Purely from investor perspective, here's how I would do FB valuation:
Assume that FB doubles its profits in next 2 years. Then also let's say it gets in to 3 new businesses as big as its current business and dominates them just as well. That would put their profits to ~$8B.
Now again assume that FB maintains its dominance successfully on all of the above 1+3 businesses for next 10 years. So in this "dominating life span" of FB, there would be total $80B made. If you put probability of everything from inventing new businesses to fending off all competitors successfully for next 10 years at 0.5 then FB's risk adjusted worth would be $40B. It should be obvious that this valuation is way too on generous side (normally I would more aggressive parameters). It should be easy to see that valuations like $100B is extremely unrealistic.
As OP has pointed out bubble is an effect when people take one unrealistic valuation as a reference point and make their own valuations just as unrealistic causing system-wide chain reaction. With Instagram, Evernote and such that chain reaction is unfolding right in front of us.
Assume that FB doubles its profits in next 2 years. Then also let's say it gets in to 3 new businesses as big as its current business and dominates them just as well. That would put their profits to ~$8B.
Now again assume that FB maintains its dominance successfully on all of the above 1+3 businesses for next 10 years. So in this "dominating life span" of FB, there would be total $80B made. If you put probability of everything from inventing new businesses to fending off all competitors successfully for next 10 years at 0.5 then FB's risk adjusted worth would be $40B. It should be obvious that this valuation is way too on generous side (normally I would more aggressive parameters). It should be easy to see that valuations like $100B is extremely unrealistic.
As OP has pointed out bubble is an effect when people take one unrealistic valuation as a reference point and make their own valuations just as unrealistic causing system-wide chain reaction. With Instagram, Evernote and such that chain reaction is unfolding right in front of us.