Are the valuations of the Web 2.0 social media companies realistic?

Are the valuations of the Web 2.0 social media companies realistic? || “The tech bubble is coming. Prepare yourself.” http://ow.ly/5x6vt

Tech Bubble - Comparison between 1999 and 2011

As much as I think these charts tell an interesting story about America’s love of innovation and technology, I think that the comparison really isn’t entirely valid.  Perhaps a better comparison would be to have a look at other companies with a market valuation in the same neighborhood (as of 05-Jul-2011):

  • Cisco ($86.2 billion valuation; $40.0 billion revenue; $7.8 billion net income)
  • EMC ($57.5 billion valuation; $17.0 billion revenue; $1.9 billion net income)
  • Hewlett-Packard ($75.6 billion valuation; $126.0 billion revenue; $8.8 billion net income)
  • Qualcomm ($97.1 billion valuation; $11.0 billion revenue; $3.2 billion net income)
  • SAP AG ($74.6 billion valuation; $17.9 billion revenue; $2.6 billion net income)
  • Average ($78.2 billion valuation; $42.4 billion revenue; $4.7 billion net income)
I admit that this is not the most scientific analysis but I think most people will appreciate the purpose of this exercise.  The very description of a “bubble” conjures the image of something that piques one’s curiosity but is tragically fleeting.  When you look at the list of companies above it is no coincidence that these are the bellwethers of their respective market segments and their business models have withstood the test of time.  Can you see Zynga, Twitter, LinkedIn, Groupon, or Facebook putting up these kinds of numbers?  What about in a year?  In five years?  Some companies definitely “cross the chasm” – just ask Google – and some definitely don’t – just ask Boo.com.
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