subscribe to this page
This article questions the very high valuation of social networking Websites (MySpace and Facebook being valued around $15 billion and $900 million, respectively) and compares these potentially inflated figures to the dot-com bubble before it burst. It describes the difficulty in making an accurate estimate of these companies’ worth because of a lack of data on their advertising revenues and cost structure. This article was an interesting look at the business end of social networking sites, as opposed to the cultural end (which is more frequently found in scholarly research). The potentially inflated valuations of these large-scale social networking Websites is also partially due to their high-speed growth. Both MySpace and Facebook have grown dramatically in the past few years (and will likely continue to do so), but this article argues that such growth does not necessarily bring profits to match.
My only critique of this article is that it vacillates between the view that the social networking companies could be a repeat of the dot-com bubble and the position that they are not in fact as risky as one might think. I didn’t feel that he fully reconciled those two opposing viewpoints by the end. They explain this discrepancy in terms of the companies being risky for investors but not for the marketplace as a whole, like the dot-coms of six years ago were. One might need a stronger background in investing and business to fully understand the implications of that statement. What I did find useful in this article though was its discussion of the social networking companies, specifically MySpace and Facebook, as major players in the business world. These new media Internet corporations, driven by user inputs, are currently being bought for many millions, and in some cases, billions of dollars. The article questions whether such Internet social networking Websites are a passing fad, but it appears that investors and corporations that buy into them (like Comcast, Viacom, Yahoo!, News Corp) think them stable enough for the time being.
tagged MySpace.com corporate_buyouts facebook.com finance social_networks web_start-ups
by rachee
...on 10-MAR-07