Comments on: Is a social network a product or a feature? http://www.joandimicco.com/blog/2007/10/25/is-a-social-network-a-product-or-a-feature/ A blog by Joan Morris DiMicco discussing social software and group collaboration Wed, 14 Apr 2010 03:11:03 -0700 http://wordpress.org/?v=2.9.2 hourly 1 By: Scott http://www.joandimicco.com/blog/2007/10/25/is-a-social-network-a-product-or-a-feature/comment-page-1/#comment-9958 Scott Fri, 26 Oct 2007 06:25:58 +0000 http://www.joandimicco.com/blog/2007/10/25/is-a-social-network-a-product-or-a-feature/#comment-9958 I haven't read the article yet, but a $15B valuation is about 100x revenue, which is about $150M, estimates say. Another estimate I saw said they probably spend $50M a year. So that gives them a theoretical P/E of 150. Pretty absurd, no? The problem is, though their subscriber base can continue to grow slowly, it can also plummet rapidly, if something "hotter" comes along. And if the user base plummets, then the valuation does, too. Maybe some service will come along and do mobility better, or something. I haven’t read the article yet, but a $15B valuation is about 100x revenue, which is about $150M, estimates say. Another estimate I saw said they probably spend $50M a year. So that gives them a theoretical P/E of 150. Pretty absurd, no?

The problem is, though their subscriber base can continue to grow slowly, it can also plummet rapidly, if something “hotter” comes along. And if the user base plummets, then the valuation does, too. Maybe some service will come along and do mobility better, or something.

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