Personal thoughts…

Tech, Hockey, and random thoughts…

The Truth about Ridiculous Valuations

If Facebook is “worth” 15Billion (which it’s NOT), then MySpace would be worth 65Billion…. which it clearly isn’t.

In the NY Post’s business section one of their articles today makes a very important point: this Facebook valuation is insane, and .com bubble-ish. They quote an analyst who applied the $357 Microsoft awarded for each registered user to MySpace, and came up with a $65b valuation. Three words: Not. Freaking. Likely.

“At $65 billion,” the article states, “MySpace would be responsible for all but $3 billion of News Corp.’s entire market capitalization – which clearly isn’t the case – and would be larger than CBS and Viacom combined.”

It’s crazy, I know, but sometimes the sheer number of users isn’t the most important thing. Irresponsible valuations, like this one, lead to solid companies with solid products, but without a surfeit of eyeballs, being ignored or, relatively speaking, undervalued.

Which is good for no one.

$240 million for a 1.6 percent stake in Facebook makes no financial sense at all. To be fair to Facebook, for a 3.5yr old company to have a revenue stream of 150M is stellar.

Now I wish I could say I believed that 10yrs from now Facebook would be at the top of the social networking scene-I’m not however, such a belief is an entirely different topic however.

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October 26, 2007 - Posted by | Tech Industry

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