Researchers warn of a social networking bubble in the offing
Claims that Facebook is worth $100 billion or even just $65 billion grossly overvalue the company, say researchers who have done a simple calculation of the company's worth. The pair of econophysicists warns that inflated value estimates for sites such as Facebook, Zynga and Twitter are signs that a social networking financial bubble is gaining steam.
"It's not the same volume of the dot-com bubble. That was really widespread," says coauthor Didier Sornette. Nevertheless, he and colleague Peter Cauwels conclude, a social networking bubble — and its impending pop — loom.
The ETH Zürich researchers argue that determining the value of social networking sites is vastly simpler than with other companies, because there's a relatively direct link between the number of users and profit. This boils the math down to a simple equation: the number of users times the profit per user. Calculated that way, Facebook's value is probably in the neighborhood of $15 b