This is like a NASCAR race, many (most?) of us watching secretly hope for a spectacular crash. It's wrong, but the potential of schadenfreude is very tempting.
Think of the effect that the Google IPO has had on access to angel and other investment capital. Two of my angels are former Googlers and my previous business was a vertical search sold right after Google IPO'd.
All our destinies are in one way or another wrapped up in this little ticker symbol for the next few years.
To me a wake-up call was a huge investment that FB accepted from DST.
In my opinion anyway, FB still seems to be in the "do something big, figure out how to profit from it later" stage. That's all well and good, but I don't know that it's $130+ per active user good.
How many ad banners are these people going to click? To put this in perspective, the initial valuation of $104B is over 2/3 the entire amount of money spent on all advertising in the US last year ($141B).
They could also use some of the IPO money to acquire Bing and somehow mold if with the Facebook.
I think that Facebook valuation is so high because of many possibilities similiar to those I've just outlined.
Let's say FB builds or buys a search engine, a popular web browser, a smartphone platform equivalent to Android, a Gigabit fiber-to-the-home project, and an AdvFace that takes 50% of that market away from Google.
If all that were to happen, then it might make sense for FB's valuation to be comparable to Google's. G's might even shrink a little bit to help.
But G has that all functioning now, whereas FB's seems merely hypothetical. Could we not equivalently reason that FB could start a P2P auction market to rival Ebay? A distribution channel to rival Amazon?
For all of Facebook's data collection, they don't seem to be able to do anything with it. To put it in perspective, I just logged onto facebook and got an ad from a company hiring coal miners. I'm asthmatic, despise big coal, currently employed, have cerebral palsy, and live three states away from this company. I could have targeted that ad better by randomly pulling a name from the phone book.
Other ads include:
* Beer - I don't drink
* Tickets to the Avengers - Okay, I do want to see that movie.
* Getting my Bachelor's Degree Online - I already have a master's degree. Facebook knows this
* Bait - While they get partial credit, since I enjoy camping, I'm not into hunting or fishing.
* Tequila - See above
* Lawn Fertilizer - I live in an apartment
* Airfare from Chicago to Oklahoma City - I don't live in Illinois or Oklahoma. Facebook knows this.
* Hunting Rifles - See above
* Vodka - See above
Conversely, Facebook should know that I'm attending a conference in DC next month, but there hasn't been any comments on restaurants or attractions in that area.
I don't deny that they have a lot of data. However, I think they're in the TiVo situation where the data simply isn't that interesting.
Sure, Facebook is full of clever hacks and nice features but the gas in that engine is the data happily supplied by their users, for the low low cost of free.
I haven't heard about facebook sniffing wi-fi packets though.
(As an example very few swimmers are probably jealous with Michael Phelps success because he totally earned it. )
No, I'm much more concerned with the bets the fund in which my dad's union's retirement pension plan is coming from.
The best explanation I can come up with is that FB benefits from its massive base of engaged users. I imagine there are a great many individual investors who are torn between wanting to participate in "internet tech" and wanting to not invest in what they don't understand. FB comes along and I imagine many of them to reason "I use it all the time, therefore I understand it". I believe Microsoft has also benefited from this effect.
These people believe they are value investing, not playing the market.
Microsoft also sold products, and had a very strong revenue stream from that. Hype helped MS grow, but their core business fundamentals have traditionally been pretty strong.
Facebook seems overvalued by at least 300%, maybe more. A quick look at tech companies that have about $100 billion market cap(like Facebook), and the closest comparison I can come to is Oracle. Unfortunately, the comparison doesn't look good for Facebook.
Oracle's revenue for 2011 was around $35 billion, which is 10 times Facebook's. Net income was around $8.5 billion(from here: http://www.oracle.com/us/corporate/investor-relations/financ... ). Facebook, according to their SEC filings, had a net income of $1 billion in 2011.
I think that Facebook's valuation is driven entirely by hype, which really means that the stock should perform quite well for the next 30-60 days, until Q2 earnings are released. At that point, I have a feeling that it will drop when investors realize that FB isn't pulling in nearly as much money as their stock is indicating.
People who put money into Facebook early were hoping to get rich(er); they didn't do it out of the goodness our their heart. It's an SV fallacy that angels are, well, angels.
On the other hand, customers are far more free with their money. (but that doesn't help me as much as you'd think; My big weapon seems to be my willingness to accept a reasonable margin; e.g. I can lower my prices more than the competition. (yes, yes, amazon has lower costs than I do. But they also have more credibility, so that translates into margin rather than into savings for the end user.) For me, the big upside is that individual Engineers have more disposable income that can be put towards the 'hobby' budget, which is the budget most of my customers pay me out of.
I dono. I have a long history of crying 'bubble' long before the crash. I refused to buy a house in 1999 because I thought housing was a bubble.
Only recently have I started thinking about this bubble as something that would last long enough to take advantage of on the upside. I have pretty extensive plans to take advantage of a crash, but I'm only now considering how I can take advantage of the upside.
"If FB can't make money, nothing can!"
update: got my order filled. Maybe a mistake. Please go 'like' something.
The worse years I had were after the first bubble and the best years are during this bubble but I still feel the way you are describing.