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Facebook IPO: Are users really worth $125 each?

The Facebook IPO suggests that the social network's 800 million users are worth $100 billion. What role will Facebook's audience play as the mega giant files what could become one of the largest IPOs of all time.

By Megan Riesz / February 1, 2012

Facebook employee work inside the company's HQ in Menlo Park, Calif. Facebook, the social network that changed "friend" from a noun to a verb, is expected to file as early as Wednesday to sell stock on the open market. Its debut is likely to be the most talked-about initial public offering since Google in 2004.

Paul Sakuma/AP/FILE

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As Facebook reportedly gears up to file for its initial public stock offering Wednesday, the value of its 800 million users has come into question. Facebook, the world’s largest social network, has been estimated to be worth $100 billion. That makes each user worth $125.

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Compared with other social media companies that have gone public, $125 is a high number. But with the plethora of personal information that users post on Facebook – willingly and for free – investors could be swayed, despite the lackluster stock performance of other social media companies.

While Facebook has proven itself to be a company with some longevity, the social media world has changed a lot since Mark Zuckerberg launched the website in 2004. Investors can’t be sure that Facebook will remain top dog for long.

“It’s tough to predict how Facebook will do with all the hype,”  says Kevin Pleines, a market analyst for Birinyi Associates. “The market has not reacted too favorably [to social media companies] since the beginning of last year.”

Almost all of the social media companies that went public in 2011 are worth less now than they were on their opening days, he says. It’s unclear whether the weak state of the market had an influence or if social media companies simply aren’t a good buy.

However, Facebook may be different. Its value lies in the website’s wealth of personal data and its requirement that all users provide their real names. This vault of demographic information means that Facebook can post targeted ads with much greater accuracy than most other websites. With every “Like” or musical artist added to a user’s profile, related advertisements may better home in on potential customers.

Still, the value of some social networks has dropped by hundreds of millions after just a few years. MySpace was sold to Rupert Murdoch’s News Corporation for $585 million in 2005. Six years later, Specific Media bought it for a mere $35 million. What happened? The audience dried up. It fell from 70 million unique visitors per month in 2005 to around 35 million today, according to The New York Times.

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