
Like Scrooge McDuck in his money bin,
the social media business is rolling in dough following one of the most funding-est weeks in its history. Facebook just raised $500 million in a round of funding led by Goldman Sachs with help from
Digital Sky Technologies -- not long after Groupon revealed it has already raised an equivalent sum as part of a planned $950 million round of funding announced just last week. These investments
valued Facebook at $50 billion and Groupon at $6.4 billion. And it was just two weeks ago that Twitter raised $200 million in a funding round which valued the microblogging service at $3.7 billion.
$1.2 billion in two weeks isn't bad (and it could be $1.65 billion shortly, if Groupon finishes raising the rest of the amount specified in SEC filings). These moves would seem to confirm
social media's position as the hottest spot in the online media business. Of course, nervous Nelly that I am, I still find myself wondering whether there isn't some degree of irrational exuberance at
work in all this.
The strongest case for rational exuberance is Facebook, according to Wedbush social media analyst Lou Kerner, who said the $50 billion valuation is reasonable in light of
revenue projections; indeed, Wedbush believes Facebook's annual revenues could reach as much as $30 billion by 2015. Twitter's valuation also makes sense, according to Kerner, in view of the fact that
"Twitter is on its way to global ubiquity as well and will drive very meaningful revenue and profits."
However Groupon will face more competition in the emerging group-discount marketplace,
Kerner warned -- not least from Facebook, Google, Amazon, along with Travelzoo and "literally hundreds of smaller players." Some skeptics have pointed to Groupon's onerous terms, which take a big cut
of retail partners' sales (already discounted by 50%), and the difficulty of scaling its personnel-intensive local sales model. Still, Kerner was mostly sanguine, noting that "businesses will always
pay for access to profitable customers" -- something which Groupon still provides.
Back to Nervous Nelly: some of the latest investments still have some bubble-like qualities, from my
handwringing point of view. For example, DST Global made its latest Facebook investment -- to the tune of $125 million, through some planned horse-trading with Goldman Sachs -- a few weeks after
failing to invest a similar amount in Twitter (the funding slot instead went to Kleiner Perkins Caufield & Byers, according to All Things Digital). Which to me suggests a process which might be summed
up, "gotta spend this money somewhere in the social media world, but Twitter passed, so I guess Facebook will have to do" -- not exactly a scientific approach.