"Consumer loyalty is directly linked to the amount the consumer invests out of pocket."
"With social networking sites the amount spent is zero - and the loyalty corresponds."
"Facebook and mySpace are only as valuable as the next big thing. In other words: they are fads."
What I'm saying is that because consumers that don't invest out of pocket are fickle and that ad-revenue follows consumers, valuations of companies that survive solely on ad revenue should reflect this.
Right now they do not, hence they are overvalued. When a company is overvalued, it's not a good time to invest. The fact that there continues to be a market is based on the fact that Facebook, or a site of equal stature hasn't actually had to justify its value.
Once it does, the house of cards will adjust a little.
If consumers who didn't pay for stuff were not making investments in other ways, I suspect it would be easier to get users to register. Time is an investment, as is trust.
What makes you think Facebook can't justify a few multiples of MySpace given its trajectory?
At 100 million visitors, $25M translates to $4 a month per user in ad funds. $4, per user, per month, sustained for 24 months. Just to break even.
Those are insane prices at insane growth trajectories. You can call that justification of a valuation, but I call it unsustainable speculation.
The people who believed Google would monetize their business in a huge way seemed to do alright. I don't think Murdoch regrets his decision. I do think people should be cautious but you're going way beyond saying just that.
The money being talked about though for Facebook and others cannot possibly be recovered though unless a number of stars align, and that's too much for me. ;-)
Still think it's crazy?
He's projecting 60% ish growth.
Unless I'm misunderstanding what you are trying to say, you're off by an order of magnitude:
$25M/100M = $0.25
Maybe it's not so insane after all.