The company Facebook has recently been valued at approximately $65 billion. While the actual worth of the company cannot be safely estimated until the company goes on the market, it can safely be said that Facebook is worth a large chunk of cash. The value of Facebook, however, comes from its users.
Facebook publicly releases some of its basic statistics on the aggregate usage of the service. As of March 2011, Facebook reports it has more than 500 million active users, who collectively spend more than 700 billion minutes per month on the service. Goldman Sachs estimates the number of users on Facebook as “approximately 600 million.” Those users share about 30 billion “pieces of content” each year. While Goldman Sachs has estimated the value of Facebook at $65 billion, other investment firms have estimated Facebook’s value, should it go on the market, at between $40 billion and $60 billion.
Doing the math of Facebook usage
Given the uncertainty of the statistics of Facebook usage, pinning down exact numbers can be tough. In order to pin down the value of each Facebook user, however, some generalizations must be made. Assuming that there are 550 million active users of Facebook and they spend approximately 700 billion minutes per month on the service, that works out to approximately 1,272 minutes per month spent on Facebook, per user. That is 69 minutes per week, 9.8 minutes per day, per user. If Facebook is worth approximately $50 billion with 550 million users, that puts the value of each Facebook user at about $91. Assuming that the 700 billion minutes per month takes into account every day of usage, that means that 365 days a year of 9.8 minutes use, average, equals a value of about 25 cents per day. That means every minute a person spends on Facebook is “worth” about2.5 cents. A minimum-wage job in the United States currently pays about 12 cents per minute.
Micropayments versus advertising
This back-of-the-envelope calculation on the value of each minute spent on Facebook reveals a few big things. Micropayments have long been discussed as the “future of the internet.” Micropayments are tiny payments made for individual uses of content or services. Micropayments are defined differently by different services, but they are usually understood to be anything less than $20. While Facebook is opening up its new currency system, Facebook Credits, the majority of the company’s income is from advertising. So the next time you log onto Facebook, keep in mind that everything you do and the advertising you see are adding up. The amounts may be small, but in aggregate, your Facebook usage makes big money for the company.