Keep your eye on the bigger picture. Facebook’s $100 billion valuation was never about its first-hour pop or its second-quarter earnings. The valuation reflected a belief about the future — by definition, not reflected in today’s numbers — that the biggest Internet company, as measured by attention, simply had to become the biggest Internet company, as measured by market cap.
“When you’re trading at massive multiples, any hint of a slowdown in growth, or of failing to meet pretty aggressive targets, is a key sell signal,” Felix Salmon writes. Too true. But, as I’m sure Felix would agree, the implicit assumption behind Facebook’s $100 billion valuation was that Mark Zuckerberg, boy-king and chancellor of the social universe, could transcend the drudgery of banner ads-per-user. Facebook is deeper, wider, more media-pervasive, and life-insinuating than every social media company put together. How does that sort of company not become the next Google?! … is the kind of rhetorical question buyers were asking themselves.
“If Facebook’s profit model stays the same, this valuation doesn’t make any sense,” Espen Robak, the president of Pluris Valuation Advisors, told me on Friday morning, just minutes before Facebook traded publicly for the first time. In one or ten years, Facebook won’t be judged by Nasdaq’s glitches, or its executives’ alleged snitches. It will be judged by the degree to which Zuckerberg meets the historic burden of expectations placed on his company’s shoulders. Hiccups or no hiccups, this was always a bet on something not unlike magic.