Which begs the question, should it be? The market caps for eBay (EBAY), Yahoo (YHOO) and Time Warner (TWX), respectively are $37.3 billion, $21.9 billion and $35.5 billion, but that actually doesn't say as much as it looks about where Facebook should stand in comparison to those three more established companies.
The answer to whether Facebook should actually be worth more than those companies gets very complex, but, first, let's look at where Facebook stands compared to them from a strict revenue perspective. Obviously, it's much, much smaller.
Facebook is said to have made around $2 billion this past year (because it's private, further detail is almost impossible to come by). Meanwhile:
- EBay made slightly more than that -- $2.2 billion -- in the third quarter alone, and its guidance for the fourth quarter was between $2.39 billion to $2.49 billion.
- Yahoo recorded revenue of $1.6 billion for the third quarter, with the fourth quarter guidance coming in lower.
- Time Warner's Q3 revenue was $6.4 billion.
On the face of it (pun intended), the answer would be that, no, you can't equate Facebook to any of those companies. But you can take a rough look at how it maps out against the others:
Yahoo: Comparing Yahoo to Facebook is a waste to time -- why did anyone bother? Yahoo's revenue has been practically flat, even in a thriving Internet economy, and Facebook surpassed it in time spent in 2010, not to mention, influence, buzz and almost any other metric you can apply. Of course Facebook should be worth more than Yahoo! Time to move on.
eBay: Like Yahoo, eBay's revenue growth is tepid. While the site expects an obvious fourth quarter bump from the holidays, it's an established business, with all of the boredom that implies. However, it's not an easy call to say Facebook should be valued at 25 percent more than eBay. Why? eBay is firmly cemented in a proven business -- that people like buying and selling things. That may not seem all that sexy anymore -- and certainly eBay will never again experience the growth it did a decade ago, but its core business is unassailable. I'm going to call this one a draw.
Time Warner: Traditional media may not be a well, media darling, but let's tell it straight: there is no way that Facebook is a more valuable company than Time Warner -- except in the heads of giddy investors. No, Time Warner, is not sporting a 150 percent growth rate -- its revenue grew by only two percent in the third quarter of 2010 compared to a year ago -- but it's on track to make about 25 times more than Facebook did in 2010.
Plus, it has one big benefit that Facebook would be wise to emulate, and fast: multiple revenue streams. Time Warner has it in spades -- from advertising and subscription revenue to the sale of movie tickets, theme parks and more. Aside from print, all of these revenue streams are also pretty solid.
While you can argue all day about whether, for instance, advertisers spend too much on TV, or whether movies are too expensive, the fact is neither of those behaviors are in great decline. Facebook does have multiple revenue streams -- like virtual gifts -- but it would do well to find other ways to monetize its considerable traffic and influence throughout the Internet.
Here's why that's so important. There's an 800-lb. gorilla in the room: the future of online advertising and privacy. Everyone in Washington wants in on the regulation game -- it's one of those rare bipartisan issues -- and the threat of something like a "Do Not Track" program being implemented, which has been suggested by the FTC, is real. That could have a depressing effect on the online advertising industry, since targeted ads fetch higher rates than ones delivered indiscriminately; it should be obvious to anyone that Facebook's success to date rests largely on the kind of data regulators want to stanch.
So, Facebook, while this round of investments is impressive, you're no Time Warner -- yet. And, maybe you're not even eBay.