But how, in the post-dotcom bubble era especially, does one place such a rarefied value on a non-transparent internet company which doesn’t make anything and charges its 550 million customers exactly nothing?

Much has been made of the fact that, at $50 billion, Facebook would be worth more than Boeing, the 100th largest publicly-trade company in the world. The world’s largest social network didn’t make Forbes Magazine’s 2010 list of the largest private companies in America, but if it had it would been tied for 220th — dead last — with Koch Foods, at an estimated revenues of $2 billion.

Goldman’s $50 billion price tag for Facebook flows from an calculation that the social network is worth a whopping 25 times 2010 revenues. But what if Facebook’s valuation was based on a smaller ratio — say the multiple of seven, the level at which publicly-traded search giant Google is currently priced?

Then six-year-old Facebook would suddenly become the 37th largest private company in America. In other words, a company with a market value of $50 billion with a revenue multiple of seven would require sales of $7.14 billion, more than three times Facebook’s estimated 2010 revenue.

Of course, when Google hit a $50 billion valuation in 2004 — when it was six — the company had sales of $3.2 billion and a price-to-sales ratio of 17, according to Bloomberg, which makes Facebook’s valuation seem slightly more plausible.

But that assumes Facebook can replicate the staggering revenue growth of Google, easily the biggest tech success story of the last decade, next to Apple. Google’s sales repeatedly doubled year-over-year throughout most of the 2000’s until slowing down in recent years. It had revenues of $23 billion last year.

Comparing private companies to public companies is a tricky business, because the latter are so much more liquid and their stock price is subject to speculation and other forces associated with the open markets. But on the numbers — and, frankly, on a visceral level as well — Facebook’s sky-high valuation has raised some eyebrows, even among former Goldman partners.

“Google’s trading at seven times sales. I’m not going to buy Facebook at 25 or 50 times sales,” one former Goldman partner told The Wall Street Journal, explaining why turned down the chance to buy into the bank’s Facebook fund.

Many more Goldman private investors have the opposite view, of course, and they won’t even be able to get in on the deal waving a fist full of dollars.

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Authors: Sam Gustin

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