This blog is intended for the participants in the Boston University School of Management IS 829 course to share their ideas and interact with others on topics and themes pertaining to how information technology impacts and influences the business strategies of firms.
Sunday, January 9, 2011
Facebook could become one stop shop for everything
After reading this article, I can say Goldman has undervalued Facebook. Facebook could become central hub for all e-commerce in future.
I am not sure if I can assess if Goldman has undervalue Facebook base on this article, but I do realized that the enormous amount of people who joined facebook when it first started in 2004 were college students who now 7 years later should have some sort of a job. Therefore, they will have the ability to buy items. The ads on facebook is useful. P&G selling pampers is appropriate too since most of these people may be married.
There definitely seems to be a lot of potential for facebook. However, such potential was seen in myspace and other internet companies. The trick here is to correctly value the risk of realizing such potentials. It seems bold of Goldman Sachs to value the company at around 25x revenue. Such a multiple seems way out of normal. What remains to be seen is whether those users (potential revenue generators) move to another new fad in the coming years....
Also there is a difference in the values provided by Google and Facebook. People generally go to facebook to socialize and find out about others. However, google searches are directed for specific needs. This gives google a better conversion rate (ads into customers) for advertisers. This is reflected in the current business view of facebook being better for impressions and google better for conversions.
I am not sure if I can assess if Goldman has undervalue Facebook base on this article, but I do realized that the enormous amount of people who joined facebook when it first started in 2004 were college students who now 7 years later should have some sort of a job. Therefore, they will have the ability to buy items. The ads on facebook is useful. P&G selling pampers is appropriate too since most of these people may be married.
ReplyDeleteThere definitely seems to be a lot of potential for facebook. However, such potential was seen in myspace and other internet companies. The trick here is to correctly value the risk of realizing such potentials. It seems bold of Goldman Sachs to value the company at around 25x revenue. Such a multiple seems way out of normal. What remains to be seen is whether those users (potential revenue generators) move to another new fad in the coming years....
ReplyDeleteAlso there is a difference in the values provided by Google and Facebook. People generally go to facebook to socialize and find out about others. However, google searches are directed for specific needs. This gives google a better conversion rate (ads into customers) for advertisers. This is reflected in the current business view of facebook being better for impressions and google better for conversions.