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Galloway & Damodaran – Google: Leaking Value and Market Cap to Facebook

In our latest chat with valuation expert Aswath Damodaran, the NYU Stern finance professor shares his perspective on social media companies with L2’s Scott Galloway. Some highlights from a discussion that centered on Facebook, YouTube, LinkedIn and Snapchat.

On Facebook versus Google: “When Facebook first went public, I valued it as a Google wanna-be — a company that if it was like Google would be a success. … When I value Facebook today, I no longer value it as a Google wanna-be. … Google is going to be the Facebook wanna-be in this market.”

On Facebook and social media valuations: “If you’re a social media company, you’ve got to think about niche markets. … Go for a space where Facebook is not that interested and make it your market. Increasingly, from a business standpoint as a social media company, the domination of Facebook has to be built into your plans when you think about what to do next.”

On Facebook disrupting YouTube: “The minute Facebook cracked the code to get on mobile and get people checking Facebook videos on mobile, they were able to get a step ahead of Google. The reality is, people no longer go through search engines looking for videos, they go through Facebook pages.”

On old media companies and Facebook Native Stories: “You’re letting the camel’s nose inside the tent. … [Facebook] will walk away with the bulk of the spoils here. It’s a question of when, not whether.

On LinkedIn’s value: “It’s focused, and that’s the key. … A lot of these social media companies chase after whatever the mood of the moment is. LinkedIn has not done that, to their credit.”

On the most overvalued company in social media: “Snapchat: I can’t even think of a way in which you can convert those users into revenues without undercutting the product you’re selling.”

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