Yahoo has tried to buy Facebook for an initial price of $750 million, and supposedly took the offer all the way up to $1.6 billion before the end of the talks. According to Executive Summary, which uses a leaked slide of Yahoo’s evaluation techniques and projects them for current figures, Facebook is now worth about $3.5 billion.

Numbers, numbers, numbers. Anyone with a calculator can plug them in and come up with arguments as to why FB is worth $10m, $50m, $1 billion or whatever.

The truth is, number analyses don’t work. Here’s an example of why:

Number of FB users at time of Yahoo offering: 7 million
Amount Yahoo was willing to pay: $750 million - $1.6 billion
Cost per FB user: $100 - $235

At the time, FB was a college community tool. And, as anyone who was once a poor student knows, students respond to money. So if the value of FB can be found in numbers, build a better tool (ain’t rocket science) and offer each student $150 to join. Hell, I’ll join too! And you ! And you!

But, of course, there is more to it than that. What you are really buying, if you are buying FB, is a mind set. There are, today, 30 million people who like FaceBook. And it isn’t even perfect. But our mind is set on logging in everyday, because our friends are logging in too.
And we love our friends.
More than we love Google.

But where is the money?
Facebook is a great start for a money making making tool, but it is not the tool itself. What Facebook has done, is it has created an audience. Not, mind you, an ad-receptive audience. Just an audience, made up of millions of people, who like to communicate with each other in an environment that they can very much control. But don’t try to send them a message to buy anything. Right now, there is no advantage to the audience to receiving that message.

Unless, of course, the audience is also making money out of it.

This is pretty much how Google’s Adsense works. Google haven’t bought Joe Doe’s website, but they have convinced him that if he puts ads on it, he can make money. Joe gives a licence of sorts to Google, to display ads on his site. Slyly, but logically, Google explain to Joe that it is still his effort that is necessary to make the money - by maintaining the website, posting good content, and pushing it out to the community.

But wait! The community in Facebook is already built in. So all we need now is for someone to convince Joe Doe that he should put ads on his Facebook page by incentivising him with cash. Of course, it is a bit awkward to sell things to friends, so it will have to be a very subtle process. Maybe Joe will recommend a book to Jane, and make money if Jane buys it. Or he’ll suggest we all go to a concert together, and make a commission on the tickets. Or we’ll all subscribe to a service that adds benefits to our online experience. Maybe if Joe sends a Facebook message to Jane that they should see a movie this Friday, a one line note can be appended that suggests which movie is going to be the hot ticket this weekend.

The options of monitization are endless, but they would have to be dealt with a lot of sensitivity. This, after all, was our community first, and it was founded on some self-evident rights. The main of these is that nobody is making money off us, without our permission.

So how much is Facebook worth?
Spreadsheets won’t tell you, because Facebook is worth what anyone will pay for it. Or what Mark wants for it.

Perhaps an alternative method to valuing Facebook is to work out how much time is spent Facebooking relative to time spent being exposed to other online marketing methods, and how fixed that ratio is. And trust me, as soon as Facebook is sold, there will be plenty of “Where’s the next Facebook ?” questions posted out there - immediately.

By licensing out Facebook, the buyer and seller get a win-win situation. The “seller” continues to develop a product that gets as much online attention span as is possible form the audience. The “buyer” takes advantage of this attention span in a sensitive, incentivised, and brilliant way. Either one messes up, and it’s back to the market.

But if they both succeed, they will perfect the ideal marketing model of the most powerful marketing machine in the world- the online community.

And we know who “they” are. Don’t we?