The Value of Social Networking Sites

A number of social networking sites have recently or are about to float their shares. As most of these sites and the services they offer are relatively new, little is known about their value or how investors may react to an Initial Public Offering (IPO). As the most used and high profile social networking site in the world, there is a huge amount of speculation surrounding the Facebook IPO with estimates of the company’s valuation ranging from $50bn to $142bn over the last six months. Some are especially cautious of making such huge investement fearing a second unsustainable ‘.com bubble’.

Facebook is expected to make a IPO sometime in 2012 as they will soon reach the 500 shareholder limit that requiring htem to release quarterly results. With reports suggesting that the IPO valuation will be at least $100bn, some a starting to question the true value of such companies. Undoubtedly, much of the growth potential is seen in advertising and ability to personally reach a vast number of customers. In addition to the huge numbers that advetisements can reach, there is the added and contraversial attraction of targetting specific demographics and social groups based on all the information supplied by users.

Facebook is not the only social networking subject to value speculation. Twitter was recently valued at $10bn on the basis of sales of just $110m, Pandora, the music streaming site, was valued at $2.6 bn, 19 times the revenue of the company、 and the networking site LinkedIn achieving a value 30 times the size of its revenue. The number of companies having recently made IPOs or planning on them suggests that we are approaching a new technological bubble laergely driven by the online companies.

The consistently high valuations being affixed to new internet sites, however, is leading some to question the true value of these sites and if such high prices indicate a that the market has reached its peak. Figures on the number of Facebook users in counties such as the US, UK and Norway have fallen since in teh start of May. The social networking site has dismissed the figures aruging that there they are simply part of natural limit trend  that once the number of users in a particular country reaches 50% of  the population, the rate of uptake inevitably slows.

The recent flotation of Pandora shares gives further evidence to the claim that internet companies are currently being over valued prior to an IPO. After an initial bounce in the share value of 9% on the first day of trading, Pandora‘s value since has taken a significant downturn with the chare price closing yesterday 25% down at $13.26 per share. This recent example of the Pandora IPO suggest that internet site investments are not one of ever-increasing resturn. However, when the IPO from Facebook finally comes around, it may well be a different story. Whilst the site currently has 700 million users worldwide, it is still yet enter the Chinese market, a move that some suggest could take users to 1 billion worldwide.

Social networking and new information technology in business is clearly of great importance. As the above figures show, it is possible to reach a huge number of cutomers in an efficient and effective way. However, these customers are spread across the globe, covering a large number of different languages and culutures. It important that in conducting business and developing marketing strategy language is not a barrier. At TJC Global, we have a vast network of interpreters and translators experienced in specific fields relating to new information technology and business strategy. This ensures that language used in interpretation and translation is not only accurate, but also relevant to the project at hand. To find out more about the services we offer in this area visit or email



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