Facebook & its delusions of grandeur

In the comments of our piece, The Return of the Tech IPO, David Coleman pointed out that Facebook and its $8 billion valuation might just be the proof that we are all getting bubblicious.

Coleman, on his blog, goes on to dissect the irrational exuberance that some of the Facebook backers might be indulging in. Some of his assumptions (like revenue and profit projections we can’t vouch for,) but his argument makes a lot of sense.

Looking at it another way, assuming that Facebook has an extremely healthy profit margin of 24% (like Google for example), the company would have earned about $12 million in profit for the year. At that rate, Facebook is valued at 666 times its current earnings. ….. Facebook, was last estimated to have around 9 million users, so at that valuation, it would be worth a measly $52.2 million! At a $1 billion valuation, Facebook was looking for $111 per user. At $8 billion…well you can figure it out.