It’s a good question. $15bn is about one tenth the value of IBM and that has to be a stretch (if not an absurdity) given that Facebook’s revenues are counted only in the tens of millions. Nevertheless, Microsoft accepted such a valuation and showered Facebook with $250 million for a 1.6% share, just to prove it. Other investors threw in $500 at the same valuation, so it isn’t only Microsoft that will buy at that “remarkable” price.

You could argue that “if Facebook is worth $15bn then MySpace, which was snapped up by Rupert Murdoch for a little over half a billion, is worth more” - because MySpace currently has a larger user base. The problem with that idea, is that MySpace is losing customers to Facebook at a significant rate - and for all that anyone knows, it may go into terminal decline.

The $15bn is a curiously round number - as though someone has said “it must be worth more than $10bn, so it has to be $15bn, right?” Irrational exuberance only works in units of $5bn.

Imho, there is no doubt that Facebook is valuable property, because it has become an anchor site on the web where people of all ages go regularly. You could claim that it was “sticky”, in the old dot com parlance, but it’s more than sticky, it’s your personal web presence. More than that, it now has a developer community developing facebook “widgets” to increase the possibilities for every facebook user. And that’s fine, but can it all be transformed into gold?

Well it might happen, if you can make Facebook even more of an anchor, by turning it into “your primary email site” and “your primary chat capability” and “your search capability”, etc. Oh and by the way, you’ll need to do something very slick in the area of advertising.

But that’s where the $15bn comes from, because some commentators, and we presume, some investors, believe that all this is possible. It’ll be a neat trick to pull off, but I’m not sure challenging Google is do-able. Google has become a tar-baby, whoever and whatever touches it sticks to it. You need a lot more than Facebook in its current state to undo that.

Facebook is a site to watch. It innovated its way past MySpace and it may have a stellar future. Despite its meagre revenues I believe a valuation at $2bn to $3bn would be justified. $15bn is irrational exuberance, in my book.

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