Venture Capitalists and private investment analysts often throw out lofty numbers when talking about the value of a company, but such entities rarely make substantial investments based upon those claims. When “The Street” makes such a valuation, there is normally real money involved. Such is the case with Facebook as respected investment firm Goldman Sachs and an undisclosed Russian firm have plopped down $500 million against a $50 billion valuation.
That kind of money will poise Facebook to bring in more talent, improve infrastructure, and take some risks with their monetization platform. It also marks another example of big investors taking social media seriously.
“When you think back to the early days of Google, they were kind of ignored by Wall Street investors, until it was time to go public,” said Chris Sacca, an angel investor in Silicon Valley who is a former Google employee and an investor in Twitter. “This time, the Street is smartening up. They realize there are true growth businesses out here. Facebook has become a real business, and investors are coming out here and saying, ‘We want a piece of it.’”
The company is not public with Mark Zuckerberg saying “don’t hold your breath” last month regarding the potential for an IPO. As a result, revenue is not disclosed but analysts have estimated their annual take around $2 billion. Such numbers are likely realistic considering this move by Goldman Sachs.
What does this mean for Facebook and social media in general? It will be a good litmus test – if this works out as well as the investors hope, we may see more super-investments made into intangible markets such as social media.