Social Networking Site Valuations

WHARTON BLOG -- Oct 4 -- In January Facebook turned down a $750 million offer from Viacom and is now mulling over a $900 million offer from Yahoo. MySpace may be on pace to be worth $15 billion in three years? Even Google's $120 billion market cap may reflect some irrational exuberance. Its shares sell for ~55X earnings, triple the PE ratio of the average S & P 500 company. Using the 55x ratio, MySpace would need about $270 million in annual profit to justify a $15 billion value. It's expected to generate $200 million revenue this year. Facebook has nine million users and annual revenue of ~$50 million. At 55x earnings, it would need a $16 million profit to justify a $900 million price. FULL ARTICLE @ KNOWLEDGE WHARTON BLOG