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October 11, 2007

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Mark Mayhew

That said, I agree with Jason Calacanis...those guys at the Social Graphing Conference are "crazy".

I believe the PC term is "mentally ill"!

Joseph Hunkins

OK, but from a practical point of view how does one go about getting a 'strategic' valuation number?

Julie

I don't get it - will facebook or myspace ever be able to generate significant revenue? I can see generating a little income from the type of thing that Bob Dylan did (which I love and have on my facebook page) but myspace wants me to buy ringtones and join some dating sites. How much would a business pay to advertise that kind of thing?

Don Dodge

Joe, Strategic value is different for each potential acquirer. For example, PayPal was worth a fortune to eBay, but next to nothing to Google.

There is a strategic premium over and above the intrinsic value of a company. We see this in acquisitions of publicly traded companies. Take BEA as an example. The stock market valued BEA at $14 a share or $5.5 Billion. Oracle just offered $17 a share or $6.7B. That is a 25% "strategic" premium...and BEA says it is too low. The stock market ais anticipating a higher offer and the stock is now trading at $18.82.

Private companies are much harder to value, but the same bidding process happens in private meetings.

Don

Don Dodge

Julie, Facebook and MySpace are already generating ten million or more in advertising revenue each month. That is likely to increase over time.

I agree that much of the page view traffic at Facebook and MySpace is of dubious advertising value, but there seems to be a voracious appetite among advertisers for that demographic.

People spend over $5 Billion a year on ringtones. I have never purchased a ring tone, and I don't click on ads, but I guess a lot of people do. Go figure...

Adi

Excellent article. It is interesting to finally hear the terms 'value' and 'worth' instead of 'users'.

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