There is, in the end, one number in Facebook‘s IPO filing that really matters: 845m people use Facebook every month. The user base is so big that it makes the traditional metrics for valuing an internet IPO (or any IPO) look a little silly.It makes perfect sense to argue that Groupon, with its 29m customers, is overvalued because its revenue growth is falling precipitously. But with 12 per cent of the world population using Facebook’s product (and half of those using the product every day), the company could legitimately argue – as countless internet companies have illegitimately argued – that revenue is a secondary consideration in establishing a rational valuation.Even user growth trends become hard to read. Users grew by just 6 per cent between the third and fourth quarters, half the rate as the same period last year. But that means 45m people (that’s the population of Spain) joined up. Is this deceleration? Yes, businesses must ultimately be measured by revenues and profits. But Groupon has already reached a scale where modest tweaking of the revenue model could create very dramatic financial results.
Facebook generated $3.7bn in revenues last year (at a 27 per cent net margin): about $5.11 in sales per user, a penny and a half a day. If it can increase that by 10% their revenues will grow by over $1bn next year, even on the assumption that user growth stalls. And there is reason to think the user base can grow, because it is already truly global: less than half of active users are in North America and Europe. None of this means that a massive valuation – such as the $100bn that has been rumoured – is warranted, or isn’t. It does mean that Facebook needs to be assessed differently, if no less cautiously, than the internet IPOs that have come before it.