How to Create $100 Billion Out of Thin Air!

I was listening to NPR (National Public Radio) the other day and they ran a story on Facebook’s upcoming IPO. The reporters, Steve Henn and Zoe Chace, did a nice job of putting things into perspective.

When Facebook goes public tomorrow, Friday May 18th, the company is expected to be valued at $100 Billion dollars. This will be the highest valuation of a tech company in the history of Wall Street.

The NPR story went on to explain (very well, I might add) what a P/E ratio is, and one way to interpret it. A P/E ratio is the total value of a company divided by it’s total profits for the past year. Most “well known”, “big” companies like Apple and Google have a P/E around 15. Facebook’s P/E ratio will be 100!

The reporters went on to explain that with a P/E of 15 it will take companies like Apple and Google 15 years to generate enough profit to buy themselves. This means it will take Facebook 100 years to generate enough profit to buy itself!

Is Wall Street, and these so called “savvy” institutional investors crazy? Or do they see a trend that everyone else is missing?

I think it’s the latter. I think The Street sees Facebook capitalizing on a concept that that is not only a new trend but a model that has been around for years. And perhaps it is finally getting the recognition it deserves.

Facebook is having its coming out party (its IPO) valued at $100 Billion because investors believe the company will grow into an ad generating cash machine!

There are three parts to Facebook’s pitch to investors:

According the the NPR story…

“1. Nearly 1 billion people now use Facebook.

2. The company knows a ton about its 1 billion users. If you’re on Facebook, there’s a good chance the company knows your age, gender, where you went to school, what you like, where you live and who you are dating or married to. That means Facebook should be able to do an incredible job of targeting ads to you.

3. In the long run, Facebook wants to figure out how to use your friends to help sell you stuff. So if your friend buys something — a meat grinder, a seltzer maker, whatever — and raves about it on Facebook, that can become an ad.

That last one — turning word-of-mouth recommendations into a massive new advertising system — is at the core of Facebook’s long-term strategy.”

Is this really a new advertising photography web system as the NPR story speculates, or has this powerful model been around for a while?

This sounds an awful lot like direct selling or network marketing! And if you’ve been in my world for a while or followed me at all you know how powerful a wealth creation engine I believe network marketing is.

I just love the way the world works – you call it “network marketing” and people want to throw-up and look at you like you have two heads. But call it “social network marketing” and people are ready to throw $100 Billion at it.

As I’m sure you’re aware, only large institutional investors will be able to buy Facebook at the IPO.

If you’d like to learn about an internet based business model that employs social marketing that you can own and build for yourself just click here.

I say let’s have our own IPO (Independent Profitable Opportunity)!