In class, we discussed the various revenue opportunities and valuation for Faceb

Question

In class, we discussed the various revenue opportunities and valuation for Facebook. We also discussed how a company like Big Skinny can use online and offline advertising to sell its products through its website. We also examined the information and reports typically provided by Google Analytics. (a) Consider the valuation of Facebook we discussed in class. What are the key assumptions in the model that are difficult to justify for (a social media company like) Facebook? Briefly justify your choices. (b) Based on the valuation model discussed in class, a steady state (Year 10 onwards) annual revenue of approximately $200 Billion will justify their current valuation. Do you think it is possible for Facebook to generate $200B in annual revenue in Year 10? Briefly justify your answer. (c) Complete the “Google Analytics for Beginners” free online course available at https://analytics.google.com/analytics/academy/ . Generate the course completion certificate and attach it with your answer as an appendix (Note: you need to complete only the “Google Analytics for Beginners” course, not the advanced courses. (d) How can Big Skinny benefit from the reports that Google Analytics can provide? Be as specific as possible.

Explanation / Answer

Answer:

a) You have not specified what valuation of Facebook you have assumued and what model you have used to reach valuation and about the key assumptions. One of the common assumption that is used to calculate valuation is the number of user. There can be many criteria to look at number of users. If you are calculating valuation based on the overall registered users, then it won't be more realistic because most of the user will be idle, hence not contributing in the traffic of website. Another assumption that is often made is no. of page views. A valuation calculated just based on no. of page views will not be much appropriate. Rather than it will be more wise to consider average time spent on website.

So, in this way you can look at various assumptions made to calculate your valuation.

b) Facebook can reach the said valuation provided its user growth, specially activer users per month growth, remains intact and ad business is able to generate sufficient revennue.

c) This will be needed to complete by yourself.

d) Google analytics provides many types of reports that can benefit a website in many ways. For ex.:

1. Real time traffic helps to analyze the performance of web site in real time in terms of no. of real visitors, their retention time. This can be used to fine tune website well in time.

2. It provides details about sources from where user come to your site, their geographies, landing pages etc. All this will help in analysing the visitors' behaviours and set the goals of website accordingly.

3. It also tells about the bounce rates. This will help in assessing the reasons behind the bounce.

4. It also helps keep track of website performance over a period of time by maintaing references to historical data which is very important from analytics point of view.

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