Good for them. They're proving that you can get obscene valuations by using second-level advertising on the back of a low-profit, highly overvalued social network.

Don't make too much fun unless you know the numbers. For all I know they might be generating huge profits. What makes you think their valuation is too high?

I was more joking than being serious.

Max Levchin's name is worth a lot of money, though, so that might have been a major factor in the high valuation. Do you think they deserve half-a-billion valuation while running on the back of Facebook? I don't know their numbers, but 500 million dollars is a lot of money.

It's not overvalued at all. They could probably pull in $50M-$100M a year in revenue right now with their traffic, extrapolating a bit from the revenues we're getting from our single application.

I'm pretty surprised by how many hackers here are completely missing this boat. IMHO it would be worth it to do a little more research before dismissing the entire space - this is going to play a larger and larger role in the future of the internet IMO.

Yeah, the potential for success is huge, but you're operating on the back of FaceBook and you have to learn a new markup language. The latter problem is probably the reason so many hackers are "missing the boat."

But look at facebook right now; its arguably worse with the apps. Companies like Slide hijack your news feed and spam your friends. That's uncool and it puts me off.

A lot of those spamming tactics are how apps get so much exposure, but I don't see Facebook allowing that kind of stuff for very much longer.

My point is, relying on Facebook as your provider is pretty risky. I wish you continued luck, though.

I'm not a fan of the spammy stuff either. Those are tactical methods and apps which rely on those tactics at the expense of actual utility quickly decay. The apps that actually stay at the top are there because there's a demand for them.

Relying on Facebook is pretty risky - but so is doing a startup. The bigger picture is that they (and I) believe that applications built on SOME social platform are going to be the future of web applications. We're barely seeing the hint of that future today, and making a bet early could pay off big or we could all be wrong.

Wow, that's a huge assumption, that the applications of the future will be delivered though Facebook.

That would be an interesting and depressing future, with companies like facebook dictating the rules of the internet. I certainly hope it doesn't come to that.

I've always thought that news sites like digg would become the eqivalent of the Web OS, the gateway to the internet. I can see Bacebook filling that space easily though, now that I think about it. The difference there is that digg is pointing users to other places on the internet, while facebook in that case actually BECOMES the internet for those people.

It'll certainly be interesting to see how it all pans out in 10 years.

He never said it would be Facebook.

I think a modularized web will be a big part of what's coming up.

Slide is on MySpace too, and they probably make more money there than on Facebook. It's easy for us YC news hackers to forget about MySpace because we probably all use Facebook but MySpace is where most users are.

Let's also not forget that all other social networks are going to open up, creating a massive opportunity for Slide that probably far exceeds what Slide makes on Facebook. $500 mil may not be such a high valuation when you think about it.

$500 million is 4 times as much revenue as Facebook anticipated for last year.

So lets assume that the costs for a successful web company are a small fraction of revenue (maybe 20%?). That's profits of 100 million a year for last-year's-Facebook.

So if this company makes 1/10th the profits of Facebook, it will take 50 years to make enough profits to cover it's current valuation. Of course, if this company is as profitable as last-year's-Facebook then their total profits will exceed their valuation after 5 years.

So I guess the question then is whether social-networking apps have the potential to generate similar revenues to the big social networking sites.

Facebook was anticipating on the order of $30 million in profit, as I recall (serving out billions of pageviews is never cheap). Feel free to multiply all of your time estimates by three.

I've been frustrated lately at humorous comments and the rapid rate at which they are upmodded. A quick bit of humour can be great at cutting to the heart of the issue, but it often seems like humour comes at the expense of over-simplification. Apologies for taking it out on you though!

Its not pure humor; I really think its probably overvalued. And I'm a pretty sarcastic person anyway, so most of my comments come out like that.

I really wish someone made wise estimates of their current revenue/profit numbers or at least provide the thought process that went behind coming up with $500M+ valuation.

Max always seems like a "burn the ships" entrepreneur, so it isn't that surprising that he's taking the go-big-or-go-bankrupt road. I'm sure the VCs involved love that attitude too, so I guess everyone's happy...

I'm curious what PG thinks. This seems like a bad idea for Slide to me, as they've now limited themselves to an IPO, or an acquisition by a massive corporation.

those are the only two outcomes max would view as acceptable anyway. and probably not even so much for the latter.

True enough. I'm all for swinging for the fences I guess, but it's good to keep options open where possible.

Ugg, really?

90% of facebook spam comes from their crappy little apps.

90% of the spam 3.3% of the valuation...

... Spammers should get a better deal really :-)

How do independent Facebook application developers compete against the 800-lb gorillas of Facebook, Slide and RockYou? Slide and RockYou seem to prove economies of scale. From Craig Ulliot - developer of 50K+ daily user FB application 'Where I've been'

"Well my application has become incredibly popular, and I'm very excited about it, don't get me wrong!

But I'm a freelance developer, not a company, and its put a powerful 4GB $450 a month dedicated server on 3 backbones at maximum load and is pushing 2000GB a month in traffic. It doesn't make me any money and I'm getting hundreds of comments and emails daily about it.

How can i support it and maintain it? What do i do with it now? its growing at a few users a second, so should i get another server each month?"

http://tinyurl.com/yu6k98

Funny is, Microsoft's market cap is 30x Intuit's. Facebook's worth $15 billion? Slide's worth $500million. See? Ratios are easy!

It certainly seems a lot easier to get a huge valuation from Wall Street than from Sand Hill Road. A lot of these "mega-valuations" (zillow, ning, slide, etc) have gotten funding from PE, hedge, and investment houses instead of classic VC.

That's a very keen observation. I am not sure about the 'lot easier' part though.

One thing that's common among all these "mega-valuations" startups are star-founders who have had billion dollar exits in the past.

This is their fourth round of funding - it's quite common to go to a larger institution for later rounds of funding for a mezzanine round before an IPO.

Ok, I relent. Bubble 2.0 it is.

Maybe I'm completely out of the loop on this one... but how do they make money?

I'm not sure. You don't buy facebook apps, you just use them if someone else invite you to. Is it possible that the advertising revenue is deep enough to support a 50+ employee company?

Yes, in fact web advertising has proved to be deep enough to support all of Google!

Of course there is a limit to the total amount of advertising dollars available and many half-good companies may not be good enough to support themselves with advertising, but there is no question that a good company can do very well on advertising alone.

I wonder what the profit-margin for a top-100 Facebook application might be after paying for bandwidth/server costs, assuming they monetize through displaying advertising.