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Facebook could be worth 1 trillion dollars

With the recent aqusition of a paltry 5% of facebook by Microsoft for a staggering $500 million dollars the potential for facebook’s valuation is unlimited. Within the next ten years facebook could easily have a valuation exceeding a trillion dollars by capitalizing on all aspects of online and offline based media.

Microsoft was only able to sieze 5% of facebook for a whopping $500 million. What this means is that this 3-year old website is worth $10 billion. At the current rate of growth that figure could easily double to $20 billion by 2009. But facebook will easilly exceed $100 billion in valuation in four years. Here is why:
Lets assume myspace has 200 million users and will add an aditional 200 million by 2010. Since facebook has just 40 million users that leaves room for 360 million more users, assuming facebook and myspace are able to carve out equal market share. Given that facebook is worth $10 billion with 40 million users it would be worth $100 billion with 400 million users, which could be the theoretical upper limit for the number of members of an online social netowork. But the limit could be as high as 600 million which consists of 280 million internet accessible Americans, 70 million Europeans, and a combination of other regions such as Asia making up the rest.
With that many users the potential for revenue is mindblowing and unprecedented. Facebook already makes $100 million a year with its 40 million members. 400 million members would translate into $1 billion in yearly revenue ussuming facebook doesn’t add any aditional monetization.
Utilyzing its huge userbase facebook could easily create a youtube competitor as well as it’ s own payment processor to compete with paypal. Facebook could also launch an auction based system to compete with ebay, which could be facilitated by the payment system.

If facebook is able to overtake ebay and paypal that will add an aditional $100 billion in market capitalization. And if facebook is able to overtake google’s online advertising lead by offering webmasters (and facebook users) a way to monetize websites though contextual ads we could easily see an additional 200 billion in market capitalization.

Ebay, Yahoo, Google, and Amazon all have a combined market cap of around $500 billion. Fox (along with myspace) , AOL/Time Warner, and Viacom have a market total of $250 billion. Provided facebook is able to overtake these industries its final market cap will be around 1 trillion if you include the 100 billion from facebook’s orginal outlay. Microsoft is also in facebook’s crosshairs.

Facebook has thousands of developers working on custom facebook widgets to create an interactive interface where facebook users can conduct work and converse without having to use micorsoft based applications. Instead of having to spend $400 on a Microsoft Office suite a facebook user could just use an ad-enabled Facebook Office instead for free.
Other possible routes for expansion include an itunes type music downloading system, and video downloads for various TV shows.

Another more feasible path is that facebook goes public in 2008 with an IPO valued at perhaps six billion. It is quite possible that given the hype the stock could surge 1000% or more within a year ands keep rising. Each aquision and entry into a different marketplace such as auctions or payment processing would add tens of billions of dollars in market capitalization.

Does this seem far fetched? Maybe. But do keep in mind that we’re entering a new era of technology and humanity. The times are changing as we cross the rubicon to type1 civilization status. The world is becoming increasing interconnected and mega network sites such as facebook will benefit. Yahoo, Altavista, Aol, and Juno used to dominate the internet scene. What happened? They were replaced by a bigger and metter network.

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