Valuing advertising-driven sites is particularly hard because the same numbers -- such as the number of users or page views -- can mean different things depending on how the advertisers are billed, Holthausen adds. "How often do they get paid for that advertising? Is it just when the advertisement appears? Or does there have to be a click through?" Similarly, not every user has the same value. That depends on how much the typical user is likely to spend and what he or she is likely to buy. Finally, Holthausen notes, a site will be more valuable if it uses a proprietary technology than if it simply offers services competitors can easily duplicate.
There are a few things you have to take into consideration when doing this:
1. MySpace's user base may be closer to 50M.
Taking into account the bots, the one-time signups and multiple accounts, their 112M user claim may have a margin of error of 70 million.
2. Facebook turned down 750M last year.
However, now it appears they are entertaining a 900M offer. If they thought they were worth much more (try $2B) this time last year, and are now considering less than $1B, what have they discovered lately to change their mind?
3. There is nothing special about these sites. Users can migrate (Friendster) to any comparable social site and not lose one whit of user experience. This didn't used to be the case, but when Facebook opened up their network, the exclusivity was lost.
If social networking valuation is your passion, I'd recommend this article for a deep read on social network values.
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