For many, Facebook revolutionized the way we connect and interact with each other, but before that there was MySpace, and before that the chatroom, and before that... the telephone?
Social media is a tricky thing in that, for all its perceived value to businesses and the general public, it is as transient and ever-changing as its users. Its very nature makes it a tricky investment, at least according to Newsweek. A recent “500 million dollar infusion of capital” from two large companies has not only graced Facebook with a current valuation of $50 billion, but the ability to put off an IPO, which shields it from thorough financial examination.
This new valuation would put Facebook not just in the running with Google and Amazon, but even the Walt Disney Company (valued at $70B). “Disney has real, tangible assets [...] to back its assessed value,” the article explains, and while “Facebook still has enormous infrastructure costs that include as much as $700 million for two data centers [...] its profits have yet to be publicly disclosed.”
This uncertainty is nothing new for the Facebook crew and their investors. A 2008 NY Times article valued Facebook at “somewhere between $15 billion and $3.75 billion,” but the reality “depends on all sorts of information we do not have, including the ratio of common stock to the various classes of preferred shares and other securities.”
And Facebook’s not alone. Groupon’s upcoming initial public offering could be valued as high as $15 billion, says NY Times. Could these sites ever repeat the doomed “here today, gone tomorrow” cycle of the dot-com bubble? Quite possibly... and today’s credit unions, like today’s investors, must toe the line by embracing the value social media presents in the current environment, without over asserting the value any specific company or venue will have tomorrow.
“GeoCities, Freeinternet.com, theGlobe.com, and others—quickly lost value when it became apparent that their rapid growth wasn't yielding revenue,” reminds Newsweek. “Investors who sold their dotcom stocks before the bubble burst made fortunes—those who didn't lost their shirts.”