Journalist covering technology reported late last week that Facebook acquired a fast-growing but not well-known application known as Instagram. That Facebook would make an acquisition of a photo sharing application was not as surprising as the price that was paid for the new firm. It was surprising because not only was the firm very small but had virtually no revenues yet. It appeared to me that the value ascribed to the firm by Facebook was on the higher side.
Writing in the Guardian, John Naughton writes about the difficulty of valuation of technology firms and gives examples of valuations that brought acquiring corporations to grief. The gist of the article though is that there is an emerging bubble for technology firms. I am cautious in declaring that there is a definite bubble but the salient feature here is that valuation of firms is a matter of intelligent guesses filled with hopes of future performance. The valuations are not to be taken much too seriously and so the answer to title question of this post is unlikely to be answered with certainty.
Writing in the Guardian, John Naughton writes about the difficulty of valuation of technology firms and gives examples of valuations that brought acquiring corporations to grief. The gist of the article though is that there is an emerging bubble for technology firms. I am cautious in declaring that there is a definite bubble but the salient feature here is that valuation of firms is a matter of intelligent guesses filled with hopes of future performance. The valuations are not to be taken much too seriously and so the answer to title question of this post is unlikely to be answered with certainty.
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