OREANDA-NEWS. March 17, 2011. OTKRITIE, one of the largest financial groups in Russia, today issued its fair value of USD 76.4bn for Facebook, the world’s largest social network, with more than 620m users in 214 countries, reported the press-centre of Otkritie.

The valuation is included as part of OTKRITIE’s investment case for the Mail.ru group, a holding of various internet assets put together in 2009 to create Europe’s largest internet company. The lion’s share of Mail.ru’s value is its stake in Facebook, which is worth 31% of the group’s value. Together with other minority stakes, these represent 50% of the group value.

During Mail.ru’s IPO, Facebook was valued at USD 24bn (based on a June 2010 transaction in which a 0.5% stake was sold to Elevation Partners). In November 2010, Accel sold a 1.47% stake in Facebook for a total cash consideration of USD 516m, driving up the total Facebook market cap to USD 35bn. In January 2011, Facebook raised approximately USD 1.5bn on a valuation of USD 50bn.

Tibor Bokor and Alexander Vengranovich, the research analysts at OTKRITIE who composed the report, commented:

“In our model, we value Facebook at USD 76.4bn for a 100% stake, or 53% above the USD 50bn valuation implied by its latest transaction. We forecast that Facebook’s revenues will reach USD 16.8bn in 2015... The enterprise value of Facebook in 2015 is estimated at USD 134.7bn, then discounted using a 12% discount rate, which yields a figure of USD 76.4bn as of YE11.”

The rationale behind OTKRITIE’s key assumptions is explained below:

Global advertising and online advertising. We estimate that the average global share of advertising in world GDP will stay flat at 0.6%. The online advertising share of total ad budgets will rise from its current 12% to 16% by 2015, as the internet occupies a greater portion of people’s free time.

Facebook’s audience will increase faster than the global online audience. At the end of 2010, Facebook’s registered user base reached 32% of the total number of people online. We estimate that its share will increase to 41% by 2015, with the growth dynamics of Facebook outpacing the growth dynamics of the overall global online user base.

Massive increase in monetization. We estimate that Facebook captured just 2.7% of ad budgets in 2010. We expect vast improvement in the company’s ad monetization, with its share increasing to 20% in 2015. This is a huge challenge, and Facebook has thus far opted not to overstretch in terms of monetization. However, the potential is there, and markets are ready to price it in. On our estimates, the ad ARPU (average revenue per user) per Facebook user could reach USD 1/month.

IVAS (internet value-added services) growth. Our IVAS ARPU estimate for 2015 is USD 2.4. As a benchmark, we used the Russian social network Odnoklassniki, which currently generates USD 3/year on community IVAS.