What's Facebook's killer-app revenue model?

It'll need a proven, predictable business to secure more cash at its last valuation

If Facebook does go back to the well, it better have a killer-app revenue model if it wants to come close to maintaining half of its $15 billion valuation. Alternatively, finding petrodollars may work too. 

There's a lot of chatter today that Facebook has to raise additional funds, despite the fact that the popular social network raised half a billion in the last 12 months - seemingly sufficient enough funds for the company to get through 2009.

But that's before its acceleration in growth. TechCrunch reported that Facebook is growing so quickly it needs to raise additional funds, and is speaking to Dubai International Capital. VentureBeat reports that Facebook is on track to double its $150 million annual sales from last year, according to a source close to the Palo Alto-based social network.

Here's Facebook's official statement to VentureBeat:

"As a matter of policy, we don’t comment on market speculation or rumor about our finances. Facebook is well-positioned both financially and within the market and any thoughtful attempt to model our business should reflect that. Our advertising business has great depth and breadth. While no ad business can ever be 100% recession proof, the breadth of our advertiser base and the innovative products we offer bolster our position in the current cycle. We’ve also been closely managing the business so we can continue to hire great people and scale. While we’ve achieved certain milestones, we are deeply committed to even greater business success in the future."

The Facebook source also told VentureBeat that the company doesn't face a "deadly burn rate nor lacks access to cash." Yet that's not according to TechCrunch's piece, which outlines Facebook's expenses:

"The company is likely spending well over a $1 million per month on electricity alone, say experts we’ve spoken with. Bandwidth is likely another $500,000 or more per month on top of that. The company has earmarked $100 million to buy 50,000 servers this year and next. And sources say they’ve been buying noe NetApp 30770 storage system per week just to keep up with all this user generated content. At up to $2 million each, that adds up quickly - we’ve heard estimates that they may have spent as much as $30 million this year alone with the company. And the icing on the cake - earmark another $15 million per year in office and datacenter rent payments. And don’t forget those human assets. With 750 employees and growing, Facebook is spending at least another $10 million per month on payroll."

The bottom line it seems is that Facebook may have to raise money sooner rather than later, like most companies. But regardless if the company hits an impressive $300 million in sales, its valuation will likely reset, like the entire market. One year ago, Google's stock traded at nearly $700. Today, it trades at $350. Yahoo is worth $18 billion, and at $13, trades at half the $33 price it traded at a year ago. Sina, China's largest portal, has several hundred million dollars in cash and is worth $2 billion. Baidu, China's biggest search engine, has a market valuation of $7 billion

Silicon Alley's Henry Blodget, a former Internet analyst, estimates that based on $300 million in sales and decent income, Facebook could be worth $5 billion.

That may be a bit high, just based on today's revenue.

Importantly, it's not the revenue that Facebook brings in, as much as the "type" of predictable, proven and scalable revenue and profit model going forward.

Google stumbled upon its ad-auction model, thanks to Overture. But its that killer-app model that's made Google what it is today. The Microsoft monolith was created because hardware vendors absorbed all the costs for developing CD-Rom copies while the software giant just gave them an image of the Windows operating system. Basically, Microsoft receives sales with zero cost-of-goods sold.

It's really unclear exactly what Facebook's model is. There isn't that easy ka-ching that you hear from Microsoft and Google.

Sure, it has advertising today. And, it probably has a significant share of the ads on social networks. But there isn't a killer-app model that is apparent.

Even Google is sitting at 50% of its value even though its search market share increased and click-through rates essentially stayed the same to the tune of 18% y/y, in the third quarter.

If you're an investor, you've got to know what the future payout is before paying last year's valuation.