Insanity, Insanity - there is nothing new under the sun

...to paraphrase Ecclesiastes Law

(Ecclesiastes law is that There is Nothing New Under the Sun, and that All is Vanity).

It would appear (sez Jemima Kiss in the Grauniad) that GOOG, YHOO, and MSFT are all trying to buy a stake in Facebook at ludicrously overvalued prices (assuming you base pricing on something rational like, oh, customer valuation).

(Current betting says deal will value the company at c $10 - $15bn with c 40m users, thats c $250 - $375 / user)

Whats with these heavyweights paying astonishing prices prices for ephemeral businesses? The history of Social Nets is that they are here today, gone in 5 years time, and a New New Star emerges every 2 years or so to cream off most of the real actives- how in heavens name can any business case work with these timescales, users and numbers?

Or is this just the MegaNetCo's equivalent of the Yacht races? Whoever overpays most for their Web 2.0 startup wins....

Its clear that at a tactical level they all believe that ownership of a piece of Facebook will propel them to some new state of financial grace, though just how monetisation works is still (very) unclear.

However, at a strategic level this seems to be much more of a dotcom mania moment. Its taken EBAY c 3 years since it bought Skype to admit it was being darn silly. On this reckoning GOOG should admit it was a tad enthusiastic re YouTube by 2008, and the Facebook acquirer by 2010.

(ooops...I meant 2 years re eBay)

One of the great books of the 1920's was Irrational Exuberance...and another was "Where are all the Customer's yachts"

Shareholders, you have been warned.....

Postscript - NYT says deal is $240m for 1.6%, valuing Facebook at $15bn. Sounds like a bad case of Deal Fever has gripped all the players, as the NYT reported:

“We are now stepping outside what is typically a business decision,” said Rob Enderle, the founder of the strategy concern Enderle Group. “This was almost personal. I wouldn’t want to be the executive that’s on the losing side at either firm.”

The theoretical rationale is that:

Google appears to be building a dominant position in the race to serve advertisements online. Fearing it might lose control over the next generation of computer users, Microsoft has been trying to match and in some cases block Google’s plans, even if that effort is costly.

I didn't understand the eBay rationale for Skype at the time (though, nor, it seems, did they ), and we thought the YouTube price was way too high considering Google's video asset base, and this seems like at best buying Ad space with maybe a chance to take a profit if anyone ever pays more than $15bn....(in fact, I wonder how much of the $240m was actually for the stake rather than the Ad deal - implicitly MSFT may have valued them far less than $15bn)