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Facebook Is About To Be About The Size Of Google With 1/10th The Revenues

Nicholas Carlson

A prominent Silicon Valley entrepreneur/investor we met with this week told us he is very skeptical about Facebook's prospects as a public company.

Here's why.

Facebook is probably going to IPO at a $75 billion to $100 billion valuation.

If the stock pops, that market cap could easily reach $150 billion – maybe even $175 billion.

Google's market cap is somewhere around $200 billion on any given day.

That spread is pretty small considering Google revenues in 2011 were $35 billion and Facebook's were about 10X smaller: $3.7 billion.

The point is: the reason investors will value Facebook so highly is not that it has some sort of amazing business going on already.

They will assume that Facebook's executives will someday figure out a way to increase their revenues 10X and more.

Will Facebook do that?

Impossible to say.

It's pretty clear Facebook leadership is not at all panicked about revenues.

In the company's IPO prospectus, CEO Mark Zuckerberg says "we don’t build services to make money; we make money to build better services."

Meanwhile, Facebook ad revenues are decelerating.

The company is finally trying to monetize mobile, a little bit, selling an ad product that guarantees brands that their "fans" will see posts to brand pages on Facebook, even if Facebook has to push them into user News Feeds on desktop or mobile.

The one very fast growing part of Facebook revenues are the taxes it levies on social games like Zynga's FarmVille. But those are growing fast year-over-year mostly because Facebook only began taxing social games heavily last year.

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