Facebook IPO Tanked

Yes, it did. The Facebook IPO valued the company at approximately $100 billion! Are they mad? What were they thinking? Easy to say that now but I think I have ranted at length to friends about insane valuations on Web 2.0 companies. These companies haven’t really proved that they can make all the much money off the many millions of users that they have. I for one can’t remember that last time that I clicked on a Facebook advert. I would like to say I never have but sometimes stray mouse clicks occur (I remember this causing accidental friend requests which is awkward and annoying). I can’t say I even notice them there much. I have definitely not bought any Facebook tokens/credits or whatever they call their attempt at a digital currency.

So what was the route of that crazy valuation? Web 2.0 companies burn cash at alarming rates. They have all that server hardware to keep running and must constantly innovate to remain relevant. Its likely that the venture capitalists behind building Facebook into what it is today wanted some of there money back. Not only that I assume that they too where taken in by that headline figure of 900million users or whatever it is. So based on promises of untold access to millions of people and pressure from venture capitalists the valuation had to be sky high. They didn’t have any other choice. Not to value highly would be to admit that the whole business plan wasn’t what they lead us all to believe. The problem is that it doesn’t matter how many users you have if all they do is turn cash into heat via looking at some pictures of their mates.

Author: phil

Complex Systems Scientist.