just saying to see FB pay that much for an app tell me that we don't know shite about valuations.
I don't think one company paying an X amount for another can help us draw any concrete conclusions. Companies overpay and underpay for other companies all of the time. I think the company itself is a good purchase for FB FWIW. The price they paid can be debated about all day, and I won't go there.
I read an interesting article about social media companies and how they seem to be mainly valued by the number of users more so than any other metric. It makes sense considering most of their revenue comes from advertising, and the more faces on your site potentially equals more advertising revenue.
But over the long haul, companies will still be valued by their profitability. I mean, that's the fundamental reason you are purchasing stock in a company in the first place, for their future cashflows.
I'm not saying Twitter's price will go up or down in the future, but eventually, their price will be based on their profitability.
This post was edited on 3/23 at 12:46 pm