Facebook is unique in that its users have played a significant role, if not the most significant role, in what it is today. According to its S-1 filing, Facebook has 845 million active monthly users. Due to this widespread user base combined with the nature of Facebook, the news of the IPO has been particularly intriguing.

Users are excited because they feel a special connection to Facebook. While it is substantial news, there are some issues being raised about it from a business perspective, particularly over its estimated valuation.

Is Facebook worth $100 billion? What do you think?

According to Francis Gaskins, President and Partner at IPODesktop.com, the past 4-5 quarters are very indicative of its future. Based on the information that was released in the filing, he does not think $100 billion is a reasonable valuation for Facebook.

“At $100 billion market cap, Facebook would be selling at about 53 percent of Google’s cap,” he said.

As he explains, Facebook’s revenue in 2011 was $3.7 billion. Google, on the other hand, had revenue of $46 billion, which is more than 10 times the amount of Facebook’s. Given this data, Gaskins doesn’t see how Facebook is worth 53 percent of Google.

Gaskins also points out that the past quarters are telling of the company’s rate of growth. He told us he was “quite surprised” when he saw the details.

“[If] you look at what happened for December 2010, March, June, and September of 2011, oddly enough, what you will find is the operating earnings were flat,” he said. “The net after tax earnings were flat, and the margins – the profit margins – went down.”

He believes the $100 billion valuation points to the ego of Mark Zuckerberg as well as the fact that Facebook is falling into the trap of believing their own press releases, a move that he calls “very, very dangerous.”

“The credibility of management’s forecast is very, very important,” he said.

Gaskins told us that Facebook didn’t have a solid strategy for being profitable that would appease Wall Street, especially since its revenue was flat even without any real competitors. However, now that Google+ exists and is appearing to gain ground, he said that Facebook’s current projections could really hurt it. He believes that Facebook should have filed its IPO last summer when it was the only player in the space.

Another issue he sees from a business perspective is how Facebook is defined.

“It’s not a technology company,” he said. “It’s a consumer of technology, which is different. They’re offering a service, and they’re not selling technology.”

Facebook is, however, an Internet advertising company like Google. According to Price Waterhouse, the yearly compound growth rate for Internet advertising will be 12 percent through 2015. So, at this rate, it doesn’t translate into high multiple market growth for Facebook.

With these revelations and others being analyzed, the social giant will likely face a lot of scrutiny. What’s bad is that Facebook is about to enter the quiet period, which means that it will not be able to respond to the negativity.

On the bright side, Gaskins did say that Facebook’s IPO would have a positive impact on the economy.

“It’ll definitely help the economy because there will be a lot more money flowing around in the tech area,” he said.

In another recent interview with Alec Shankman, the CEO of Hollywood interactive community GotCast, he told us that technology and the entertainment industry were “merging quickly.” Sites such as Hulu, Netflix, and, of course, YouTube are creating many new opportunities for both known talent and budding talent.

While there are many opportunities, there are also challenges in bringing these two industries together. After being an agent for several years, Shankman realized that there was a gap in connecting fresh talent to agents, producers, and casting directors. He and his business partner Wil Schroter took this problem and developed a platform for bridging this gap called GotCast.com.

“We’re actually merging the way talent is discovered and the way that talent finds work with technology,” said Shankman.

They wanted to create options beyond American Idol, The Voice, and other talent oriented shows.

He went on to explain that the service has both a free and premium model and anyone that wants can sign up. The service also has a social-based component called MediaBlastr that allows family and friends to vote for their loved ones on various social sites. Brands such as MySpace, Dove, and Sony Playstation have created contests that have gone viral through this element.

“It’s really difficult for a brand to get talent to, or anybody for that matter, to speak about the brand across Facebook and Twitter without getting paid for it or without having a really specific reason,” Shankman said.

“But, in this case, when you’re saying, ‘Hey, I wanna be the new face of Dove, come vote for me,’ and you’re posting it on Twitter and Facebook and Google+, and then your friends go to vote for you and they sign up and they post the same thing, it gets really viral really quickly; and it’s incredible for brands,” he added.

The other challenge with this intersection of technology and entertainment is monetization. The entertainment industry is accustomed to having tried and true business models, but this new space is different. Shankman told us that GotCast, and the others that are embracing the two, are still experimenting with revenue models.

“Technology is growing like crazy everyday, so it’s gonna be in the entertainment space whether entertainment’s ready or not,” he said.

Despite these challenges, Shankman said that Hollywood was motivated to integrate technology because it didn’t want to “miss the boat” like the recording industry did.

This model works in many cases, such as with Twitter, but the question of whether or not it is an effective business practice is still debatable.

Should the business model or the success of the business come first? What do you think?

Many of these online businesses find their business model in an advertising platform. While we’ve seen multiple companies have great success with advertising, studies show that consumers are often frustrated by the excessive ads.

