I thought that for a while, but the thing is that Facebook's actually pulling in revenue. Internet tells me they have a PE of 60, which is high (20 is normal for a mature company) but not order-of-magnitude insane. If Facebook is overvalued then advertising as a whole is, and that doesn't seem likely in this age of metrics and PPC competition.

During the '00 bubble people said Yahoo's valuation was inflated because all the bubble companies spent their money on Yahoo ads. But for my money Yahoo has turned out to be worth its bubble valuation. Even if most of its value has come from a few clever investments, well, sounds like Facebook's doing the same thing.

Probably. But if you put yourself in the shoes of the executive team at Facebook, buying WhatsApp killed off a potential threat , and it was worth 8% of market cap to do that. Everyone talking about how much WhatsApp is worth vs some other company is missing that point.