As much as I think FB's valuation was high, they have the advantage of having a Product That People Really Want. This means that they have a lot of room to adjust their business model (so long as they don't screw up the UX/product while at it).
Contrast this with GroupOn, whose product IS the business model...
Their valuation assumes that they will be doubling income many times over.
Most people (such as your post) completely ignore that, and focus on a good brand that is Facebook, and how the internet revolves around this company now.
with a P/E ratio of 85 it is priced as HIGH GROWTH stock. this means that you are paying $85 for $1 of profits.
Meanwhile FB is having hard time continuing its growth because everyone is already signed up (1 for every 8 people in the world), so they try to increase revenue by attempting to keep users on longer, making the service more intrusive and annoying to a portion of its inhabitants.
I'm no financial analyst, but I don't see above as sufficient to multiply its revenue and live up to the hype that is it's stock price. They would need to make some really breakthrough moves to do this.
> If you're not paying for it, then you're not the customer; you're the product.
Facebook's product is it's database of user information. If the actual customers, which currently consist mostly of ad companies, aren't interested, then they have a serious problem indeed.
While there is a nugget of truth in that quote, it is also a vast simplification. There is a (somewhat) symbiotic relationship between FB, you, and FB's advertisers. If any one of them are abused too badly, the combined organism will die.
That means FB has to create a product people are interested in using and has to protect their privacy just enough while giving their advertisers what they need to successfully market products.
This god-awful meme assumes 'payment' is made only in cash, fails to grasp the nuances of marketing, sweeps aside the subtleties of non-cash transactions, and is such a silly oversimplification that it is almost entirely meaningless.
Facebook's product is ultimately their users via their ad platform. Their users don't really make them any money, it's the advertisers who are paying FB.
In terms of having a Product That People Really Want (ads), it appears there's mixed emotions about that currently.
I think arturadib was talking about the user-base BEING Facebook's product.
You are correct as well, when you say that the user-base is their competitive advantage. It is a competitive advantage in the production of their product... a centralized pool of users.
You are mistaken, however, to categorize the UX as the product. The UX is simply a clever widget used to build the product... again, a centralized pool of users.
Contrast this with GroupOn, whose product IS the business model...