Facebook could be worth more than Google, says investor

Facebook Wallet?

Facebook could eventually surpass Google’s USD200bn market cap, according to Index Ventures partner, Neil Rimer, as investor anticipation surrounding the social network’s IPO intensifies. Speaking at the FT Digital Media conference in London, Rimer says that Facebook is only just beginning to exploit the many ways it can monetise, and claims that with the amount of data that Facebook’s 845m users contirbute to the social network every hour, the firm could even branch out into search, directly challenging Google’s core business.

Rimer’s views are echoed by Balderton Capital partner Dharmash Mistry, who says that Facebook’s touted USD100bn post-IPO valuation is “not too crazy”, adding that even if analysts downgrade the social network’s revenue growth for the next two years from 80% to 50%, it could still provide significant value. Facebook is set to go public in the coming months in what is considered by many as a landmark moment for the digital media sector.

While ads remain Facebook’s core monetisation method, initiatives such as its social graph, and the raft of media partners that have linked with the company to integrate their services with the social network, are key to maintaining its value to consumers and investors. Companies have also emerged from Facebook’s ecosystem, mostly notably Zynga, which form their core businesses around Facebook. Zynga’s Facebook-based social titles such as FarmVille and CityVille propelled it to success and ultimately a USD1bn IPO in December. However, Zynga is now making concerted efforts to lessen its reliance on Facebook, most recently launching its own web-based gaming platform that will allow users to play games on its website, rather than through the social network. Meanwhile, services such as Spotify have benefitted from rocketing user numbers and traffic to their external properties since tying up with Facebook last year. Mistry adds that a move by Facebook into payments could boost services further by enabling content platforms to charge consumers, and hinted at a “Facebook Wallet”.

The investors’ comments reflect those of Facebook’s international accounts director, James Quarles, at FT’s Innovate conference last year. Quarles claims that Facebook’s open graph platform positions Facebook as a distribution platform, enabling it to adopt innovative smaller services, rather than attempting to gain ownership of content itself. However, ru-Net Holdings chairman, Leonid Boguslavsky says that Facebook has attempted to compete with rivals, for example with its short-lived daily deals platform, as well as acting as a content facilitator.

Rimer cites startups such as social bookmarking site Pinterest and recent Index investment, fashion retailer Nasty Gal, as companies that have been created and gained traction because of Facebook, illustrating the depth of the emerging Facebook ecosystem. Investor excitement surrounding Facebook’s public offering is continuing to mount after social network signalled its intentions in January, and co-founder Eduardo Saverin says that the company has merely “touched the surface in terms in terms of what type of applications and uses the social graph can help with.”

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