I am fascinated with how things get valued, so when I read that Microsoft's investment in Facebook valued the company at $15 billion, I wondered how they negotiated that valuation. Todd and I started discussing what it is that drives value for Facebook, and decided that, since it is primarily user participation and activity, it would be fun to measure that and see how different users were valued. I remember how popular Dane's blog widget was, so we figured we would just build a Facebook app that did something similar for user profiles. If you wonder what your profile is worth to Facebook, check out the app.
Here is how it works.
1. Take the average profile value by dividing the total number of active users from the stats page into the total valuation of Facebook.
2. Pull in data for each person who installs the app, including # of photos, friends, wall posts, notes, groups started, and a few other minor things.
3. Calculate a score based on how many of the items in step 2 each user has compared to the average. The scores are weighted in reverse order based on how common they are. So for instance, friends count for 10 points each, because the average user (so far) has 107 of them. Starting a group counts for 40 points because the average user has started .4 groups.
4. Add up all the points for a user, and divide by the average point total for all users.
5. Multiply the resulting number by the average profile value from step 1.
This app taught us that the Facebook API really isn't all that great just yet. There are so many limitations, we had to do some funky stuff to get it to work. As a result, trying to boost your score by adding more notes or photos won't translate to a higher score for at least 24 hours. And the app tends to stall sometimes because, compare to other apps, we make so many requests.
If you install the app, your score will change daily based on who else has the app installed, because every person that adds the app changes the averages for photos, friends, notes, wall posts, etc. So check it out and let us know what you think, and let me know if you find any bugs.
UPDATE: Several people have wanted to know what they need to reach a certain level, like $1000 or whatever. It's really tough because your value is judged in relation to everybody else. In other words, if everyone adds 10 friends, nothing will change because your relative value stays the same. So in a sense, you have to stay active on Facebook just to keep your value where it is. To increase your value, you have to be more active than everyone else.
What others are saying about whether or not Facebook deserves their $15 billion valuation:
It's worth every penny.
Not worth it.
Doesn't matter because Microsoft is going to crush them.
Zuckerburg is now a billionaire.
Is Facebook worth it? Maybe.