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Is Facebook Worth $1 Billion?

  • CNNMoney, Monday, September 25, 2006 11:30 AM
Here's a question that's been bandied about thousands of times: Is the social-networking phenom Facebook worth $1 billion? Time Warner CEO Dick Parsons answered that with a resounding "no" last week. CNNMoney also posits the question, asking investors from Wall Street as well as Facebook's college student users what they think of its possible $1 billion sale to Yahoo. "What's beautiful about Facebook is that it's a great place to advertise because it generates the equivalent of online word-of-mouth. That's a powerful phenomenon," says Richard Dorfman, a managing director of Richard Alan Inc., a financial advisory and investment company focused on the media industry. Jay MacDonald, a partner of DeSilva & Phillips, a New York-based investment bank specializing in media and digital music, says $1 billion is a fair price, given what price News Corp. paid for MySpace. Other Wall Street analysts agreed. However, given Facebook's number of users compared to MySpace, Yahoo would be paying six to eight times what News Corp. paid for MySpace last year, according to Tim Boyd, an analyst with Caris & Company. Some argue that Facebook is more organized and that the word-of-mouth is stronger there than on MySpace--but interestingly enough, college kids don't agree. One recent grad called Facebook "nerdy," and said MySpace is "more for everyone." Others say the organized, after-school-club-like feel comes across as inauthentic or immature. Many, of course, absolutely love Facebook. The larger point: the site's popularity is with a group of notoriously fickle consumers with a very high turnover rate every year. Can Facebook's popularity last? Or will it end up like Friendster?

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