Lets look at the short term since their IPO is around the corner.
I think the short term metric is whether they're worth a 100B valuation. Q1 profits were $205M give them leeway (they did spend $300M cash on Instagram) say they have 1B in profits this year and their P/E when they go public will be ~100. That's indicates an extremely high growth company.
Considering their profits are down this quarter and their growth rates are slowing I think Chris's point may be more of is Facebook worth as much as they say they are. I, personally, prefer to see them at a P/E of 40. I think this is a pretty mature company and their primary revenue growth is behind them. The real short term question for Facebook won't be whether they can continue to grow their user base (they're likely tapped out) but how well they can increase the revenues on the users they have.
I think your comment is spot on, but I see large opportunities for them to increase revenues in the near term. Contrary to popular belief, Facebook ads are not well targeted. The only thing you can target is profile data and some action data like "likes". That is weak because stated preferences are less valuable than revealed preferences. Their remarketing offerings are non-existant. For instance, I can't target people that have visited my site, and GM can't target people that have already searched and looked at the chevy equinox.
I have bought about $5k of facebook ads, and they were not great. If I could remarket on facebook, I'd likely spend several thousand a month, and GM would spend a ton more than the $10M they recently cancelled.
I honestly think I could re-work their ad platform, and double revenues over time without changing the product.
Right now, on facebook I am seeing ads for generic stuff like cell phones, and clothing. On other sites on the internet, I am seeing ads with a special offer for a local gym that I was considering.
Your comment made me realize that while I click on ads on Google all the time, I have never clicked on an ad on Facebook.
I don't have a really good explanation why, except that maybe the ads I see on my Facebook pages seem to have a 'scammy' feel to them (the most common ad I see is for Canadian Pardons - Facebook must think I'm a criminal).
since most Ads dont work, and people advertising "healthy food" and "local plumbing" figured it out already, the only one truly left are the advertisers that make money of ripping off innocent or unaware people: ads such as mom that makes $150 per hour, amazing cream for deep jungle that makes grandma looks like shes 30, pills that will let you lose 50 pounds in 1 week, etc.
If we're going by likely ad revenues, I'd tend to agree, but a big unknown is the value of all that data, and their willingness to exploit it. Even if companies won't pay much more than they currently are to run display ads on Facebook, I would bet there are people who would pay a lot to get their hands on various pieces of that raw data.
I think the short term metric is whether they're worth a 100B valuation. Q1 profits were $205M give them leeway (they did spend $300M cash on Instagram) say they have 1B in profits this year and their P/E when they go public will be ~100. That's indicates an extremely high growth company.
Considering their profits are down this quarter and their growth rates are slowing I think Chris's point may be more of is Facebook worth as much as they say they are. I, personally, prefer to see them at a P/E of 40. I think this is a pretty mature company and their primary revenue growth is behind them. The real short term question for Facebook won't be whether they can continue to grow their user base (they're likely tapped out) but how well they can increase the revenues on the users they have.