In a recent interview with WebProNews, Jeff Tinsley, the CEO for MyLife, told us that businesses have more than one option when it comes to finding a revenue model. He said, “Advertising is not the only model that works, as proven by us and proven by LinkedIn.”

In addition to MyLife’s free service, it also has a premium model with three different subscription services for users. He told us that users are willing to pay for what they consider to be valuable. In this case, in particular, users see value in connecting with people they want to hire and vice versa.

Tinsley said that both sides benefit, so it makes it something that is worth paying for. He went on to say that this model has worked so well for MyLife that there is potential for an IPO in the future. He said that it is something that they “seriously want to take a look at.”

More than likely, opinions are mixed on determining the best form of monetization for a business. However, I think it’s safe to say that most of the deciding factors depend on the business itself. Any thoughts?

A post on the YouTube Biz Blog announced this afternoon, "[W]e’re extending the YouTube Partnership Program to include individual popular videos on our site.  Now, when you upload a video to YouTube that accumulates lots of views, we may invite you to monetize that video and start earning revenue from it."

This move makes sense for several reasons.  First, you have to consider how content creators will react.  The ones who are contacted by YouTube will no doubt be thrilled to receive money.  The ones who aren’t will at least know that the possibility exists, and may make more and better videos as a result.  That, in turn, should benefit the average YouTube user.

Then there’s the corporate perspective.  Google has been trying to monetize YouTube for years, and by extending the Partner Program, should be able to sell more ads and bring the site closer to profitability.

Anyway, here’s one last detail that’s both a drawback and a hint at the next step: the YouTube Biz Blog post stated, "For now individual video partnerships are available only in the United States, but we hope to roll these out internationally soon."

Which do you prefer: Sirius XM or Pandora? Tell us.

What is the huge draw for Pandora versus Sirius XM for iPhone and iPod Touch radio fans? Unlike Sirius, Pandora is free for all (except a select few users).

Apple users tend to gravitate toward free content. Who can blame them… after paying for unlimited data, who wants to pay another subscription fee?

Sirius XM did give Pandora a "run for the money" with more than a million downloads in a short few weeks. It should be noted that the company hasn’t released any official numbers of new service agreements, which will ultimately tell if the Sirius XM app is a success.

With Pandora’s rapidly growing customer base (around 18 million), when do you expect the company to re-tool their monetization efforts? Do you think they’ll try charging a minimal fee for the service? Tell us what you think.

He basically said that Facebook is fine with the money it has. "If there’s an investment to be done on very good terms, we will consider it if for no other reason than to have more buffer if we want to do something in the future," he said at the event.

He also said that he hopes an IPO is in order, but that it won’t happen for a few years according to Reuters. There is no rush on that.

"I know for a lot of companies the IPO is the endpoint or the goal. For us it will be an event on the path to where [we] want to get eventually," Reuters quotes him.

Zuckerberg also mentioned the possibility of the company developing an ad network. "You can see over time us wanting to offer more ways for people to monetize their site and help out with that, and it could be a pretty natural extension for us to do something with ads or a number of other things that we’ve considered."

Speaking of monetization, Justin Smith at Inside Facebook has an interesting post up about how Facebook might one day monetize the open stream API, which was opened up to developers a while back. He lists the following three ways as possibilities:

1. Selling targeting data
2. In-stream virtual currency transactions
3. Selling tools and reports

Yesterday, All Facebook claimed to have data showing that Facebook has surpassed 225 million users. Compete data showed that the network had 104 unique visitors and over 1.6 billion visits in April.

For starters, they refer to YouTube as the fifth most popular US web brand according to Nielsen, though March saw the site drop slightly to number 6.

"Credit Suisse estimates that 41% of all US video streams will go through YouTube in 2009, and the site will see 375 million unique viewers worldwide," reports eMarketer. "But if you thought that time spent and a high usage rate would equate to big business for the video giant, you would be mistaken."

They quote estimated YouTube revenues for 2008 and 2009. The estimates are quite varied, but none of them exceed $500 million, and the rest are significantly lower. eMarketer then cites analyst estimates for how much it costs to keep YouTube running.

"According to Multichannel News, Credit Suisse analysts project that YouTube bandwidth costs, content licensing agreements, hardware needs and other expenses will reach over $700 million in 2009," they say.

eMarketer’s conclusion is that YouTube is unprofitable, and that they need to form more partnerships and offer more premium content, which can be more easily monetized.

Well, we’ve just started to see the beginning of this. Last week, YouTube kicked off its offering of movies and shows, as reported by WebProNews here (then there’s the Universal parternship on Vevo, which has potential). While this is certainly a step in the right direction for YouTube, it’s going to take more than what they’ve got at this point to compete with Hulu and other online video destinations.

