Here are some of the facts I found notable from the report, complete with accompanying charts from CB Insights:

• Of the companies that were acquired, 76 percent had not raised any investment and instead obtained funds through other avenues:

• Facebook and Google made the most acquisitions last year, doing 12 acquisitions each, with Facebook making acquisitions primarily for talent:

• Out of all the companies acquired, just eight were acquired for more than $1 billion. Those eight companies amount to less than 3 percent of all acquisitions in 2012. 80 percent of companies were acquired for less than $200 million, and more than 50 percent were acquired for less than $50 million:

• Not surprisingly, California saw the most acquisitions, although every state except South Dakota saw at least one:

• And for everyone betting on New York City over San Francisco for the best place to launch your startup, take note: New York saw the highest percentage of acquisitions of internet companies:

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The report, which can be found in its entirety online here, looked at 472 private technology companies estimated to be worth $100 million or more. Here are a couple of interesting points that caught my eye:

• Big companies still cost big money: It might be fairly cheap to build a software app and do a startup (as the Lean Startup approach advocates), but growing that business to larger valuations and a potential IPO still costs money. Of the companies the report evaluated, the median funding per company is $75.8 million, with an average of $84.7 million. 
• Selling to businesses over consumers pays: 80 percent of the companies in the study target their services at other businesses, as compared to strictly consumer businesses.
  
• Mobile and telecom come in behind internet for top sectors: Internet companies dominate the list, making up 229 of the 472 total, but mobile and telecom companies, like those focused on wireless connectivity and broadband services, are doing well too, with 76 companies represented.
• New York and Massachusetts vie for second place: California still tops the list of where the companies come from, but the two northeast states are essentially tied for second.
• It takes time to grow a company: Not surprisingly, the companies topping the list weren’t built overnight. One-third of the companies raised their first financing more than seven years ago.

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Now Facebook’s share issue looks like a disappointment at best and a train wreck at worst, and the doubts that investors have about it as a growth business are likely to trigger broader doubts about the viability of every other social-web business without a rock-solid monetization model.

The reality of Facebook's limited ad model and plateauing growth is setting in. Scary stuff in internet social land. google.com/finance?q=FB

—
Steve Cheney (@stevecheney) July 27, 2012

It’s not just Facebook’s fault, of course. Groupon was the first major disappointment associated with the social web (although many have argued that it isn’t really a technology or web-based company and that it isn’t all that social either). Nevertheless, the group-buying service’s IPO was one of the first to test the waters for a technology-related offering, and by most accounts it appears to have failed miserably: The shares are down by more than 65 percent from their initial issue price, and the company’s financial performance has been lackluster, with few signs it will improve in the foreseeable future.

The other player that should share some blame is Zynga, although its poor performance is directly connected to Facebook, since the two have a symbiotic relationship: More than 90 percent of Zynga’s revenues come from the social network, and more than 10 percent of Facebook’s revenues come from Zynga-related payments. Shares of Zynga have fallen by about 70 percent from the initial offering price, and while insiders have cashed out to the tune of about $500 million, regular investors are still left holding the bag. As a result, anyone who was counting on the Facebook platform to be a cash-cow monetization scheme for social apps and other web services is likely revising their financial models by subtracting a few zeroes.

Is Facebook just a moderately successful ad platform?

And now we have Facebook, which is down by more than 50 percent from its initial offering price after what the market seems to have decided was an unimpressive quarterly earnings report. Although the company met estimates, those estimates had already been reduced during the run-up to the IPO, and there were enough question marks in the results — especially in the critical area of advertising revenue and the mobile market — that investors seem to have gotten spooked. Facebook’s market value is now hovering around $51 billion, which is barely half the $100 billion it was allegedly worth before it went public (Update: According to updated figures from Facebook, its current market value is $65 billion; a number of market-data sites like Google Finance have an outdated share figure).

As Om described in a recent post, there has proved to be an uncomfortably large gap between what private markets think these kinds of businesses are worth and what public investors think they are worth. So who is right? Regardless of where you come down on that question, public markets have the upper hand, since venture investors require some kind of liquidity event like an IPO to see a return on their investment. Even if they manage to pump a company’s valuation up and get out quickly after it goes public, the risk of miscalculation is still severe, and each lackluster offering makes it harder for the next.

