For something that was practically unknown at the beginning of the century, the social website phenomenon has created a frenzy among internet users and investors. From social media and gaming sites to social networking and social buying, many of these websites are fetching multi-billion dollar valuations.
IN PICTURES: How To Make Your First $1 Million

When News Corp acquired MySpace in 2005 for $580 million, the ground breaking deal made international headlines. However, the value of the following social websites makes the MySpace purchase price look like chump change. (The glitz and glam of Hollywood could help put some more glitz in your pocket. Check out Analyzing Show Biz Stocks.)

Social Business Networking
LinkedIn ($2 Billion)
Out of the list of social website giants, LinkedIn was the first one on the scene and will be the first one to go public. The company was founded in 2002, quickly captured a 34 million user base at the beginning of 2009, jumped to 60 million within one year and surged to over users 90 million as of 2011. Perhaps helped by the recession, as millions of unemployed workers explored alternative measure to finding a job, LinkedIn provides the valuable service of helping professionals expand their network of business contacts. This business networking site is valued at $2 billion.

Social Gaming
Zynga ($8 Billion)
Before Groupon earned the title of the internet's fastest growing website, the honor was held by Zynga, an online game developer. Able to leverage off the social networking phenomenon, Zynga developed the highly profitable and highly addictive Facebook applications of Farmville, CityVille and Mafia Wars. The power of social websites is possibly best reflected in the valuation of Zynga. Veteran game developer Electronic Arts, the maker of such popular titles as The Sims, Medal of Honor and the Madden football series, has a market cap of approximately $6.5 billion. Zynga, on the other hand, a three-year-old startup, is valued at around $8 billion. (While some investors see it as volatile and unreliable, the tech sector can provide fantastic returns for investors with a little knowhow in the field. (See A Primer On Investing In The Tech Industry.)

Social Media
Twitter ($8-$10 Billion)
Although not as famous as Mark Zuckerberg, the founders of Twitter created the internet equivalent of text messaging. The company was created in 2006 and gained immediate acceptance within one year. Twitter has an estimated 190 million users who generate an average of 65 million tweets a day. Recent rumors have suggested that Facebook and Google may potentially be interested in purchasing the micro-blogging website. With blogs and online media gaining worldwide popularity, Twitter will continue to capitalize on this trend.

IN PICTURES: 8 Tips For Starting Your Own Business

Social Buying
Groupon ($15 Billion)
Groupon is a fairly new entrant to the social website landscape. Andrew Mason launched the website in November of 2008 with a simple idea – sell people coupons. What initially started with a focus on the Chicago consumer, Groupon now has major operations in Israel, Columbia and Romania. While others have tried to replicate Groupon's business model, this social buying website has capitalized on its first mover advantage and has become the fastest growing site ever. During the mid-months of 2010, analysts were skeptical that Groupon deserves the suggested $3 billion valuation. However, only several months later, following Groupon's rejection of a $6 billion offer from Google, the website is speculated to move forward with a $15 billion IPO.

Social Networking
Facebook ($50 Billion)
After what started as a simple idea to connect people around Harvard, Facebook has seen exponential growth. In the seven years following its creation, this social network currently has 500 million users, 50% of which use the site on any given day. With ever-growing traffic levels, in September of 2010, Facebook became the internet's top ranked website, jumping in front of Google. Despite that other social networking sites appeared in this space before Facebook, Facebook provides a more personal experience between users. Mark Zuckerberg's creation is currently valued at an astonishing $50 billion.

The Bottom Line
The extraordinary price tag put on social websites has many speculating that the industry is in a bubble. However, only time will tell whether or not these multi-billion dollar companies continue to experience the level of growth required to justify their valuation.

Related Articles
  1. Investing

    The European Effect on Google's Bottom Line

    The EU is turning up the heat on Google. What effect will it have on the company's bottom line?
  2. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  3. Investing Basics

    If You Had Invested Right After Amazon's IPO

    Find out how much you would have made if you had invested $1,000 during Amazon's IPO, including how the power of the stock split affects investment growth.
  4. Stock Analysis

    The 6 Worst Technology Stocks of 2015

    Learn about the technology sector and how it has performed in 2015. Understand the six worst performing technology stocks by average return in 2015.
  5. Entrepreneurship

    Top 5 Startups That Emerged in Denver

    Learn why Denver is one of the hottest markets in America for startups, and identify five of the top startups that are emerging from the Denver market.
  6. Entrepreneurship

    Top 5 Startups That Emerged in Raleigh

    Learn about the startup scene in the Research Triangle hub of Raleigh, North Carolina. Discover which startups are the hottest to emerge from this tech city.
  7. Entrepreneurship

    Top 7 Startups That Emerged in Mexico City

    Learn why Mexico City has the potential to emerge as a major player in the startup scene, and identify several companies leading the way.
  8. Economics

    How Do Asset Bubbles Cause Recessions?

    Understand how asset bubbles often lead to deep, protracted recessions. Read about historical examples of recessions preceded by asset bubbles.
  9. Investing

    Is Alphabet the Next Berkshire Hathaway?

    Google has made headlines for self-driving cars and biotech products, but the most profitable part of the business remains the advertising connected with its search engine.
  10. Stock Analysis

    6 Things to Know About Soul Cycle Stock

    Learn about SoulCycle and how it has found success. Understand six aspects of the company everyone should know before considering an investment in SoulCycle.
RELATED TERMS
  1. Venture Capitalist

    An investor who either provides capital to startup ventures or ...
  2. Google Blogger

    Google Blogger is a free publishing platform run by Google (GOOGL). ...
  3. Wordpress (CMS)

    Wordpress is widely considered easy to use and is the CMS of ...
  4. Content Farm

    Content farming has been likened to the “fast food” of the internet ...
  5. Contactless Payment

    Contactless payment is a secure method for consumers to purchase ...
  6. Information Management Technology ...

    Information management technology is the distribution, organization ...
RELATED FAQS
  1. What kind of assets can be traded on a secondary market?

    Virtually all types of financial assets and investing instruments are traded on secondary markets, including stocks, bonds, ... Read Full Answer >>
  2. Why would a company decide to utilize H-shares over A-shares in its IPO?

    A company would decide to utilize H shares over A shares in its initial public offering (IPO) if that company believes it ... Read Full Answer >>
  3. How do I place a buy limit order if I want to buy a stock during an initial public ...

    During an initial public offering, or IPO, a trader may place a buy limit order by choosing "Buy" and "Limit" in the order ... Read Full Answer >>
  4. How do corporate actions affect floating stock?

    Corporate actions, defined as a company's actions that affect the amount of outstanding company stock shares, can either ... Read Full Answer >>
  5. What are the advantages and disadvantages of listing on the Nasdaq versus other stock ...

    The primary advantages for a company of listing on the Nasdaq exchange are lower listing fees and lower minimum requirements ... Read Full Answer >>
  6. What securities does the primary market deal with?

    The primary market deals with all newly issued securities. When businesses, governments or other groups want to raise capital ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!