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After Goldman Sachs announced in January that it would put $1.5 billion of its money and its clients money into Facebook at a $50 billion valuation, the social network’s valuation began to soar like crazy as new investors followed suit.T.Rowe Price got in. So did JP Morgan, at $60 billion.
We found private investors buying small amounts of Facebook stock at valuations well over $100 billion.
Now, suddenly, the fever for Facebook stock has cooled.
Reuters reports that a number of Facebook insiders, including early employees and investors, are trying to sell as much as $1 billion worth of stock at a $70 billion valuation – and they are finding no takers.
“At the current valuation where it is, it is really hard to justify the investment,” Sumeet Jain, partner at venture capital firm CMEA Capital, told Reuters. His firm looked but said no. “It’s hard to imagine it will turn into a $270 billion company in the next few years.”
“It’s priced to perfection in the private marketplace,” another investor pitched on the deal told Reuters. “I don’t like to own anything I can’t sell right now.”
A source briefed on Facebook’s financials tells us the company could see $2 billion EBITDA this year on $4 billion in revenue. Those revenues numbers are good, but they aren’t where Google’s were after it first six years:
There are some signs that Facebook is aware of its light revenues, and that’s its working on ways to get them in line before next year’s IPO.
Earlier this week, Facebook announced “Deals,” a Groupon-like offers product that will put coupons to local businesses in users’ News Feeds. This won’t be a revenue-generating product at first, but if it gets any traction, assume it will be – especially since users have to buy the deals with Facebook Credits.
Yesterday, we learned that Facebook will soon announce another new ad product for users’ News Feeds. Designed by Chicago ad agency Leo Burnett, the ad will prompt users with questions and then send their answers to all their friends.
Many Facebook watchers are still expecting the company to spread its “Facebook Credits” payment system beyond coupons and social games and into e-commerce. Others harbor similar hopes for an off-network Facebook advertising system.
When executives sign on with Facebook, they are told the goal is to turn it into the world’s first $1 trillion company.
In public, Facebook CEO Mark Zuckerberg says his plan to grow the company’s revenues is to help other industries grow by becoming “social” and then taxing them.
He says this because he’s seen success from the social gaming space, which paid Facebook about $400 million last year, and the group-buying industry, will buy about $100 million worth of Facebook ads this year.