NEW YORK (TheStreet) -- Social media site Facebook has been much in the news of late. Its creation was the subject of what many predict will be an Oscar-winning movie. Its founder, Mark Zuckerberg, was recently dubbed Time Magazine's 2010 Person of the Year. And now, thanks to a $500 million infusion of capital from Goldman Sachs (GS) and Russian investor Digital Sky Technologies, Facebook is reportedly worth $50 billion.
If that $50 billion valuation is accurate, Facebook is now worth more than Yahoo! (YHOO), eBay (EBAY) and Time Warner (TWC), and is running up hard against such Internet giants as Amazon (AMZN) and targeted rival Google (GOOG).
But what is that valuation based on? Some media experts have compared Facebook with Disney (DIS), valued at about $70 billion. But Disney has real, tangible assets -- parks, hotels, cruise ships, iconic images to market on everything from t-shirts to tableware, and a massive library of classic animated films - to back its assessed value. Facebook has a virtual network that, according to Time, links one-twelfth of the world's population. However, according to the Wall Street Journal, Facebook still has enormous infrastructure costs that include as much as $700 million for two data centers, and its profits have yet to be publicly disclosed. When an investor buys a piece of Facebook, what exactly does that investor get?The sudden, meteoric explosion in value of online social media sites like Facebook and Twitter is eerily reminiscent of the rise, about 15 years ago, of the online businesses that created the "dot-com bubble." The Internet was far less widely used than it is today, with many consumers feeling a little queasy about sharing personal and credit card information with businesses that lacked brick-and-mortar facilities. Still, visionaries saw the potential for the Internet we have today, so virtual companies sprung up and grew like weeds as investors threw money their way. Some, like Google and Amazon, developed an enduring online presence and lasting financial value. But far too many -- GeoCities, Freeinternet.com, theGlobe.com and others - quickly lost value when it became apparent that their rapid growth wasn't yielding revenue. Investors who sold their dot-com stocks before the bubble burst made fortunes -- those who didn't lost their shirts.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV