Wow – do we ever live in the digital age! You have probably already heard the buzz about Facebook having a rumored $10 billion valuation. Microsoft is thinking about investing to own 5% of this incredibly valuable and young (as in the age of the company) social network. Two years ago when Brant and I were in Silicon Valley on our initial Bazaarvoice fundraising tour, there was a ton of buzz about Facebook taking $10 million in funding at a $100 million valuation. Accel Partners, one of my investors in Coremetrics (the company I founded prior to Bazaarvoice), had led the round and taken a 10% stake. Now Accel's stake in Facebook is worth $1 billion, for a 10,000% return so far.
But you probably haven't heard about this: today, Google's valuation surpassed Wal-Mart's for the first time. Wal-Mart is the largest company in the world as the Fortune and Global 1. As of today's market close, Google is worth $177.6 billion while Wal-Mart is worth $175.58 billion. Wal-Mart has a P/E ratio of 14.46 while Google's is 46.24. The high relative P/E is a reflection of Google's insane growth (and projected growth) and margins since their founding (that may seem like a high P/E overall but note that Yahoo!'s is 51.75 and the only explanation is that the market must value a more diversified and theoretically more stable revenue stream).
And talk about a young company. While Facebook was founded in 2004, Google was founded in 1998 (that's around $20 billion of value created every year since their founding). It's amazing to think that only around 10% of all advertising is spent online today. The revenue shift from offline to online advertising is mindboggling. We are witnessing the creation of the most valuable company in the history of the world.
The only explanation for Facebook's incredible valuation is the average (very long) dwell time of the user (especially Millennials, as Kelly Mooney would call them) and the theoretical future value of their advertising stream. I presented at a local high school recently and learned, not surprisingly, that the students were communicating (i.e., living) in Facebook more than IM or email. But it's not just for kids. Our CMO, Sam Decker, wrote about Facebook taking off for business users in his blog. I have certainly seen that. The CEO of Ice.com just sent me an invite to connect on Facebook today (I had the pleasure of presenting with his brother, Pinny, at last week's awesome Shop.org Annual Summit in Vegas). I am getting 5-6 invites per week now and am spending more time on Facebook than LinkedIn now. And everyone, including Bazaarvoice, is rushing in to integrate with Facebook.
I wrote about how the Web browser and social networks are becoming increasingly more integrated in April. Hang on to your hat – if Microsoft invests in Facebook, it is going to get really interesting really quickly. How consumer-generated content becomes more integrated in social networks is going to create some very interesting (viral) opportunities. We're gearing up for that here.
By the way, I would be remiss if I didn't mention that Google never advertised. Neither did Facebook. Both brands were built entirely by word of mouth. And both brands are very young but obviously very established. That's just how valuable of a service they created. They're worth talking about… really worth talking about. Now, Facebook me.