How Much Is That Social Media Company in the Window?

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Now that LinkedIn has taken the plunge and gone public, the company is valued at approximately 45 times the amount of revenue it generates annually—meaning there is a bit of a disconnect between its estimated market cap and its actual profits. LinkedIn's massive windfall has "people who know things" speculating about an imminent wave of similar IPOs from social media companies that investors may be grossly overvaluing.

The Atlantic has an interesting charticle analysis showing the revenue-valuation ratio of the most popular social networking companies. I'll leave it up to you to decide whether or not there's another tech bubble swelling, or if these companies will indeed grow as astronomically as expected.

Of note:

• Twitter currently has the highest revenue-valuation ratio, with an annual revenue of $150 million, and a valuation of $7.7 billion
• Facebook is expecting a $100 billion valuation by 2012. It also has the highest current annual revenue—$2 billion.
• Color Labs was founded in 2010, and currently has no annual revenue. It is now valued at $41 million.
• The oldest company—Skype—has one of the lowest revenue-valuation ratios, with a valuation 9.8 times its annual revenue.

Head over to The Atlantic to read the whole article.

May 27, 2011 - 10:27am
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