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Google Deserves Its Valuation, Facebook Doesn't - Bloomberg View

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I do wonder if Facebook could implode, as the author suggests:

Social networks are supposed to be sticky because people hang out where most of their friends are. Half of Facebook's 1.2 billion active users have fewer than 200 friends each, and the average is 338, according to Pew Research. Such a small number is easy to recreate on a different network.

I left a social platform behind once -- LiveJournal in 2011 -- and am now in the process of leaving Facebook. The annoying self-launching videos that Facebook is so proud of were the last drop for me. Even with more than 4,400 friends and 99,000 followers -- many of them fake accounts, as often happens on Facebook -- switching to Twitter is not a traumatic experience: Most of my friends are already there.

I can see his point that in some ways Facebook's valuation is detached from reality:

I know what Facebook is about: Making a mockery of money.

When the social network bought WhatsApp for $19 billion, listicles of how else it could have spent that money proliferated: GQ suggested82.5 million bottles of Johnnie Walker Blue; CNN, the UN's annual aid budget (Facebook would have had $6 billion left over).

Now that Mark Zuckerberg's company is worth more than $200 billion -- $201.55 billion at the time of this writing -- it's time for people to amuse themselves with that shallow math again. My favorite comparison -- now making the rounds on Twitter -- is with Russian President Vladimir Putin's crown jewels, oil producer Rosneft, natural gas monopoly Gazprom and state-owned lender Sberbank. Their combined market cap is $202.3 billion, meaning that Russia's vaunted energy wealth plus its financial power is worth about as much as a company with 7,000 employees that had just $7.8 billion in sales last year, compared with Gazprom's $165 billion.

The comparison is pointless for a number of reasons, including the political factor and the old economy vs. new economy divide, but it's inspiring: 10 years of bold innovation using little except your brainpower and some silicon chips can make you wealthier than building infrastructure for decades and having hundreds of thousands of people run it. It's a fairy tale with a moral almost everyone -- with the possible exception of Putin -- likes.

What worries me, though, is Facebook's inexplicable advantage over its new economy peers. Google's market cap is only twice that of the social network, and its revenue approached $60 billion last year. Facebook has a price to earnings ratio of 85 compared with Google's 30 and a price to free cash flow ratio of 61 compared to Google's 37.

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