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DateFriday, April 29, 2011
AuthorJason Calacanis

Is Sheryl Sandberg'ing?

LAUNCH Entrepreneur Jason Calacanis Examines the Possibility of Facebook's Revenue Being $12bn, Not $4bn



LAUNCH_Facebook.pngWhile the chattering class wonders if there's an upper limit to Facebook's valuation (and throws around that "bubble" word again) our LAUNCH analysis suggests the company is holding back on the throttle. In fact, we believe they may actually be under-monetizing by a factor of three or more, potentially blowing away the widely leaked 2011 figure of $4bn for a truly staggering $12bn!



Carrying forward to 2012, $6bn in revenue could actually be closer to $18bn, and that puts the then 8-year-old company at nearly half of Google's 2012 projected $40bn. Assuming a 35% margin, this would imply net earnings of $4.5bn in 2011 and $6 billion plus in 2012.



Combine that with a 20x forward-looking EBIDTA multiple, as appropriate for such a fast-growing company, and Facebook cruises neatly to a $120B valuation. And that's just next year, 2012.



Suddenly the question of why Goldman is a buyer despite the $50bn valuation (not to mention rich civilians paying even more on the secondary market) may make a little more sense. Remember, this is Goldman we're talking about. They never spend more on an acquisition then they have to of course (cf. rules #001-003).



Now, it's common for pre-IPO companies to sandbag their performance using the old UPOD* approach to save some bullets for a rainy day, but Facebook's under-monetization may be unprecedented. We've drilled down into eight units we've identified to demonstrate just how.



Responsible for this conservative strategy is none other than the motherly business genius that is Sheryl Sandberg. It's the same approach she employed cannily for Google which, come to think of it, has missed earnings expectations just four times in 27 quarters and has always grown, even in a down market.



Famously, Mark Zuckerberg doesn't love playing the expectations game, but when you're a public company, earnings are essential to keeping stock prices up - and employee stock options from going underwater. Just ask Google, which recently thumbed its nose at Wall Street with a disastrous result.



Come along to LAUNCH to see the eight ways Facebook could grow revenue by three times almost instantly.



We're hoping this little brainstorm gets product geniuses like Kevin Rose and Excel nerds like Henry Blodget to expand (and correct) our assumptions.




Jason + the LAUNCH team



* That stands for underpromise and overdeliver.





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