With LinkedIn and RenRen filing to go public, it seems the chatter at every social event I attend these days turns to what Facebook could be worth.  Facebook has had a stellar valuation trajectory – from having raised $12.7 Million at a $100 Million valuation in April 2005, to raising $500 Million from Goldman Sachs and DST at a $50 Billion valuation in January 2011.  That’s a 500-fold increase in valuation in less than six years.  Wow.  Is there further upside?  I think there is.

Getting to a $100 Billion Valuation for Facebook

Facebook has about 650 Million users, and is forecasted to achieved $3.2B in 2011 revenues, which translates to about $5 per user per year.  Assuming a normalized 35% EBITDA margin, a $50 Billion valuation for Facebook represents about a 45x normalized EBITDA multiple:

• Revenues:                                         $3.2 Billion
• Normalized EBITDA  (@35%):      $1.1 Billion
• Multiple:                                            45x
• Market Cap:                                      $50 Billion

Going forward, if we assume that Facebook can get to 1 Billion users and monetize at $10 per user per year,  at 35% normalized EBITDA margins, we get to a $100 Billion valuation for the company, assuming a more modest 30x (normalized) EBITDA multiple.  Given that Google is currently monetizing at roughly $20 per user per year, this does not appear implausible.

• Revenues:                                       $10 Billion
• Normalized EBITDA  (@35%):    $3.5 Billion
• Multiple:                                          30x
• Market Cap:                                    $100 Billion

You Know What’s Even Cooler? $200 Billion!

According to Alexa, Facebook’s “Daily Reach” is converging on that of Google, which currently ranks first.

However, notably, Facebook’s “Time on Site” is roughly 3x that of Google!

And, according to Comscore, Facebook overtook Google in terms of “Share of Time” around July 2010 and the gap has been widening ever since.

Combine Facebook’s leadership in “Time on Site” and its growing leadership in “Share of Time” with the plethora of personal information that Facebook possesses about its user base and you can easily see why Facebook is an advertiser’s dream.  Facebook is a true treasure trove for granular advertisement targeting that should be able to achieve higher monetization.

Google, monetizing at $20 per user, has approached $200 Billion in market capitalization over the past year.  Given Facebook’s clear leadership in engagement and growing user base, a $200 Billion+ valuation for Facebook seems plausible.