The answer is simple. Only if they can turn their organically grown database into a revenue stream channel the $100 billion valuation makes sense and one can make money out of it. If you think this is a good answer, think again?
This answer fails to understand the influential power social connections can have long-term. By thinking you can't make money since users aren't clicking on ads you are missing the whole point. In the online world we are all used to measuring everything from click through rates to sales in real time, however with social sites like Facebook one must have a holistic approach in order to reap the benefits which lie underneath the surface. It's a bit like saying we shouldn't invest in customer service because it doesn't produce returns; while you may not be able to track the return on investment on your customer service initiatives like you can with your marketing campaigns, that's not to say that investing in customer service won't yield positive returns.
A new report by internet marketing research company Comscore suggests that social media marketing can show a positive return on investment by directly influencing sales, but it has to be measured in a different way to conventional online marketing since it's not ads that are driving sales, building brands and creating customer loyalty. It's the very act of being social and engaging with your customers. That means understanding the link between Facebook's various ad units with what Comscore calls free earned media, which is essentially the posts and other actions by brand and consumers on the social network.
The Comscore report cited examples of how advertising on Facebook could be traced to sales increases. For example, by tracking consumers who were Starbucks fans on Facebook against a control group of shoppers who weren't exposed to those messages, Comscore found that over a four-week period, 2.12% of the brand's fans and their friends made a purchase at the coffee shop. That's 0.58 percentage points higher than the 1.54% for the control group. That suggests that fans and their friends made 37.7% more purchases than those not exposed to the brand's earned media.
So all in all, can we buy Facebook shares at the current price and still make money. While the answer seems positive, you may want to wait as the current scepticism around Facebook's potential to deliver a return on investment may result in share prices dropping short-term, only to start seeing an upward movement medium to long term but we will most probably have to wait several years to witness this change. I guess the question is, if social media advertising is still in its infancy, where is the social media stock market? You can't expect for investors to understand now what most marketers still don't.
Social media will create a revolution in how we behave ourselves and eventually will start the next bull market, but not for at least three to five years. Social media gives the ability for everybody to be in instant communication with everyone else, and that's very powerful. We must not forget that Facebook is the pioneer of the social media generation, and remains as the most powerful social media network in the planet.