This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Social Media: Next Dot-Com Bubble?

Stocks in this article: GS GOOG EBAY DIS

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.


Oh, really?

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,, 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.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs