Facebook’s going public in a few days and will finally get a real valuation attached to it. During a 2009 Burger King promotion that doled out free Whoppers for deleting some of your Facebook friends, I estimated Facebook’s valuation at about $1.8 billion.
What BK has unwittingly done here is provide a way to determine the valuation of Facebook. Let’s assume that the majority of Facebook’s value comes from the connections between their users. From Facebook’s statistics page, we learn that the site has 150 million users and the average user has 100 friends. Each friendship is requires the assent of both friends so really each user can, on average, only end half of their friendships. The price of a Whopper is approximately $2.40. That means that each user’s friendships is worth around 5 Whoppers, or $12. Do the math and:
$12/user X 150M users = $1.8 billion valuation for Facebook
At the time, Facebook’s estimated worth was anywhere between $9-15 billion, about an order of magnitude more than the company’s 2009 Whopper valuation. According to the company’s Key Facts page, Facebook has 901 million monthly active users as of the end of March 2012. Doing the math again:
$12/user X 901M users = $10.8 billion valuation for Facebook
Right now, the price range for the IPO is $34-38 a share which would put the company’s overall valuation at $104 billion, the same order of magnitude more than the current Whopper valuation.
Now, I’m no economist, but that’s a lot of hamburgers.