Facebook worth $15B?

Hello guys, I've just ran across an interesting story on Wired about Facebook gigantic valuation it has received this week at around: $15 billion .

So how for god's sake can anyone valuate a startup with an estimated $150 million in revenue which isn't wildly profitable, and doesn't have a clear revenue model at a value of $15 B?

Hint: its all about its estimated user base and the potential to monetize its user's activity.

Facebook has actually earned its valuation on the market's expectations, and expectations for its future are high. Sustained growth will be critical. Facebook has 50 million users today, and many believe it can ramp up to between 200 and 300 million users globally in the near term. The fact that Facebook is doubling its user base every six months bodes well for the future, says startup adviser and investor Dave McClure, but whether it can turn those users into cold, hard cash is the burning question. "If they can figure that out, then there's probably an even richer valuation than $15 billion," he says.

Recently Microsoft (MSFT) has shown its own interest at Facebook investing $240 million for a 1.6 percent slice.

Remember that $240 million is chump change to Microsoft, which has $6.6 billion cash in the bank. Greg Sterling, both an independent consultant and a senior analyst for advisory service Local Mobile Search, frames it this way: Microsoft wanted to block Google (GOOG) from horning in on its advertising relationship with Facebook. It also couldn't afford to lose perceived momentum with its largest advertising partner.

So how can Facebook turns its users into cash?

Think targeted advertising. Facebook could use its extensive user data to serve up advertising targeted on an individual level.

If you really think about it, its incredible how much info and user data Facebook has, not to mention the fact that they've opened its network for 3rd party developers, to develop little apps (Widgets) specifically for its platform. The more time its users spend on the site, the bigger of an advertising medium it could become.

Its not all bright and sunny though, A major challenge will be the fact that users of social networks tend to click on ads much less than, say, search-engine users do. The more data Facebook can give back to brand advertisers --for example how certain demographics behave on the site -- the more valuable its platform could become.

Now its Mark Zuckerberg's job to keep Facebook cool and hip, while creating sustainable revenue model that goes beyond the current banner ads and $1 virtual gifts.
Facebook plans to announce it advertising plans on November 6th.