[lmm]

I thought that for a while, but the thing is that Facebook's actually pulling in revenue. Internet tells me they have a PE of 60, which is high (20 is normal for a mature company) but not order-of-magnitude insane. If Facebook is overvalued then advertising as a whole is, and that doesn't seem likely in this age of metrics and PPC competition.

During the '00 bubble people said Yahoo's valuation was inflated because all the bubble companies spent their money on Yahoo ads. But for my money Yahoo has turned out to be worth its bubble valuation. Even if most of its value has come from a few clever investments, well, sounds like Facebook's doing the same thing.

[gruntled]

A PE of 60 is very high. A very rough rule is that the PEG (PE to Growth, where growth is earnings growth in percent) should be about 1.0.

So a PE of 60 means the market is expecting very approximately 60% year on year growth.

[technotony]

That's probably what facebook is growing revenues, so maybe it's rational. this (a little out dated) chart shows that: https://marketrealist.imgix.net/uploads/2014/05/Companies-Ad...