Recently Facebook raised $ 1 Bn (received $ 1 Bn) based on a valuation of $ 50 Bn. The question that often arises is how are the companies valued. There are many aspects that go on while making forecasts about growth/valuation of a company. Investment bankers/consultants/Analysts takes into account numerous factors by looking into history, company management, industry growth, economic factors and many other variables in order to arrive at a number that depicts the value of the company based on how good is its future.
On the other hand Google is valued (enterprise value) at $ 164 Bn. Facebook and Google are two well known companies and often comparison is made between them. In order to compare these two companies we need to take another financial number and compare the ratio. Now there are various ways of doing it. Rather than making it an Investment banking exercise let’s keep it simple and compare valuation per unit of revenue ie divide valuation by revenue. It will indicate to what level a company is valued for every dollar it earns.
Facebook Valuation: $ 50 Bn
Facebook Revenues: $ 1.6 Bn
Facebook Valuation to Revenue Ratio: 31
Facebook primary source of revenues: Display Advertisement
Google Valuation: $ 164 Bn
Google Revenues: $ 29.32 Bn
Google Valuation to Revenue Ratio: 5.6
Google primary source of revenues: Search Advertisement
Facebook valuation to revenue ratio is almost 5.5 times that of Google. Since we know that valuation is primarily based on estimation of how much a company will earn in future and it happens that in this case primary source of revenues are advertisement on its platform. Does that mean that display advertisement will be the future?
Well it is difficult to say what will be the future, however Social networking sites provide rich data source for relevant targeting. Search and non social display advertisement would need to emphasis on getting rich user information for relevant targeting in order to provide a better ROI to the advertisers. The future would be guided by the companies that are able to gather relevant user information and use them in a way that enables efficient advertisement.
P.S.: I am referring to search advertisement as all the ads shown on Google/Bing/Yahoo search page and anything else is referred to display advertisement for the purpose of this blog. Also please note that these are indicative figures and not exact.
Mobile or Online aka portability vs usability……..Well both are important and both mobile and online have its own benefits and shortcomings. With the advancement in technology, the line between mobile and online is becoming lesser day by day.
However, it poses a problem for advertisers. How to manage the budget across online and mobile channel. Earlier, most of the digital advertisement was online however with the phenomenal rise of mobile media, advertisers and agencies are finding it difficult to manage their budget, team, resources across both the platforms. More importantly, once the campaign is started, it is often difficult to monitor and optimize the campaign across two different channel s? I believe it would be important for advertisers/agencies to identify a tool that can provide a comprehensive picture of the campaigns. It is important to keep optimizing campaigns by continuous insight from analytics. If there is no single tool that helps to consolidate data, it is better to run campaigns in a set of media from where it is possible to gain insights or from where it is easy to compile data in a format that would provide insights. However, if there is a tool that enables to run and manage campaign from single platform across various channels, then experiment with the new channels to generate higher ROI. Since many studies claim that mobile channel provides a better ROI, it would be great to test it. Moreover, with the lines between mobile and online blurring and with the pace at which mobile is gaining grounds, it would be extremely important to start gaining insights about mobile, so that one keeps ahead of the knowledge curve. Most importantly, it would be very important to find or develop a tool that would enable to optimize the budget not using excel but with sophisticated techniques.
The bottom-line is that it is important to utilize data in way that leads to insights, insights leads to actionable strategy and a strategy well executed generates a better ROI.
Digital ad serving industry has been going through tremendous change and still in its evolution phase. BIZense with its product Adatrix is taking part in shaping the evolution of digital ad serving industry. We have innovation and technology at the core as we believe innovative technology is going to play a very important role in shaping this industry.
With the launch of our product we bring this platform to you so that we can share our thoughts and hear your views.
We will be regularly coming up with lot of insights, opinions and updates of new product features. So keep watching this space.