I hate to leap in with what seems like an ad-hominem attack on the 37 signals, but their utter and complete misunderstanding of all the basics of business is starting to grate on me, and I'm wondering if it has anything to do with Chicago. Is the problem that they're sitting there in a city without any other Internet industry, stewing in their own witty ideas, listening only to the adoring comments they get from the groupies? How else could you explain just how far they seem to have drifted away from basic reality?
First of all, David: The word is VALUATION, not evaluation. KTHX.
Secondly, EVERY SINGLE COMPANY IN THE WORLD that has shares that trade is valued by taking the last share traded and multiplying by the number of shares outstanding. It's just the DEFINITION of valuation. It's TAUTOLOGICAL.
The whole section "Minority investment evaluations aren’t real" is so economically bizarre and incorrect that I don't even know where to start. It's like you wrote a blog post arguing that it is incorrect to refer to a 5' tall boy as 5' tall because he's often sitting down. Every single day every single public company in the world is valued by the last share traded, usually for a tiny fraction of the company.
Finally, to the main point. Facebook has certainly figured out how to make money off of 500,000,000 users. And as they optimize, they will make a lot more money. When they figure out how to make another DIME off of every user, they will instantly be making another $50,000,000 a year... in pure profit. How much profit will 37signals make if you figure out how to make another dime off of every customer? Eh David? Facebook works on the theory that when you have a lot of people, you don't have to make as much per person, because the amount of money you make is the number of customers times the amount of money you make off of each one. Again, that pesky multiplication.
It's weird, it's like in Chicago they don't have multiplication or something.
First of all, David: The word is VALUATION, not evaluation. KTHX.
Secondly, EVERY SINGLE COMPANY IN THE WORLD that has shares that trade is valued by taking the last share traded and multiplying by the number of shares outstanding. It's just the DEFINITION of valuation. It's TAUTOLOGICAL.
The whole section "Minority investment evaluations aren’t real" is so economically bizarre and incorrect that I don't even know where to start. It's like you wrote a blog post arguing that it is incorrect to refer to a 5' tall boy as 5' tall because he's often sitting down. Every single day every single public company in the world is valued by the last share traded, usually for a tiny fraction of the company.
Finally, to the main point. Facebook has certainly figured out how to make money off of 500,000,000 users. And as they optimize, they will make a lot more money. When they figure out how to make another DIME off of every user, they will instantly be making another $50,000,000 a year... in pure profit. How much profit will 37signals make if you figure out how to make another dime off of every customer? Eh David? Facebook works on the theory that when you have a lot of people, you don't have to make as much per person, because the amount of money you make is the number of customers times the amount of money you make off of each one. Again, that pesky multiplication.
It's weird, it's like in Chicago they don't have multiplication or something.