Steve Rubel, Senior Vice President in Edelman’s me2revolution practice, comments today that it’s like the good old bubble days.
Many people I know, love and respect are heralding every new site as like it’s Jes.usR.com. No one’s casting a cynical eye anymore. No one’s looking at valuations and reality - or at least very few people are.
Now, as an isolated comment, I’d brush it off. After all, I think we’ve seen this happening for the last few years. I don’t think it’s any worse, and let me tell you, from a Web 2.0 CEO point of view, it’s not simple getting money without a great deal of proof that you have a valuable business model. Money isn’t just flowing from the heavens.
Photo thanks to Jeff Kubina
However, it seems pretty obvious that some people are under the illusion that we can demand what ever money we wish. Markus Frind, the man that single handedly launched a very successful dating site called Plenty Of Fish, seems to think his company is valued in the billions based off the back of the Microsoft and Facebook deal.
Now I have a good deal of respect for Markus. He’s a nice guy, and has done one hell of an amazing job of making one hell of a profitable business, but it aint valued in the billions. I’d also make a guess that Markus made the statement because it’s controversial: he has a history of saying things that stir up the blogosphere, and get him some attention. Good on him if that’s the case, it’s smart free viral marketing.
But let’s assume he’s serious — even if it just gives me an excuse to post a blog entry today 
— and let me give you a couple of reasons why he’s not valued in the billions.
Firstly, I don’t believe that Facebook is valued at that $15 billion. Microsoft is one of the most business savvy tech companies on the planet, and I doubt they pumped $240 million into Facebook because it bought into the $15 billion valuation. Microsoft won a few things in the deal, and you only have to read the title of Microsoft’s press release to understand how they saw the deal: Facebook and Microsoft Expand Strategic Alliance. A sweet deal for only $240 million, when you consider the money they are likely to make in the next few years. It also stopped Google from winning yet another battle.
Secondly, I’d doubt that Facebook believes it’s revenue model is solely based on advertising. Just to be uber-clear, I don’t believe their valuation, but the argument made in the ReadWrite/Web article is based just on advertising revenue, and I think they’ll make money from many other avenues. Facebook isn’t just a model to deliver adverts, they’ve also demonstrated their well on the way to being a platform. I’m also certain they’ll have a few other ideas up there sleeve.
So, lets not prove Rubel right, and run off all half-cocked thinking we’re valued in the billions. Lets show him that we’ve got a bunch of viable business models, which I’m certain will make him more than happy.
