|In PG's essay about "what happend to yahoo":|
> By 1998, Yahoo was the beneficiary of a de facto Ponzi scheme. Investors were excited about the Internet. One reason they were excited was Yahoo's revenue growth. So they invested in new Internet startups. The startups then used the money to buy ads on Yahoo to get traffic. Which caused yet more revenue growth for Yahoo, and further convinced investors the Internet was worth investing in.
Is Facebook in a similar situation today? They're not profitable, but investors are investing in them. They even acquire startups!!
As far as I can tell, all of Facebook's money comes from investments. They're getting bigger, but not because of any revenue they're actually making.
The founders got rich.
So economically, how does this work?
It seems to me like a bubble phenomenon:
Investment money => grow bigger => more investments.
The guys at the top of the pyramid benefit the most.
No actual revenue is being made.
I don't even know if they have a viable business model. I don't know the details of whether or not they're profitable yet, or how much they're making, but from what I'm reading around, they're either not profitable or the revenue they're actually making is very small. (Please do correct me).