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Goldman Sachs Invests $375M In Facebook

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First, it has likely established itself as the leading candidate to win the very lucrative and prestigious assignment of Facebook’s initial public offering, whenever that day comes. Then, of course, there are secondary share offerings, mergers-and-acquisitions business and other banking fees that would inure to Goldman.

Second, Goldman’s private wealth management clients — handled by the firm’s money management unit for rich families — can boast to their friends on the golf course that they own a pre-I.P.O. stake in Facebook.

There is also the huge paper wealth being accumulated by the Facebook co-founder, Mark Zuckerberg, and his fellow executives that will some day be monetized and have to be managed. Goldman would likely have a leg up there, too.

Although the Facebook investment represents a negligible percentage of the firm’s roughly $900 billion balance sheet, it is symbolically significant because it had been unclear whether Goldman would, in the wake of the financial crisis, be using its balance sheet to make these types of investments.

So, it looks that all those narcissists who use Facebook are now helping to make even more money for GS.

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How do you monetise people's inane verbal diarrhoea?

500 million people having the opportunity to tell 150 other people how bad their hangover is doesn't constitute a business.

I don't see how the advertising revenue is sufficient to justify it.

Just like 10 years ago, there's no real substance.

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It works well as a way of communicating with family, posting photos etc but I only have "Facebook friends" who I actually know in real life, I imagine when you collect them like Pokemon cards it can become messy. I have never once clicked on an advert when using it tho and I am puzzled as to how it can be valued so highly.

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How do you monetise people's inane verbal diarrhoea?

500 million people having the opportunity to tell 150 other people how bad their hangover is doesn't constitute a business.

I don't see how the advertising revenue is sufficient to justify it.

Just like 10 years ago, there's no real substance.

you cant.

but Goldmans dont care.

They have invented a way to sell a "security" interest in a private company, where the internal financials remain unknown.

this private firm can have, IIRC 500 shareholders as a limit.

GS are to become or are already a shareholder and are selling pieces of this shareholdership to what they hope will be 1000's of hopefuls, who will invest and take a piece of the amazing action.

This puts the facebook value to Billions instantly and avoids SEC rules on shareholder limits on undisclosable closed Companies.

Another scheme to avoid the law to enrich banksters and fleece the public.

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How do you monetise people's inane verbal diarrhoea?

500 million people having the opportunity to tell 150 other people how bad their hangover is doesn't constitute a business.

I don't see how the advertising revenue is sufficient to justify it.

Just like 10 years ago, there's no real substance.

You get the feeling you have all these members and then someone just makes a number up for the economic value of each member and then multiplies it by the number of members and suddenly you have a company worth $10tr simply because of the made up number.

I find it hard to believe facebook makes any real money, it's telling they are just talking about paper wealth, wealth I take it hasn't been realised yet. Being slightly cynical I get the feeling the bankers are talking up facebooks value to find as many suckers as possible to buy something essentially worthless.

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Being slightly cynical I get the feeling the bankers are talking up facebooks value to find as many suckers as possible to buy something essentially worthless.

Isn't that Goldman's SOP?

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http://market-ticker.org/akcs-www?post=176313

Don't let it be you.

Facebook, the popular social networking site, has raised $500 million from Goldman Sachs and a Russian investor in a deal that values the company at $50 billion, according to people involved in the transaction. The deal makes Facebook now worth more than companies like eBay, Yahoo and Time Warner.

Riiight.

This, of course, isn't because Facebook actually needs $500 million, right? It was all a "strategic" investment? The board simply took the money and gave up a stake because..... they're nice guys?

Uh, no.

Of course the rattling about an IPO will now ensue. After all, if it doesn't then people will start to ask very pointed (and difficult-to-answer) questions - like, for instance, "why did you give up some percentage of control of the company for that $500 million if you didn't really need it?"