The biggest issue with all of these companies — and the thing that makes this a much broader issue than just Facebook’s fate — is that their financial performance hasn’t even come close to the expectations that many seemed to have for social-web businesses, and that raises questions about the assumptions that venture investors have been operating on. What if Facebook isn’t a dramatically new kind of social-web business but just a moderately successful advertising platform and/or payment service? As one venture investor put it:

Zynga has been crushed, Facebook payments are effectively dead — Facebook is just a mediocre ad company with a ton of traffic.

Pressure to prove the social web can be monetized

Of course, Facebook could come up with some dramatically profitable new monetization method: some kind of e-commerce offering perhaps (although there is still much skepticism about that as well) or a way of making virtual payments work for something other than Zynga games. Or it could start charging for features like API access or some other aspect of the platform. But that would also be a substantial risk. And so investors are left waiting for the company to show that its social ads are going to generate enough revenue to make its valuation look reasonable, or that mobile is going to be a big moneymaker. But we are a long way from that now.

There is likely still room for some technology-stock offerings to do well, judging by the response to IPOs from companies like Kayak — the online travel service — and Palo Alto Networks. Both are web-enabled businesses, but they don’t rely on the same kind of advertising-based business model that Facebook and its ilk are shackled to. As a result, their monetization methods are a little more tangible and therefore easier to value. But even some of those kinds of companies are seeing valuations get reduced, as Square and others have found.

In hindsight, a lot of the assumptions about Facebook and what it was going to do for both social-web valuations and the technology sector in general were aggressive, to put it mildly. While much of the fallout may take place behind the scenes, in the offices of venture capital investors and the boardrooms of private money managers, there will definitely be an accounting for those ambitious expectations. And the pressure on companies like Twitter to prove they have a solid path to monetization will be ramped up even further. If you don’t like where that is taking the company, prepare to be further disappointed.

Post and thumbnail images courtesy of Flickr users Sarah Korf and George Kelly

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Also, if you look at other great companies, such as Oracle, Microsoft or SAP, and their valuations on revenue or on EBIT, those companies trade between $10 billion and $14 billion.

I’m basing this off of the barometer my team uses. Each quarter we introduce the MW IT Index. Our market-weighted-value index takes the market value of 120 companies grouped into four technology categories: IT services and business process outsourcing, IT supply chain services, software, and SaaS. The index assigned a value of 1,000 to each composite group on December 31, 2008, and it has tracked the category performance since then.

Bottom line is that SaaS companies are trading at a premium of 150 percent or more from the other segments according to our latest quarter.

Facebook initially traded at about a 300 percent premium above such SaaS companies as Salesforce.com.

Facebook was trading at 30 to 40 times revenue, compared to companies in the IT products and services space that are trading at four to 10 times EBITDA and SaaS companies that are trading at two to five times revenue. If Facebook’s financials were in the IT Services space, it would be valued between $4 billion to $6 billion, not $57 billion.

It just shows that the space you are in matters. SaaS, IT services, IT BPO and IT supply chain companies are valued quite differently than Facebook.

But people must remember that when they invest in Facebook, they are investing in a company with assumptions that are going to be very difficult to achieve over time. Assumptions that leave little margin for error are built into the price of the stock.

For example, in the ’90s, Cisco was going to be the first trillion-dollar company. But they didn’t make it. The reasons why do not matter — what does matter is that a very high bar was set.

So, the Facebook market expectation is set as high as they have ever been. In addition, Facebook’s CEO, Mark Zuckerberg, was quoted as saying in a recent article in New York Magazine, “We don’t build services to make money; we make money to build better services.”  Most companies must do the opposite — make money then build better services. This is bearing out in the market reaction.

Today, Facebook has almost $4 billion in revenue and a billion in earnings. That is a real company. But, the market expectation might not be real yet, and there is little, or no, operating margin of error for the company to make its mark.

Plus, when we look into the future at possible competitors for Facebook, we don’t know who they are. They are probably in college or in a garage. That is why Warren Buffet does not invest in technology companies. Today’s technology darling can be obsolete tomorrow.

If you want to look at out-of-sight valuations, look at the SaaS space. If you want to leave the galaxy, look at Facebook.

We will see if they can meet expectations five years from today. That is possible.

The news that GM pulled its advertising will have little bearing on Facebook’s valuation. By the way, I assume you saw that Warren Buffet recently bought 10 million shares of GM.

