More Fuzzy Social Network Math

Big numbers are floating around the social network scene again, as Jordan Rohan, an RBC capital analyst, says, after a meeting with Fox interactive, that MySpace could be worth 15 billion, measured in terms of the value created for shareholders of parent company News Corp. Huh?

Rohan based his view on an extrapolation of estimates for the value of Internet properties ranging from $1 billion for both MySpace rivals YouTube and Facebook to the market capitalization of $120 billion for Google Inc. (GOOG.O: Quote, Profile, Research).

He said MySpace was currently sold out of space for video advertising. The CPM, or price per thousand ad views, on a premium show such as Fox’s The Simpsons runs as high as $35-40 on MySpace, he said.

Wow, talk about fuzzy logic, those numbers he’s throwing around are the same kind of numbers, fuzzy. This report doesn’t mean anything, and it probably just some guy trying to pump up his profile, or News corp trying to push up share prices, or both. Pete Cashmore from Mashable says,

So how did Rohan arrive at the figure? Apparently he looked at the rumored $1 billion Yahoo-Facebook talks (no purchase yet) and the $1.5 billion valuation for YouTube (this number is also baseless), then extrapolated. He also factored in Google’s $120 billion market cap, and looked at how MySpace could monetize its audience – direct response marketing, ecommerce and high-price advertising. Whether or not the prediction turns out to be true, most people would agree that this kind of comparative math is fuzzy at best, and a stab in the dark at worst – nobody is buying YouTube for $1.5 billion, for instance. Whether the aim is to bump up News Corp’s stock price or get more attention for RBC, I’m not sure, but it seems these valuations amount to little more than guesswork.

Once someone actually pays that much for one, I will believe it.

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