Facebook Worth Up to $10 Billion, Is the Web 2.0 Bubble About to Burst?
Facebook Worth Up to $10 Billion, Is the Web 2.0 Bubble About to Burst?
September 27, 2007: Analysts at Ovum have speculated that the recent attempts to purchase a stake in Facebook have pushed it’s potential value up to US $10 Billion and could be a sign that the web 2.0 bubble is about to burst.
For most people who are involved in web based enterprises, there’s still bitter sweet memories of the dot com boom and what happened to the marketplace when that bubble burst. So it’s no surprise that talk of the 2.0 boom being a bubble on the brink of bursting is going to cause concern in some sectors.
The speculation started when rumours surfaced that Microsoft were looking to acquire a minor stake in Facebook for around 300 – 500 million, placing it’s total value in the vicinity of US $6-10 Billion. Google is also rumoured to be courting Facebook for a minor stake, though whether they are attempting to gain a bigger share then Microsoft is unknown.
“We don't normally take rumours seriously, but there's so much smoke here that there has to be some fire. And at up to $10bn, that could be a very large fire! Indeed, it is such a large amount that it makes me suspect that we're in the run-up to another bubble in internet company values” Says David Bradshaw, Principal Analyst at Ovum.
The 2.0 boom has been fueled by the success of social networking sites such as Myspace and the newcomer Facebook, and this seems only set to expand with the rapid growth these sites are experiencing. What could be problematic is the financial value companies are placing on 2.0 real estate when it’s incredibly difficult to quantify what they are worth and what kind of return can be expected from 2.0 investment.
“Web 2.0 is a widely hyped term, but if it means anything it is greater collaboration between users mediated by the web. Social networking is one element of this but only one - but other sites are more centred on collaboration. Indeed, two of the largest successes of Web 1.0 - Amazon and EBay - were successful because they mediated collaboration between buyers and sellers” said Bradshaw.
Whether it’s Microsoft, Google or some other player, Facebook seems set to take on some kind of financial backer at some point, though it famously resisted buyout attempts up until now. It’s just a question of where the fire is going to come from, not who is blowing the smoke.
“Facebook is no more than a step along the way and that there's something further to come. Maybe we need bubble 2.0 to burst before we can get to that - but let's hope not” explained Bradshaw.