he "sudden, meteoric explosion in the value of social media sites like Facebook and Twitter" has inspired awe, says Lauren Bloom in TheStreet.com. But it's "eerily reminiscent of the rise, about 15 years ago, of the online businesses that created the 'dot-com bubble.'" After the first online gold rush, some companies — such as Amazon — became honest-to-goodness money-makers. "But far too many — GeoCities, Freeinternet.com, theGlobe.com, and others — quickly lost value when it became apparent that their rapid growth wasn't yielding revenue." Goldman Sachs' recent investment in Facebook valued it at $50 billion, making it worth more than Yahoo, eBay, and Time Warner. Facebook is even gaining on Disney, which is worth $70 billion. But, notes Bloom, Disney investors are buying into "real assets" — parks, cruise ships, a "massive library of classic animated films." What exactly do you get when you buy a piece of Facebook? Here, an excerpt:
So, how much is Facebook's network of users really worth? The potential is clear — when so many people are gathered in one (virtual) place, offering so much personal information about themselves, they create an unprecedented platform for targeted advertising....
Putting the hype aside, though, there remains a significant question as to whether Facebook's potential for generating income is more virtual than real. Goldman Sachs' investment has certainly bolstered Facebook's apparent value but investors in Facebook, including its employees, eventually will want to exit and take profits with them. If it turns out that Facebook can't live up to its potential for generating advertising revenue, venture capitalists who invest for the long term may get burned.
Read the full article in TheStreet.
- There is a better alternative to raising the minimum wage
- How the strange case of Obama's Uncle Omar complicates immigration reform
- Is Biden helping or hurting U.S. interests in Asia?
- Watch The Daily Show use Pope Francis to hammer Fox Business pundits
- Rick Santorum wins the prize for the worst Nelson Mandela tribute
- 5 books to read before your 30th birthday
- Which professions have the most psychopaths?
- What to expect when you're expecting (100 years ago)
- This is how much extra it costs to eat healthy every day
- Diagnosing the Home Alone burglars' injuries: A professional weighs in
Subscribe to the Week