Facebook have recently received an injection of captial to the tune of $500million from Goldman Sachs and a Russian investor for 1% of the company, which values the company at $50 billion. Making Facebook more valuable than eBay, Yahoo, Time Warner or Amazon. It is now the 2nd most valuable internet company in the US after Google which is valued at

This interest has raised speculation that the company may float in 2012. Although there is also the possiblity that the company may remain privately owned which allows investors to circumvent public disclosure requirements of public corporations. This issue is currently being investigated by the Seucrities and Exchange Comission.

One of the dangers of high valuation in social media sites is that the actual physical assets of such companies are relatively tiny compared to their valuation. Look at MySpace as an example, it was bought in July 2005 by Rupert Murdoch for a mere $580million. After facebook overtook myspace in 2008, revenues began to fall. In 2009 30% of the workforce was laid off. There is currently talk of a further 30-50% reduction in staff as part of a sell off deal. Some analysts point to examples like Lycos, Infoseek and Excite which were valued in the many billions, and are now virtually worthless. If myspace goes down the route of diminishing revenues and popularity, it could easily find itself worth much less that what it was bought for in 2005.

Facebook has a similar problem. While it's current popularity and hence advertising revenues are looking healthy, the valuation is quite high, but if users migrate to other newer platforms, or if activity on the site decreases (especially important is the click through rate on advertising), then there is a difficult uphill struggle to try to retain value. To date, no internet company has ever clawed it's way back to the top once it's popularity nose dives. Look at AOL as a classic example.

Maybe web 2.0 is about to become the .com bubble 2.0? Or perhaps the floatation will mean that the investment was a good one for the early adopters like goldman sachs and Microsoft (which aquired 1.6% of the company in 2007 for only $240million).