This Knowledge@Wharton article says “less than three years after emerging from nowhere, the hot social networking website MySpace is on pace to be worth a whopping $15 billion in just three more years. Or is it?Is the much smaller Facebook, run by a 22-year-old, really worth the $900 million or more Yahoo is reported to have offered for it? Maybe. Or maybe this is Dot-Com Bubble, Part II, with MySpace, Facebook, YouTube and the other new Internet phenoms destined for oblivion when the fad fades.”What makes this hard is that these companies seem to be so many years away from the kind of earnings that the valuation numbers are forecasting for them,” says Andrew Metrick, finance professor at Wharton. The $15 billion MySpace figure “would imply that a lot more people will be on MySpace than are currently on it.”Further,”Metrick believes social networking sites will not be a passing fad. But there’s no guarantee that MySpace, Facebook or any of the other current players will be the big winners in the end. Fader, too, believes social networking is here to stay, but he thinks it may work best not as a freestanding function but as an additional feature on sites that draw users for other reasons. Hence, the winners may turn out to be other sites that adopt social networking features. Or they may be new players, or current networking sites that broaden their offerings”.

Dot-Com Bubble, Part II? Why It’s So Hard to Value Social Networking Sites