Marty Wolf is the founder and president of martinwolf, a leading middle market IT M&A specialist. Since 1997, he has guided buyers and sellers in the IT services, business process outsourcing, supply chain and software industries through more than one hundred transactions, including divestitures of Fortune 500 divisions. 

Image courtesy of Flickr user 401K.

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Valuation. Valuation. Valuation.

Valuation is perhaps one of the biggest traps in a term sheet. Valuation means what the value of your company is before you accept the investment. A valuation that is too low is one an entrepreneur will soon regret. Essentially, you have given too much of the company to the investors relative to their investment dollars. On the other hand, a valuation that is too high may cause future investors to avoid a “pricey” deal. The solution is to do your homework by studying similar deals and consulting folks in the venture industry, as the valuation of private companies can be a “black art.”

Resetting vesting.

Look out for the fist in the velvet glove. Investors have a strong interest in imposing incentives on entrepreneurs to stay fully committed. One dial that they love to tweak is your vesting schedule. A typical vesting schedule will be based on a four-year time period, in which your shares vest monthly in 1/48 increments of total shares. Often entrepreneurs are well into their vesting by the time money is within sight. Investors, however, want to make sure there is enough runway to keep the founders motivated all the way through an exit. Be prepared to be flexible, but keep what you have fairly earned in terms of equity.

Liquidation preferences.

Ignore this at your peril! The liquidation preference is the part of the exit consideration that the preferred stockholders get in preference to the common stockholders (that means you!) upon an exit. A high liquidation preference formula can leave entrepreneurs out in the cold or greatly reduce what they receive upon exit of the company. Liquidation preference provisions come in many flavors and seemingly slight differences in the wording can have a huge impact. The best one to hope for is a non-participating 1x preference.

Protective provisions.

What are protective provisions? They are a series of promises about things that a company will not do without the consent of their investors, including raising a future financing round, changing the bylaws or certificate of incorporation, or selling the company. These protective provisions are considered “negative” controls because they prevent the company from doing something but cannot be used to force the company to do something. If there are too many conditions or they are too restrictive, the company can find its ability to make decisions greatly reduced.

Expanding the option pool.

Investors will often insist that a company greatly expand the size of its stock option pool on a pre-investment basis. While this is to be expected to some extent, make sure that your option pool does not get too far above norms (20 percent or lower of the fully-diluted capitalization is a normal range). Practically speaking, the size of the option pool should be no greater than the amount of equity incentives for employees that are needed to get to the next round.

Jay Mandal is the co-founder and CEO of LawPivot, an online marketplace for businesses to receive crowdsourced legal advice from lawyers.

Yusuf Safdari is an attorney from Pillsbury Winthrop Shaw Pittman LLP who provides advice on LawPivot.

Image courtesy of Flickr user Steve Rhodes.

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Exxon, an oil company, has seen its market cap steadily drop from a high of around $500 billion in 2009, while Apple’s has grown exponentially in that same time frame, thanks to successes like the iPhone and the iPad, along with a computer arm that has seen steady increases in sales. Market cap tends to reflect performance, and there’s little denying that Apple has been putting on quite a show in recent years, including a very successful last quarter.

Apple managed to handle the U.S.’s recent credit rating downgrade by the S&P with a bit more resilience than most, which probably helped it achieve this milestone today. But despite a bit of a resurgence yesterday for Apple, performance wasn’t so hot today for either company. Apple closed down 2.76 percent compared to yesterday, while Exxon fell further with a 4.41 percent drop.

Now that Apple’s on top, it just has to stay there. Continuing to do what it has been doing should be a pretty good way to accomplish that, but the company also appears to be hedging its bets with expert legal maneuvering. Considering that most analysts still have very ambitious target prices, it should stand a good chance of staying ahead for the near future.

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In one of the most eagerly-awaited stock issues in years — in part because the technology sector has been starved of initial public offerings — LinkedIn went public on Thursday and the shares immediately jumped by almost 100 percent from the offering price, giving the company a market value of more than $9 billion. The business-oriented social network is clearly a good business, with annual revenues in the neighborhood of $400 million. But is that really worth $9 billion, or are investors consumed by irrational exuberance?

Whether LinkedIn’s IPO is a sign of a new technology “bubble” or not — as some have argued it could be — there’s no question that some of what the stock has seen so far is pent-up demand as a result of the lack of technology stock offerings over the past few years. The last major tech issue was Google, and that was seven years ago, which is a lifetime in Internet terms. And companies such as Facebook, Zynga and Twitter have been racking up gigantic share valuations — as high as $60 billion or more – on secondary markets and through private investments by brokerage firms, in another sign of the demand for big tech players.

