GOLDMAN Sachs and Digital Sky Technologies have shocked the investment world by swallowing a $50bn valuation for social networking site Facebook.
But few were immediately prepared to dispute the price tag with Wall Street’s most prestigious investment bank: broken down per user, it doesn’t sound quite so outrageous, at $100 a head. After all, no other tech firm can boast a membership rate of 8.3 per cent of the world’s population.
Still, veterans of the Dotcom bubble will be anxious to know what makes the current craze for pre-float tech shares different.
Analysts reckon the key is that modern social networking sites actually generate revenues: best guesses put Facebook’s incomings at $2bn per year, and the company has shown an ability to innovate far outside its original core model of static profile pages.
More importantly, with valuations skyrocketing, investors don’t need to be in on the basis of long-haul fundamentals to make money.