Valuation, Facebook Ipo | featured news

Foursquare is having troubles convincing investors that its valuation shouldn't shrink, a sign of a cooling toward social media startups in the wake of Facebook's messy initial public offering.

How to put all this into a Facebook valuation? To justify the big numbers being tossed around – $100bn and up – several things must happen in the next five to seven years. The business needs to become much less capital intensive (inclusive of acquisitions) over time, as Google and Microsoft have done. That is the easy part. But margins must also stay near today’s level of about 50 per cent – which would be uncharted territory. And sales would have to grow at least sixfold in this period.