1. Companies inflate user numbers because high user numbers bring high valuations.
2. Except that, oops, the data show that valuations and user numbers are uncorrelated. The ratio varies by nearly two orders of magnitude, from $5.80 per user to $200 per user. YouTube has 1/3 of MySpace's users but is valued three times higher. Gosh, it's almost as if the market is ignoring these inflated and possibly irrelevant user numbers while focusing on other things. Which invalidates the entire premise of this article.
3. Valuations are insane! Especially the ones that are based only on rumors! OMIGOD ITS A BUBBLE ITS GONNA BLOW OH NOES!
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Incidentally, the author wonders how Google could possibly earn back the $44 per user that it paid for YouTube. If this AdAge report I found on Google is to be believed (warning: evil PDF link):
...the NBC TV network took in $5.6 billion gross ad revenue in 2003. NBC claims to reach 103 million U.S. viewers, according to the ever-reliable Wikipedia. That's a gross of $54 per viewer per year, using a very generous definition of "viewer". And that's just one TV network, in one country, in one year.
Which is not to say that Facebook is not overvalued. I still don't know anything about that.
1. Companies inflate user numbers because high user numbers bring high valuations.
2. Except that, oops, the data show that valuations and user numbers are uncorrelated. The ratio varies by nearly two orders of magnitude, from $5.80 per user to $200 per user. YouTube has 1/3 of MySpace's users but is valued three times higher. Gosh, it's almost as if the market is ignoring these inflated and possibly irrelevant user numbers while focusing on other things. Which invalidates the entire premise of this article.
3. Valuations are insane! Especially the ones that are based only on rumors! OMIGOD ITS A BUBBLE ITS GONNA BLOW OH NOES!
Incidentally, the author wonders how Google could possibly earn back the $44 per user that it paid for YouTube. If this AdAge report I found on Google is to be believed (warning: evil PDF link):http://www.journalism.wisc.edu/~gdowney/courses/j201/pdf/top...
...the NBC TV network took in $5.6 billion gross ad revenue in 2003. NBC claims to reach 103 million U.S. viewers, according to the ever-reliable Wikipedia. That's a gross of $54 per viewer per year, using a very generous definition of "viewer". And that's just one TV network, in one country, in one year.
Which is not to say that Facebook is not overvalued. I still don't know anything about that.