Unlike Facebook and Twitter, however, LinkedIn is a far more traditional kind of web service. Although it has tried to add social features — including many that have been copied from Twitter and Facebook, such as the ability to follow companies and see status updates — LinkedIn has not really become a social network in any kind of real sense. For the most part, the site still seems to be used primarily by people who either want to hire someone and are looking for candidates, or by people who are looking for work and are trying to connect with as many people as possible in their field.

When it comes to the social aspects of business connections, other companies have been focusing on those elements with much more success than LinkedIn — including Hashable, which is a little like what LinkedIn might look like if it was created today, for a mobile and real-time social world, as well as a Facebook-based service called Branch Out. And while LinkedIn recently launched a platform that is very similar to Facebook’s “open graph” platform, with social plugins for websites and the ability to login with your LinkedIn identity, it’s not clear whether most people want to connect their professional networks to the rest of their social activity on the web in that way.

At the moment, in other words, LinkedIn is still a kind of Web 2.0-style job board. That’s not to say job boards can’t be good businesses, and LinkedIn has shown that it is a good business, generating revenue of $243 million last year and even turning a profit to boot. That’s nothing to sneeze at, by any means. But is it worth a multiple of more than 50 times projected earnings for several years from now? That assumes an incredible pace of growth for the company over the next couple of years — and LinkedIn has said it isn’t likely to be profitable this year as it spends more on its infrastructure.

While Apple and Google have both boasted fairly sky-high multiples in their day, comparing LinkedIn to either one of them isn’t for the faint of heart. The growth that Apple and Google have been able to produce over the past several years is so anomalous compared to the vast majority of stocks and companies — even in the technology sector — that they might as well be from a different planet. And anyone who goes into this new tech IPO bubble (if there is one) expecting those kinds of returns from every company that goes public should be aware that they are on the fast train to heartache.

Here’s a video from Bloomberg of LinkedIn CEO Jeff Weiner talking about what the company plans to do with the money it has raised in the IPO and how it plans to respond to competition:

Post and thumbnail photos courtesy of Flickr user Coletivo Mambembe and Nan Palmero

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What set off the latest buzz was a Sunday morning Wall Street Journal report that Facebook could hold its initial public offering at a valuation of $100 billion. The number came from unnamed company insiders, who arrived at it based on the $2 billion in annual earnings before interest, taxes, debt and amortization (EBITDA) they say Facebook is set to make in 2011.

There’s a lot being said about this, but to me, two particularly salient points stand out from the chatter:

• Consider the (potential) source.

Skeptics have noted that the WSJ report’s sources could well have some skin in the game. After all, the WSJ article comes just days after an April 27 Reuters report that a group of Facebook shareholders are attempting to sell $1 billion worth of company shares in a secondary market at a price that values the entire company at $70 billion. Those same shareholders had previously tried in vain to offload their Facebook holdings at a price that valued the company at $90 billion, according to the Reuters report, which cited five unnamed sources claiming direct knowledge of the situation.

Could it be that people who are reportedly shopping around their Facebook stock are the same ones talking up Facebook’s valuation to the press?

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I don’t have any inside information about Facebook’s finances, and I’m not a Goldman client. But I’m convinced that when we look back at this investment, it will rank as one of the best stock opportunities available today — akin to buying Apple stock just before the release of the iPod.

Yes, there are many examples of unjustified Internet hype in the market today, but Facebook isn’t over-hyped; it’s simply an exception to the rule, a once-in-a-decade occurrence of a company that fundamentally changes the way we live and work, and has built a profitable business with huge growth prospects in the process. Let me explain why I’m so sure of this.

Advertising isn’t a business model? Tell that to Ogilvy

Detractors point to Facebook’s business model — advertising — as evidence that the company can’t possibly be a big business. Isn’t advertising a $210 billion business in the U.S., and about three times as big globally? So the objection could be that Internet advertising isn’t “real.” But hold on: internet advertising is expected to be a $25 billion business and grow 70 percent by 2015. And while SNL Kagan doesn’t yet break out social advertising as a category (I bet they do soon), Facebook reportedly did close to $2 billion in revenue last year; pretty good for no business model.

