More Proof that Facebook is a Bubble

(Note: this is largely a summary of Social Media Ad Revenues Will Reach $8.3 Billion by 2015 by Erik Sass at MediaPost)

In a post yesterday, Erik Sass noted that BIA/Kelsey predicted that the Social Media ad spending - a decent proxy for Facebook revenue, as they seem to be earning almost all of it - will quadruple from ~$2Bn/yr to $8.3Bn/yr.  This is a healthy 32% growth rate, "reminiscent of the first surge of Internet advertising in its glory years from 1997-2000 and then again from 2003-2008."

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Facebook, as recently as January, was claiming run rates of $2Bn annually while selling through Goldman Sachs at ~$50Bn EV, or 25x revenue.  That's already quite bubblish, but check this out.  On Monday, the WSJ reported an implied IPO valuation of $100Bn for Facebook assuming a Spring 2012 IPO.  Assuming little cash or debt on the books (i.e. Market Cap approximates EV), and assuming that Facebook gets 100% of social media ad spend, this implies ratio of 12x for 2012 EV to 2015 revenue.  That doesn't give Facebook IPO investors very far (anywhere?) to go over those 3-4 years and get any returns.  That's practically the definition of a bubble - when future success is already baked into current prices - and then some!