Warren Buffett didn't buy Facebook (NAS: FB) , and I have a feeling that if I told him I liked the stock, he might punch me in the gut. Actually, that seems to be the most common reaction to my mentioning the possibility that Facebook is a good company. But Warren would be wrong to punch me in the gut, even though everyone would applaud him for doing it.

Facebook is going to make money for shareholders.

Why would any sane person ever buy Facebook?
One hundred times earnings! A hundred! Google (NAS: GOOG) , the greatest tech company known to man, only trades at 18 times earnings! What sort of idiot would be tempted to buy a company that overvalued? A company Warren Buffett has no interest in? A company run by some short dude in a sweatshirt?

I am happy to be that tempted idiot.

Let's dispel a myth or two. A hundred times earnings is a lot, but I've seen a higher IPO -- for the mighty Google itself. Big G IPO'd at 217 times earnings on its opening day of trading, and it had the gall to pop to more than 250 times earnings. So maybe 100 isn't "crazy."

Second, let's talk about revenue. Right now, Facebook makes its revenue through the sale of ads. In 2011, the company made $3.1 billion, or 85% of its total revenue, through advertising. Clearly, this is Facebook's current moneymaker, but let's look closer at the missing 15%.

That remaining $557 million in revenue came from Facebook's payment platform, which the company made mandatory for payment acceptance last year. Right now, it's mainly being fed by Zynga (NAS: ZNGA) , but in the future, any payment made on Facebook will be processed through the homegrown platform. Let's take this knowledge and do a quick "what if" scenario.

What if the investing world is right and Zynga's competitive moat is about 4 inches wide and half that deep? Every Zynga-style company that Facebook partners with (Activision Blizzard, Microsoft, Electronic Arts -- you know, start-ups) can pull in upwards of $400 million -- Zynga alone contributed $445 million in 2011. There is an excellent opportunity for Facebook to turn its 900 million users into an army of app purchasers. From my perspective, the Facebook Payments platform is the true growth driver for the company.

And the rest
We haven't even touched on Facebook's brand strength and customer loyalty. Millward Brown's most recent brand ranking report places Facebook as the 19th most valuable brand in the world, just behind Amazon.com. The research firm estimates Facebook's brand to be worth $33 billion, a 74% increase on last year's valuation.

And now everyone is thinking, "This may all be true, but isn't it just like MySpace?" On the contrary, MySpace last boasted about its user numbers back in 2006, when they finally hit 100 million. That's no longer impressive. Heck, Twitter already has almost 600 million users. By the way, Facebook has tapped that frothy keg, too. Its seemingly crazy Instagram purchase has put it in every Twitter user's timeline. Instagram has more than 50 million users and is adding around 5 million a week.

Why are you not buying Facebook right now?
Facebook has a massive base of users, who spend an average of 400 minutes a month on the site. It has an untapped payment platform that generates income off the back of other companies' hard work. Its revenue grew 88% last year and 154% in 2010. If it were a country, it would be the third largest in the world by population.

No, my vote at the shareholders' meeting isn't going to stand in the way of Mark Zuckerberg doing what he pleases. No, there isn't any meaningful system of checks and balances on Zuckerberg. And yes, one of the founders has seemingly stepped into the Twilight Zone to save a few million in taxes. But here's the thing -- I just don't care.

Facebook is going to do really well. The stock might flounder around for a while, but in two years, you'll be rolling in returns. It should be noted that I don't even really like Facebook, but look at the thing. This is an excellent company that has changed, is changing, and will continue to change the way we look at the Internet and social interaction. It's a once-in-a-long-time stock, and I want in.

Trust me. I know plenty of people disagree with me, even some fellow Fools. The Fool's senior technology analyst certainly thinks he's identified another company in the social networking space whose potential outstrips that of mighty Facebook, which he details in our new research report. If you want to find out more about the company he thinks investors should buy instead of Facebook, grab your copy today.

If you like the idea of being in on the ground floor of world-changing companies, and you want to make some money from being so enlightened, then you are an excellent person. You are also the sort of person who should read the Fool's free report on 3 American Companies Set to Dominate the World. These companies have been there and done that, and they're now ready for even more "being" and "doing." Get your free copy now.

At the time this article was published Fool contributor Andrew Marder doesn't own any of the stocks mentioned in this article. But seriously, he is going to buy some Facebook. No joke. The Motley Fool owns shares of Google. Motley Fool newsletter services have recommended buying shares of Google. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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convoluted logic in this article. the writer talks about companies in the past who were the hot new thing. some have stalled. the writer then expects people to believe that can't happen to facebook.

if stocks were guarenteed, everyone would be rich.

May 25 2012 at 9:48 AM Report abuse rate up rate down Reply

Looks like someone needs people to buy in so that he can dump his IPO stock at a gain rather than having lost money.

May 25 2012 at 8:29 AM Report abuse rate up rate down Reply

Oh Please. the user base numbers are so hyped up, even thou many are duplicates, for pets, for past charities, for any cause of injustice, old businesses, every different product a company has and even dead people.
Just by losing GM, 10 mil in revenues went out the web page. If advertisers slowed down or dropped off, then you can only fall back on that 15% or real stuff as an investment. Which once people have purchased it or the product becomes old, it will drop off. too.
Stocks value right now are based off to much Virtual Ads that can be so easily Manipulated by people/programs to inflate the ads seen or clicked. That should make companies worried they are paying for something that's not really being seen by real peoples eyes.
All advertisers should drop ads on Facebook for 3 months and you will see what happens. Stocks will tumble or stockholders can each create 100 duplicate accounts and then use a program to run thru them to inflate the ad seen count and have it click links and see the stock prices rise as the advertisers pay more for the hits/links. All because of Virtual Data Manipulation.
Don't place money of virtual media that can be re-written or easily inflated.

May 24 2012 at 10:39 PM Report abuse rate up rate down Reply