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Justification for Facebook’s Huge Market Capitalization

According to this USA Today article, Facebook’s market capitalization is $250 billion dollars. Market capitalization is the number of outstanding stocks multiplied by the price of the stock. Some people may think that Facebook’s market cap is overly optimistic and over-valued. However, even though $250 billion is an astronomical amount, the number can be justified.

Facebook recently hit the billion-users-a-day mark, and on a monthly basis, nearly 1.5 billion users log into Facebook. What is preventing Facebook from becoming the next MySpace, i.e. a popular social networking site that suddenly lost its popularity? Well for one, MySpace was not well equipped to handle the fast-paced change in technology and trends. Facebook undoubtedly attracts many of the world’s best programmers and engineers. Therefore, Facebook has the resources to not only follow the popular trends, but to set trends.

Secondly, there are no other social networking sites that are even close to rivaling Facebook. The next Facebook-esque website that pops into my mind is Google+, but that has seemed to fail. I signed up for Google+, but didn’t stay because none of my friends had an account, which is the main reason why Facebook is not going to die out. Everyone has a Facebook, so it is more convenient to stay on Facebook in order to contact your friends and family. In other words, your Facebook network is exponentially more likely to imitate your actual network.

Facebook has been investing in other things as well such as Intagram, and more notably, they have been doing research and development for what might be “the next big thing” – a virtual reality via Oculus. So Facebook is going to continue to grow, and it will also be sustainable in the long run because of the sheer number of users and because of the revolutionary emerging projects. With all things considered, their market capitalization is justified.

Source: http://www.usatoday.com/story/money/personalfinance/2015/09/04/facebooks-daunting-size-5-figures/71713166/

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