about it today or even sometime in the future. We can't help it. When Facebook rejected a $ 750 Million offer and demands $ 2 Billion from potential acquirer, we think that Facebook will face the truth, which is not pretty. One month later, the company was getting a mere $ 25 Million in private funding which if they take a 5% stake, put Facebook entire company at $ 500 Million.

Now, businessweek reports that traffic has fallen at Facebook in September. As recent as three weeks ago, Yahoo! was willing to spend $ 800 Million on Facebook. A far cry from $ 2 Billion, of course, but it is a generous offer nevertheless. Facebook marketing director Melanie Deitch was quoted that Facebook is focused on building the business instead of making a quick exit. On the same article, however, Facebook disputes comScore statistics in September 2006. Huh? If they concentrate on building the business, why on earth do they have to argue monthly statistics with comScore?

We think that they miss the boat by playing hard to get. Facebook perhaps can fetch $ 2 Billion or a $ 1.65 Billion valuation that YouTube achieved. The chance is slim, they know and that is why they refused to agree with comScore statistics that shows that its unique visitors drop 10% from 14.8 Million to 13.3 Million in September.

We have said it in the past and we'll said it again. If you have $ 2 Billion to blow, you'd better buy the like of CNET Networks (CNET) with diverse revenue streams instead of the fickle social-networking industry. In fact, you can get CNET for less than $ 1.5 Billion now.

In fact, in a constantly-changing environment of social networking, one can do A LOT of thing with $ 1.5 Billion. For example if you want to draw 15 Million visitors monthly, which is higher than Facebook's current visitors. Why don't we pay 15 Million people $ 100 each to visit our website for the next twelve months? Or how about this? You can make a million dollar

contest for visitor who had the most page views from your friendster-style website content? You think there will be MILLIONS of teenagers and students swarming to your sites now? So, in closing, Facebook at $ 2 Billion is unattainable. Perhaps in five to ten years, it would be cheap, but not now anyway.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding CNET Networks Inc. (CNET) or any other securities.

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