What's Facebook Really Worth?

14 Pages Posted: 26 Jul 2012 Last revised: 21 Aug 2014

Date Written: July 25, 2012

Abstract

This paper tells a unique story of the real worth of Facebook, Inc. on the eve of its first earrings call as a public company. And the first quarterly financial statement following what many investors believe was a badly botched IPO. The story evolves in three parts. PART I, The View from the Space Station, reports on research behind a distribution of Facebook’s market cap probabilities written in October 2010. PART II, When Art Informs Science: Facebook’s Optimal Revenues, walks through the math behind the calculation of its optimal market share and revenue based on information in the company’s February 1, 2012 Form S-1 Registration. Part III, A Simulated Classroom Discussion with Mark Zuckerberg, is a fictional classroom conversation between the author and the founder of Facebook. The purpose of the discussion is to simulate an answer to the question of the company’s real worth in a business school guest speaker format.

Keywords: Gross Margin, Carve out, Competitors, Earnings, Facebook, Group Revenues, Long-term, Marginal Analysis, Market Cap, Market Share, Operating Efficiency, Operating Expenses, Optimal, Peers, Revenue, The X Factor

Suggested Citation

Cook, Victor J., What's Facebook Really Worth? (July 25, 2012). Available at SSRN: https://ssrn.com/abstract=2118043 or http://dx.doi.org/10.2139/ssrn.2118043
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