Sure, there is something behind our general fatigue toward websites with online advertising-based business models. There are innumerable small, sub-scale sites that can’t get the attention of premium, brand advertisers that drive the bulk of this spending, due to the small, fragmented size of their audience. But let’s not throw Facebook under the bus based on this. This is a site that reaches 500 million, sorry, no, 600 million people–- half of whom log in every day -– with a wealth of data that allows targeting on a level never before seen. Want to run a campaign that reaches fans of Natalie Portman? Facebook just happens to know 61,860 of those in the US. What about Lady Gaga fans who speak French? 23,060. Men who like Aardvarks? 2,260. You get the idea.

Detractors point to the current state of Facebook’s sales team and ad units as evidence that it won’t be a big business. I sometimes hear people say “well, I’ve never clicked on an ad, so…” usually trailing off afterwards. Think of it a different way: Facebook built a business with $2 billion in advertising revenue, and you’ve never clicked on an ad? Imagine how big it will be when you do start clicking…regularly. The television industry has had 60 years to evolve its ad formats and sales forces; Facebook’s only been at it with any seriousness for the past three or four years. Give them another two or three to get it perfected.

Facebook has sound fundamentals — no, seriously

Let’s assume that the data reported in The Wall Street Journal is accurate, and that Facebook ended 2010 with close to $2 billion in revenue, implying $500 to $600 million in profit using the range of reported profit margins. That’s a revenue growth rate of 157 percent and a profit growth rate of 150-200 percent from the $200 million in profit reported for 2009. If true, it would actually be conservative to expect their profit to double in 2011, implying a forward P/E of 42-50 for the Goldman investment, which puts it right in line with those of Amazon (53), Baidu (45), and Netflix (49). What’s so unreasonable about a forward P/E of 50 for a company like Facebook with an audience size and engagement level that implies many more years of doubling revenues and profits ahead?

The problem is that now that financial data is trickling out, we’re comparing Facebook to public stocks of similar size, and public market investors just aren’t used to companies that have more than doubled their revenue and profit in the past year and can credibly forecast to continue to do so – for at least a few more years. Comparisons to Google’s current financial ratios are spurious, for Google’s several years of post-IPO meteoric growth are well behind it. The company has grown less than 10 percent a quarter for the past 5 quarters.

Facebook is no one-trick pony

The vast majority of Facebook’s revenue today comes from one form of advertising or another. Remember last year’s brouhaha over Facebook Credits and Facebook taking a 30 percent cut of developers’ revenue? Given the size of companies like Zynga (once estimated to generate $50 million in revenue per month), won’t that be an even bigger number over time? Considering that Credits weren’t rolled out until the end of 2010, I’d think of this entire business as “new” over the current revenue base. And given the company’s breadth and usage, who’s to say that Facebook couldn’t make a run at other, already proven business models like Web search and local advertising?

Think Apple Stock is too expensive? Buy shares in another visionary

Call me old-fashioned, but here’s something else Goldman clients are buying with their Facebook shares: a team led by a visionary, not unlike Steve Jobs, who’s highly skilled at predicting our future modes of personal communication and interaction. In Mark Zuckerberg, Facebook’s stockholders are getting someone who has the foresight to shape the future patterns of how we spend our time and keep in touch. And he’s demonstrated an ability to execute on these prophecies in spite of protests by the vocal masses. Remember the uproar when Facebook released its news feed back in 2006? The company apologized at the time for a lack of communication but completely ignored the general consensus and kept the news feed intact. Anyone want to eliminate it today? It’s now the focal point of the site and the basis for zillions of hours of activities and eyeballs. Remember predictions that no one would spend their time using applications on the Facebook platform? Tell that to the 18 million people that played CityVille today, and the 2.5 million developers building on the platform. And these are just a few of the many product innovations like photo tagging that Facebook has made commonplace.

What could possibly go wrong?

Well, plenty of things. We all remember AOL and Myspace. This kind of skepticism has plagued Facebook at every turn –- only to be dismissed as the site achieves the next milestone and continues its exponential growth without missing a beat. I’m sure eventually there will be another technology juggernaut that emerges to steal back our time and scare Facebook about being disrupted. But this has never happened overnight, and no one is pointing to a company or idea currently out there that presages Facebook’s irrelevance.

