Search Technology Unveiling Facebook’s Valuation: A $30 Billion Mistake?
We announced the launch of SENSEnews.com last week, which constituted a prime example of how search technologies will be used in the future.
SENSEnews aggregates news articles from more than 30,000 sources, one million blogs, and Twitter content. Using its semantic search technology, SENSEnews then detects pre-defined criteria in the captured articles to determine the performance of a company and the value of its stock. It was shown to be highly accurate in valuing companies like Google, Microsoft, and Intel using the same methodology. Now, using this technology, we analyzed the value of Facebook.
During the last twelve months, Facebook’s value has been steadily increasing – from $12 billion to $50 billion – based on reported investments and transactions. According to SENSEnews Index, the value of Facebook had an upward trend in 2010 until September, and then it significantly dropped back to its previous level of June 2010 (as shown in the chart below). This brings up the question: which valuations are correct?
There are two different sets of valuations, one recorded before September 2010 the other recorded after this date. The first set includes a January 2010 valuation of $14 billion (offer to buy on Secondmarket) and a June 2010 valuation of $24 billion (Elevation Partners). They are in agreement with each other when mapped on the SENSEnews Index. The second set includes November, December, and January 2011 valuations of $35 billion, $56 billion, and $50 billion, respectively, the last one by Goldman Sachs. All these valuations after September 2010 do not agree with each other, nor do they agree with the first set, according to the SENSEnews Index.
The turning point detected by the SENSEnews Index in September 2010, which was caused by an increased number of court cases and legal entanglements, suggests that (assuming the first set of valuations are correct) the current value of Facebook is actually around $20 billion, $30 billion less than its latest valuation.
It is interesting to note that Goldman Sachs’ $50 billion valuation was achieved by Facebook in September 2010 according to the SENSEnews Index (as seen in the chart.) It was probably when the actual value assessment was made by Goldman Sachs. However, by the time the investment was closed in January 2011, Facebook’s value had dropped.
“We have seen before that increased level of legal entanglements has negative effect on stock prices like in Google and Microsoft” said Dr. Riza Berkan, the CEO of hakia and co-inventor of SENSEnews. He added “Each court case is like a hand grenade, you never know their future impact on a company’s monetization capabilities.”
The estimated value of private companies like Facebook, Twitter, and others, can be monitored at SENSEnews.com via subscription.
