Graphiti

Is Facebook Worth It?

Estimates of the historical value of a user put the IPO hype in perspective.

When Facebook went public, the company was valued at $104 billion, an astonishing figure for an Internet company. Was the figure preposterously high? That depends on how you look at it. The value in Facebook lies in its enormous audience—901 million people every month who are potential viewers of advertisements and buyers of virtual goods. So you could think of Facebook this way: it was worth about $116 for every user it has. On that basis, the company wasn’t being valued as highly as Google ($200 per user) or even the question-and-answer service Quora ($145). This metric also reveals that investors are much less optimistic that Twitter (worth less than $60 per user) or Tumblr (about $8) will profit handsomely from their very large audiences.

Another reason this metric is useful: it indicates that for all the hype around Facebook and its kin, the situation isn’t as hyperbolic as it was in the dot-com boom. Remember Excite, one of the first Web portals? It and its 18 million users were worth as much as $6.7 billion—$372 per user—to the @Home Network in 1999. The next year, Lycos was valued as highly as $12.5 billion, or $431 per user. It might be of little solace that valuations aren’t as inflated as they were 12 years ago, but at least today, unlike then, there is a sizable amount of Internet ad revenue to vie for.

This article was updated on May 22 to reflect the peak value for Lycos, rather than its closing acquisition price.

Uh oh–you've read all five of your free articles for this month.

Insider Premium

$179.95/yr US PRICE

More from Intelligent Machines

Artificial intelligence and robots are transforming how we work and live.

Want more award-winning journalism? Subscribe to Insider Premium.

  • Insider Premium {! insider.prices.premium !}*

    {! insider.display.menuOptionsLabel !}

    Our award winning magazine, unlimited access to our story archive, special discounts to MIT Technology Review Events, and exclusive content.

    See details+

    What's Included

    Bimonthly home delivery and unlimited 24/7 access to MIT Technology Review’s website.

    The Download. Our daily newsletter of what's important in technology and innovation.

    Access to the Magazine archive. Over 24,000 articles going back to 1899 at your fingertips.

    Special Discounts to select partner offerings

    Discount to MIT Technology Review events

    Ad-free web experience

    First Look. Exclusive early access to stories.

    Insider Conversations. Join in and ask questions as our editors talk to innovators from around the world.

You've read of free articles this month.