Everyone that starts a business eventually wonders about monetizing what they've built. But there's a difference between exiting because you want to exit and exiting because you need to exit in some form or fashion in order to actually make anything. Paper "valuations" of closely-held companies without public balance sheets and audited financials you can look at and ask questions of are difficult to justify - usually because the so-called "value" isn't really there.

The question that has to be asked of any business is how do you make money? That is, how do you generate revenue and from that revenue, how much of it do you get to keep, after all expenses - including commitments to pay other people you entered into (to service, for example, salaries and debt.)

There has been an explosion in user interest in social media sites. The social buying site Groupon, which recently rejected a $6 billion takeover bid from Google, is in the process of raising as much as $950 million from major institutional investors, at a valuation near $5 billion, according to people briefed on the matter who were not authorized to speak publicly.

Again: How do you make money?

Anyone remember Myspace? It was bought at a ridiculous valuation. How much money has it made for its owners? Hmmmm..... anything?

Don't get me wrong. I have a Facebook account (is there anyone who doesn't) but I don't see how you monetize it. With a valuation of $50 billion the assumption is that the estimated 500 million active Facebook users will bring $100 in monetizable activity to the value of the firm - after expenses. Let's presume that's over a five year time horizon (an eternity in the digital world, and too long - but I'll be kind.) Is there $20/user/year of profit (not revenue) available? I don't think so.

Adding to this is the fact that there's no direct monetization on the site at all - and any attempt to add is is likely to wind up blowing up in their face. This leaves them with advertising - and unfortunately for Facebook, you're not really there to have your page taken over by ads. Indeed, on my News Feed - the typical top page that people look at, there's just one little ad on the right side, and it's typically not visible at the screen size I use. I can't recall ever clicking on an ad displayed on Facebook.

My view: They need the money. Of course I can't prove that, because, well, there are no public financials. Go ahead and believe otherwise. Go over to Second Market if you want (and can qualify to trade there - I do qualify but you wouldn't catch me dead buying stock in a privately-held company where I had no access to the internals of the firm or its financials!) or even better, roll the dice with Goldman, who intends to (they say) create an "SPV" to evade SEC regulations on small firms with more than 500 shareholders (again, has anyone seen a cop somewhere? Is that not clear declaration of an intent to go around the law?)

In any event you can bet the hypester machine on this deal will be locked on overdrive, otherwise known as "full retard", right up until you get the pump - at which point it'll be dumped. Whether the dump will come in the near future or whether they'll actually manage to keep the hype machine going all the way through an IPO (and you'll "win" your bet, if you place one) is difficult to determine

This much I do know - it's easy to be popular when you don't charge money to come in the door, and Goldman will figure out a way to get millions in fees - whether the company is ultimately worth anything or not.

Turning that horde of people on Facebook into money is a much-more difficult proposition, and one that Facebook and their business model, from what I can see, has zero support for thus far.

Dennigers take on it.

It would appear no one has much idea how facebook makes money. Friends reunited tried charging and that worked so well.

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Facebook seems to have lost it's steam if you ask me. Only a few of my 'friends' actually update their 'status' on a regular basis. The site seems a lot less active than when I first joined a couple of years ago.

Maybe people have just deleted me and I haven't realised.

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Facebook seems to have lost it's steam if you ask me. Only a few of my 'friends' actually update their 'status' on a regular basis. The site seems a lot less active than when I first joined a couple of years ago.

Maybe people have just deleted me and I haven't realised.

It's the communal 'facebook communication' model that people may get bored with.

On Facebook, people don't really communicate - they announce things to others, usually to impress them and stay 'popular' (whatever that means).

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It's the communal 'facebook communication' model that people may get bored with.

On Facebook, people don't really communicate - they announce things to others, usually to impress them and stay 'popular' (whatever that means).

Videos like that restore my faith in humanity. I don't facebook.

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You get the feeling you have all these members and then someone just makes a number up for the economic value of each member and then multiplies it by the number of members and suddenly you have a company worth $10tr simply because of the made up number.

