[DesertCat]

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Facebook has been the apple of Silicon Valley’s eye and Zuckerberg has resisted offers over $1 billion in the past. According to rumors they’re doing about $500 million in annualized revenue, but I don’t think they’re making a lot of profits, if any (someone correct me if I'm wrong, this is just based on old news and the fact that they recently did another round of funding).


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The difference here is that if you are right, FaceBook has a hell of a lot of revenue and it's growing hella fast. I can't think of any internet startup that ever had that much revenue during the bubble other than Amazon, and Amazon's revenue was of questionable value (no margins).

Remember, the bubble got out of control when zero revenue companies were being valued at huge amounts because they were leaders in their "segment" and someday they'd figure out a business model and how to make money. Now it just seems like some companies have figured out business models and have revenues and possibly profits to show for it.

If Facebook does $1B in revenue in 2 years with 20% pretax margins (and strong future growth prospects), that's $200M. That's easily worth many billions.

We may later decide that Facebook et. al from this period were overvalued because it turns out their growth prospects weren't as shiny, or their business models not as profitable, as projected. But I doubt we'll ever regard this era as overvalued as 1998-99.

Think back to the railroads. In the middle 1800s they were the dotcoms, investors lost millions in trying to fund trains to anywhere. Eventually after enough failures the survivors became solid businesses as rational investment expectations, taught by the lessons of the first wave, took hold.