Earlier I raised six reasons why I thought the attempts of Quepasa.com (QPSA.OB) bulls to draw comparisons between per-user valuations of Quepasa and Facebook were flawed. After reading the press release this week announcing that Quepasa's social network topped 25 million users, and had 17.4 million unique visits in November, I decided to revisit the first of those reasons: that Quepasa.com and Facebook might count their users in very different ways. It turns out that they do.
Unfortunately, despite these differences, Quepasa bulls continue to press comparisons between Facebook and Quepasa. Just today, Ian Cassel urged investors to value Quepasa based upon Facebook's phenomenal success:
"Facebook, I think just last week had a $50 billion valuation. That's just incredible. I think the valuation was closer to $20 billion 6 months ago, and when you divide $50 billion into I believe close to 550 million members you get a per member valuation of close to $90 per member. And with Quepasa, you know even with the move up Friday, its probably only at about a $9.50 valuation. And, you know, I'm not saying Quepasa deserves to be at a $90 valuation but I think that a $15 – $20 – $25 valuation is not a stretch…"
Now let's give him credit where it is due. Ian identified the growth story early and appears to have captured most of the uptrend. That's great, and it deserves respect.
But the Facebook-Quepasa analysis does not. It hinges on the fallacy that Facebook user statistics and Quepasa user statistics count the same thing, and therefore can be accurately compared. Even the most ardent Quepasa bull knows that is not true.
Facebook counts only active users, but Quepasa counts both active and inactive users. A full 50% of the users as counted by Facebook statistics log in every day. The average Facebook user creates 90 pieces of content each month. There are more than 550,000 Facebook applications and more than one million websites integrated with Facebook.
And Quepasa? By dividing the number of unique visits QPSA.OB reports each month by the number of purported Quepasa members, we can see that the average user that Quepasa counts as a member visits less than once per month. It is simply misleading to compare this inactive user base with Facebook's incredibly active user base.
Bottom line: Quepasa.com shares remain in a very strong uptrend, but the bulls modeling valuations based on a per-user comparison with Facebook or other social networks are off base. In my view, the next six months are crucial to QPSA.OB. Quepasa will have to prove that it is a real operating company capable of growing revenues from non-related parties. If it does that, the bulls' optimism will be justified. But my best guess is that the company proves itself to be much better at growing investor hype and inflated user statistics than dollars, pesos, or reals. I have no position now, but will consider a short entry once the uptrend falters.
Disclosure: No position in QPSA.OB or Facebook.