With the apparently imminent flotation of Zynga, the 'social gaming' company (can anyone explain to me what social gaming actually means, and what makes it social??), the expert analysts out there expect the value of the company to be around the $15bn - $20bn mark. Yes, BILLION, not million. Oh yes, and they made a profit of.......90.5 million dollars last year, making their estimated value an astonishing 221x their profit.
With estimates of Facebook's value anywhere north of $100bn with rumoured profits last year of £400m, that gives a multiple of 250x.
Is it just me, or is the question of whether another price bubble is forming, a rhetorical question now?
Irrespective of my thoughts of Facebook and Zynga (which are becoming more negative and unrepeatable as time goes by!), I couldn't value Zynga at any more than $1bn and Facebook at $4bn. I could also argue that Zynga should be worth substantially less since they are, to all intents and purposes, dependant on Facebook to survive.
It's only worth what someone is prepared to pay for it. Valuations of a company without much in the way of tangible assets (relatively speaking) is largely a marriage of convenience between guesswork and optimism anyhow.