Yes, YouTube dominates the online video picture in terms of total number of video streams and unique viewers by a longshot according to Nielsen’s Online VideoCensus, but you won’t find hit shows like The Office, or House on YouTube. You’ll find crazy old shows like "My Mother the Car" and maybe some MacGuyver.  I think you get the point.

It’s not that YouTube doesn’t have any current major studio content, but it’s going to take more than what it’s got if it wants to monetize the Hulu way.

Consumers Are Going Online

First we talked about how the current economic situation is driving more consumers online as opposed to in-store. Federman cited an AdAge piece stating that Web sales were growing at five times the rate of brick and mortar stores, a trend that the economy will no doubt fuel further. "The Web represents an unprecedented choice for today’s consumer  – a broader spectrum of product options, features and prices to compare than physical stores offer," says Federman. "The sheer time savings, and the saved transportation cost make the Web an increasingly preferred venue in which consumers are shopping."

"From the retailer side, the economy is clearly causing brick and mortar chains to evaluate the profitability of every store, and close those that are under-performing," he continues. "It’s hit everyone from Best Buy whose Web growth outpaced in-store sales to Starbucks.  For the consumer, fewer stores is another driver to the Web."

The Scramble for Advertising Opportunities

The next subject Federman talked about was how Google’s dominance has left marketers scrambling to find new opportunities to advertise.

"Google has done an excellent job helping the 80+% of buyers who start the purchase online (Pew Internet & American Life Project, 2008) identify which retailers are selling which product and driving traffic to the retailer’s Web sites," Federman explains. "For marketers, implicit in the Google model is the skyrocketing costs for keywords – it’s more challenging than ever for them to make any sort of brand impact."

But What About the Flood of Content?

Add to that the ever-increasing amount of content being uploaded to the web (with user generated content playing a big role) is having a negative effect on online advertising, perhaps even more so than the economy.

"Consumers are hungry for information," Federman notes. "In fact, 64% of them use multiple sources for information, and visit 2.5 sites in the purchase process (JupiterResearch). What will emerge from the plethora of content is a sort of user loyalty that will result in consumers using more information from fewer, but more trusted sources.  That loyalty may be driven by the site that provides the most accurate recommendations, superior customer service or the best promotions based on their personal hot buttons."

Learing from Google

"What we know from Google is that marketers find paid search to be effective – it’s a pay for performance model and highly measurable ROIs are more easily justified than CPM based offerings and mass media," adds Federman. "But Google only gets you so far, what do you do with your brand once you’ve arrived at the online storefront?"

He then referenced JupiterResearch again indicating that for the first time, the retail sites have become the source for online research, overtaking search engines.

"Taking the learnings from Google, and applying them to site-side search is a huge opportunity for marketers," he says, citing an example from his own Searchandise Commerce. "Marketers place cost-per-click bids by brand, SKU or category to elevate their placement in on-site search results.  Knowing that 80% of buyers start their search online, and that over 70% of clicks occur in the top 10 search results, attaining premium placement is an innovative way to engage prospects at the point of purchase while displacing competitive offerings.  The service addresses that last mile of search that Google does not address."

Federman has some interesting ideas about building trust and loyalty. Searchandise’s site drives the point home itself, "Retailers are looking for innovative ways to merchandise, monetize and maximize virtual shelf space, the same way end-caps and other displays are used in-store. It’s all about engaging the prospect at point of purchase."

Marketing Shift, which notes that LinkedIn just came off its most successful quarter yet, takes a look at the network’s "three-pronged" revenue model:

   1.  Upgraded Acccounts: Business, Business Plus and Pro Accounts provide extra features, including thorough lists of who’s searched for you and your company.

   2. Hiring services.

   3. Advertising comparable to the Wall Street Journal Demographic

LinkedIn CEO Reid Hoffman recently appeared on Charlie Rose. Here is an excerpt (via Vator.tv) from that interview that showcases a little of his philosophy.

LinkedIn does not have the users of a Facebook, but its niche is much narrower than that. Considering that fact, they’re doing quite well in the social networking space. According to MarketingShift, LinkedIn has a new user joining every second. The state of the economy and the amount of job losses are surely factors that further boost the usefulness of the kind of networking LinkedIn provides.

More people are seeing this along with a pull-down menu for trends now, including myself. I never get these types of things before other people, so that’s probably a sign it’s on the way very shortly for everybody else.

Perhaps Twitter decided to nudge the ball into rolling motion with the announcement of Facebook’s Twitterish changes coming next week. Real-time search is about to get big.

Another interesting thing that Loren Baker at Search Engine Journal points out is that Twitter is showing what looks like sponsored search results. On Twitter SERPs, you will see a "Featured User" box on the right. One example in a search I conducted was for Whole Foods, which just happens to be the second most popular brand on Twitter according to Electric Artists’ tracking.

"Think they’re paying for this?" he asks about a "feature user" he came across – the New York Times. Perhaps that revenue model isn’t too far off.