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Facebook Valuation The true value of the Facebook (NASDAQ:FB) common A stock is a difficult puzzle. There are too many moving parts for definitive assumptionmaking. Modeling future free cash flow shows the relationship between market expectations and the value of the stock. The thesis on FB growth needs to be analyzed and benchmarked. For Facebook, this relationship is exacerbated. FB is a Valentino Shoes Outlet "controlled company" with CEO Mark Zuckerberg controlling 55.9% voting power holding common B shares. He is often perceived as an eccentric tech wiz that is not motivated by money. In the S1, Zuckerberg explains that Facebook is focused on influencing the flow of information. The company was started for a social mission and not incorporation.

To be a shareholder in FB stock, it is essential that you believe in Mark Zuckerberg. The company and industry it operates in has a business tempo unlike others. Billion dollar acquisitions occur at Valentino Shoes On Sale lightspeed. Zuckerberg has said

Moving fast enables us to build more things and learn faster. However, as most companies grow, they slow down too much because they're more afraid of making mistakes than they are of losing opportunities by moving too slowly. We have a saying: "Move fast and break things." The idea is that if you never break anything, you're probably not moving fast enough. Advertisers pay for products displayed on Facebook, based on the number of impressions delivered or the number of clicks made by users. Payments and other fees is a percentage of the financial transactions that occur through the site. The current model relies heavily on website traffic.

Facebook uses a methodology called average revenue per user which is total revenue for a region divided by the average of the monthly active users in the Valentino Shoes region. ARPU was $3.08, $4.08, $5.11 in the last three fiscal years, respectively. The ARPU for Q1 2012 was $1.21; annualized at $4.84. This is a decrease from the prior fiscal year.

Revenue is a function of MAU and ARPU. If Facebook achieves its mission of making the world more open and connected (increasing MAU) without achieving ARPU growth, then shareholders will likely lose wealth to positive externality. Greater connectedness may prove great social value, but needs to be harnessed effectively to create shareholder value. This problem has been perceived slightly through the term monetization. ARPU will increase as Facebook and its developers increase effective and efficient consumer and advertiser products that are perceived as such.

In the revenue function, there are ceilings to the independent variables. The maximum for MAU occurs when every internet user becomes a Facebook user. Facebook currently has approximately 900 million users of the 2 billion internet users. There is also a limit on advertisement investment dollars. Facebook needs to provide consumer information that has value to advertisers greater than competitors without litigation and legislation on privacy. The strategy is to reach more internet users and provide better products to users and advertisers. Taking a position in the 5 billion user cell phone market is a longerterm strategy that poses new challenges for FB. This market is more mature with different saturation. It is difficult to quantify a sustained competitive advantage in either market given the rate of change in market preferences.

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