I look forward to Facebook going public so that we finally have access to its financial data. Only then can we advance this debate as to whether we’re truly looking at a “once-in-a-decade” kind of company. In the meantime, I’m sure we’ll see a lot more backlash against the “hype.” I won’t have time to read it though; like a lot of you, I’ll be too busy perusing photos of Bali beach vacations taken by junior high-school classmates to whom I haven’t spoken in years. And maybe I’ll even click on an ad or two in the process.

Ethan Kurzweil is a Vice President with Bessemer Venture Partners in Menlo Park, California. He works with Internet companies of all types, including Playdom, Zoosk, Crowdflower, Twilio, Reputation Defender and OpenCandy. You can find him on twitter at @ethankurz. The views expressed in this post are his own, and do not represent those of Bessemer. Disclosure: Ethan has a very small position in a Facebook secondary vehicle, purchased in 2010.

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Facebook CEO Mark Zuckerberg

Facebook founder and CEO Mark Zuckerberg’s reported pledge to donate $100 million in stock to Newark, N.J. schools has sparked a heated debate over the valuation of the company, which has been estimated at $33 billion based on private share transactions. Forbes magazine added fuel to the fire with its annual ranking of the world’s richest people, which puts Zuckerberg at number 35 with an estimated net worth of almost $7 billion, based on what Forbes says is Facebook’s overall value of $23 billion. Zuckerberg’s ranking puts him just ahead of Apple founder and CEO Steve Jobs.

So is Facebook really worth $23 billion, or $33 billion? The short answer is that it depends on what you mean by the term “worth.” David Heinemeier Hansson, co-founder of software developer 37signals, argues in a blog post that it’s absurd to say that the social network is worth that kind of money in any real sense, because it isn’t publicly traded the way that stocks such as Google are, so there’s no easy way to determine its actual value as a company. He also argues that the company’s worth is vastly inflated based on the revenue people estimate that it’s pulling in.

So the Facebook valuation based on minority investments is in my mind a complete joke in the sense that there was $33,000,000,000 dollars on the table. Irrational investor exuberance indeed.

In a heated response at Y Combinator’s Hacker News site, however, software entrepreneur Joel Spolsky takes issue with Hansson’s argument. There is a very active market for shares of Facebook, he notes, through services such as SecondMarket, which specialize in trading the restricted stock of private companies such as Facebook and Zynga (which is reportedly worth as much as $5 billion based on the activity in that market). So Facebook is worth $33 billion in the same sense that Google is worth $165 billion, Spolsky argues (there’s also a lot of back-and-forth in the YCombinator comments about the relative merits of Chicago — where 37signals is based — vs. Spolsky’s home of New York, but we’re leaving that part out).

The whole section “Minority investment evaluations aren’t real” is so economically bizarre and incorrect that I don’t even know where to start. It’s like you wrote a blog post arguing that it is incorrect to refer to a 5′ tall boy as 5′ tall because he’s often sitting down.

Hansson counters that the private market is not as liquid (meaning there isn’t as much activity as the public markets) or as transparent to outside observers. And what about the sale of stock to companies like Microsoft — which bought 2 percent of Facebook for $240 million in 2007 — or Russian venture fund Digital Sky Technologies, which also bought a stake last year? Elevation Partners invested $120 million in June, the deal that implied a valuation of $23 billion (just to complicate things further, Elevation bought its stake through private share trades on secondary markets). Hansson says these don’t count because they involve such a small portion of Facebook’s outstanding stock.

But Spolsky is right that this criticism doesn’t really apply; only a small amount of Google’s stock is freely tradable on public markets as well (since insiders control an estimated 30 percent and institutional holders have another large chunk locked up) and yet we’re quite comfortable saying that the web giant is “worth” $165 billion. Hansson is also on thin ice when he argues that bond markets are more transparent than the market for private stock: In fact, the bond market is still incredibly opaque to anyone but a registered bond trader. Until recently, current bond prices weren’t even posted and updated regularly the way stock prices are.

In reality, of course, every economist knows that things are only worth what people will pay for them, and since no one has actually paid $33 billion for Facebook, we shouldn’t really say that it is worth that much, or that Zuckerberg is worth $6.9 billion. But then, no one has paid $165 billion for Google either. The fact is that market valuations — whether private or public — are really just a convenient method of tracking what some people are currently willing to pay for a small chunk of the company. It may not be totally realistic (in fact, an acquirer would likely have to pay much more than just its $165-billion market cap in order to buy Google), but it is the way things are done, and by that rationale, Facebook has just as much claim to its “worth” as Google does.

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