Less than meets the eye at Facebook

Consider what happened when MySpace tried to increase profits from users. With lots of pressure to drive revenue, they doubled the ads on the site. As they tried to monetize users, the site became ad-congested, a real eyesore. Users left in droves.

So how does this play into Facebook’s sky-high valuation? The company’s worth has been pushed ever higher by a series of private deals, all made before the SEC filing was made public. Microsoft made a well-timed investment of $240 million in 2008 at a $15 billion level; Elevation Partners paid $120 million at a value of $23 billion in June 2010. Goldman Sachs poured up to $2 billion into the social network at a $50 billion valuation in January 2011. All of these private investments were made by sophisticated investors, but without the benefit of the SEC data.

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 In seven years, the social networking site has grown from a project hatched in a college dorm to the largest social networking site in the world, well on its way to hitting its goal of having 1 billion users.

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 Facebook filed for its initial public offering Feb.1, giving us more insight how the tech titan operates. Here’s a look at some of the social networking giant’s shareholders and their affiliations with the company.

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A year ago, I offered five questions for Facebook private investors:

●FB claimed (in January 2011) 500 million subscribers. How many of these are active users — at least once or twice a week? How many of these are dead accounts, with no activity for 30 days, 90 days or more?

●What is the average revenue per subscriber? How are you planning to grow this?

● How much churn does Facebook go through? For every 100 new subscribers, how many subscribers leave?

●What is the life cycle of the typical Facebook subscriber? How active are they for how long; what sort of arc do they cut across their FB life cycle?

●Besides advertising, how will you monetize your user base? Are you selling their data to buyers? What about anonymized data — are you selling this also?

Last month, I compiled a new list for Facebook IPO investors. Those of you thinking of buying Facebook’s IPO at these rich valuations should be comfortable with the answers to these:

●What is the IPO offering price going to be? What market capitalization will FB come public at?

●What are the key pricing metrics? P/E, growth rate, price to book, price to sales?

●What is FB’s growth potential? At 800 million users, where do they begin to plateau? Top out?

●What is FB’s plan for penetrating China?

●How are the privacy concerns going to be handled? What else might come out of the closer FTC scrutiny of Web firms’ use of personal data?

●How long are insiders/VCs going to be locked up? Are they committed to holding onto shares for the long haul, or are they cashing out at the IPO or as soon as possible thereafter?

What I learned from Facebook’s filing was that they have 161 million active users who actually go to Facebook.com each month. That’s not shabby — but it’s a far cry from the MAU claims of 850 million. That definition of active users is probably overstated by a factor of 500 percent. I suspect that the $100 billion valuation may be overstated by nearly as much.

Me? I’m sitting this one out.

Ritholtz is chief executive of FusionIQ, a quantitative research firm. He is the author of “Bailout Nation” and runs a finance blog, the Big Picture.