I find it hard to believe facebook makes any real money, it's telling they are just talking about paper wealth, wealth I take it hasn't been realised yet. Being slightly cynical I get the feeling the bankers are talking up facebooks value to find as many suckers as possible to buy something essentially worthless.

I think facebook had near 2 billion in revenues in 2010.

Not to be sniffed at, I'm afraid.

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i realy dont get facebook, its very boring on there. so boring infact that what i see most are doing on there is playing games ie farmville ect. its not a very good communication platform, yahoo messenger ect are far better for having an actual conversation. I see it as just the latest fad in a very long line of fads. its the place there all hanging out just now but this will change just as quickly as it did to the one's that went before ie bebo, myspace ect.

its just a pic hosting site with a chat applet after all.

Another i feel thats lost it is ebay, there taking about 20% of every sale in fees now, it seems to me they know the games soon up so are fleecing all the can get while they can. more and more people are now drifting over to free classified ad bulletin boards it aint gonna be long for the critical mass to be reached, i think craigslist has a chance to be king of the internet if they can build some good user rating system into its site. i loath ebay who are charging the same fees as traditional auction houses yet dont need to do any physical delivery or storage or even selling for the same fees.

Edited by homeless

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Videos like that restore my faith in humanity. I don't facebook.

Me neither. Neither do I twitter. I don't even carry a mobile phone unless I am travellig somewhere and think I might have the same need that used to be satisfied by a phone box.

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It works well as a way of communicating with family, posting photos etc but I only have "Facebook friends" who I actually know in real life, I imagine when you collect them like Pokemon cards it can become messy. I have never once clicked on an advert when using it tho and I am puzzled as to how it can be valued so highly.

Good point.

I never, ever use their adverts, and i keep reporting those on property as offensive...

Still, it works for me since I can be somehow in remote touch with people I grew up with in Italy or wherever.

on R4 they were saying that the revenue (not the profits!) was nearly $1bn for 2010. And it's valued at 50bn???

Bubble-tastic

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I think facebook had near 2 billion in revenues in 2010.

Not to be sniffed at, I'm afraid.

How do you know....its accounts are NOT publicly available.

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People do click on the adverts I'm afraid. Facebook has a pretty good advertising system. You can target by age, sex, location, interests. Much more precise than say Google Adwords, though perhaps not as good Plenty Of Fish. I make about £20-30 a day on Facebook. Their advertising department isn' t exactly helpful, and indeed your advert can be removed if deemed inappropriate of offensive by readers. I also have heard of people conducting all their business on Facebook, rather than via a traditional domain name and website. I'm not sure its worth $50bn but there is certainly money to be made on Facebook (as there is on Twitter).

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This puts the facebook value to Billions instantly and avoids SEC rules on shareholder limits on undisclosable closed Companies.

This depends on if the SEC will accept their attempt. It is quite clear that grouping 500 investors and calling them 1 investor is a device whose only purpose is to defeat the SEC rules. It comes down to the difference between 'the substance and the form'. The form may comply, but the substance of the arrangement clearly contravenes the rules. It is about more than this deal, it is about who shall be the governor and who the governed, who has the final word. If the SEC does not intervene, then they will create yet more devices and each time say it is fine, because they say so. Such power plays, testing the limits of the regulators, are all part of the game.

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How do you know....its accounts are NOT publicly available.

Hard to see how it couldn't make significant money via advertising given the number of page views per day (around 8 billion I think).

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Hard to see how it couldn't make significant money via advertising given the number of page views per day (around 8 billion I think).

Thats true, but also bear in mind the "interwebb" is changing due to the way people access it now. Some people access Facebook entirely through an iPhone or Android phone. Its not just geeks sitting at PC's anymore.

Edited by Sir John Steed

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Thats true, but also bear in mind the "interwebb" is changing due to the way people access it now. Some people access Facebook entirely through an iPhone or Android phone. Its not just geeks sitting at PC's anymore.

Even better. You not only know who you're targetting; you can know where they are located at any given moment.

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  • 312 Brexit, House prices and Summer 2020

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      • down 5% +
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