On the eve of Forbes' declaration that Faceback founder Mark Zuckerberg is worth $2 billion, investigative industry rag Silicon Alley Insider ponders whether MySpace is "now worthless" and whether it was even worth buying on the part of Rupert Murdoch. (He paid $580 million for it, which at the time was considered a steal. But that was back when people used the site ....for actual social networking rather than just to look up bands). How quickly the tide comes in, and goes back out, in the internet world.
Let's consider the valuation of some of web's social networking trends, shall we? It's a fun game which a lot of industry sources like to play at - with no accepted formula and no right answer.
*Facebook - the social networking giant has been popular for awhile now, yet advertising revenues are still abysmal - the last valuation was published in May 2009 at $10 billion
*Twitter - arguably the web's latest 'thing' - currently valued at $1 billion - but no one knows if that figure is anywhere even close to accurate, since the company doesn't make any money and has no business model
*MySpace - currently valued at $500 million to $1.2 billion
*Friendster - remember them? they lost all their business to Facebook yet claim to have a handful of fans left in Asia - currently valued at $210 million
Again there is no right answer in this game, and perhaps this is what makes it so fun to watch. The only accepted truth is that once the site becomes unpopular, the valuation dips. Oftentimes this has no relation to the actual revenue the company is making. If only businesses in other sectors were valued on these vague, cloudy formulas! Just imagine a world where your bank was valued based on 'hype' and 'promise'!
Suggested reading: Ray Valdes at Gartner has posted an interesting and more educated viewpoint on how valuations happen and what they imply.
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