>> did the folks 7 years ago get a bad deal or are the valuations now over the top?

More likely Option 3: Vastly more people are connected to the Internet, which now has far superior paths to monetization.

I imagine there is some of that involved but perhaps more importantly is the overall usage of the Internet by those people (i.e. time spent online, using mobile devices, etc)?

On the people count front, Google's numbers show %-wise between 2006 and 2010 we went from 68.21% to 79.3% population wise (and population generally went up 4%) so there was a growth in the user base but not one to justify 40x growth in value on similar headlining companies IMHO.

I think we may be talking about two different sets of numbers. It sounds like you're quoting GOOG's penetration into US (or OECD) total population. (I'm guessing from the percentages.)

I'm saying that the aggregate number of people using the Internet has grown much, much faster. I don't have exact numbers handy, but it's certainly possible that the total Internet population has grown more than 100% over this period.

You also raise an interesting point about frequency of usage, which would also contribute to valuations.

In 2012 it doesn't require huge leaps to see how a company Pinterest rapidly could get to revenue numbers that support this valuation. At YHOO's current revenue-multiple-margin mix, this would imply revenues of around $400m-$500m. I don't know what their revenues are now, but given their growth and reach I'd be surprised if investors didn't pay a higher multiple for Pinterest than for YHOO.

Total number of people using the internet seems like a questionable metric for valuating U.S.-based internet startups, most of which (understandably given their business stage) focus primarily on the U.S. and maybe OECD for feature development, user base growth, and monetization. It's currently a bit laughable to imagine Pinterest monetizing their Nigerian and Indonesian user bases. Is there any particular datapoint that would lead us to believe their userbase significantly extends or will extend beyond the OECD?

It's like valuating a paper products company by the total number of people in the world. Sure, they all might be able to or even want to use a paper product, but what's important when making the call is the company's ability to sell to them while still making money.

People are also far more comfortable spending online now, this helps both in directly monetizing users an the amount people will pay for ads.

But the 2005 valuations should have accounted for the fact that by 2012 there would be far more internet usage, and priced it in accordingly. In fact, like many things, they could have over-estimated internet usage. I doubt they were saying in 2005, "well, this is all the people who will ever use the internet!"

Anyway, I think the OP here is spot on. It's not that these companies are crap or worthless. It's the size of these valuations. We throw around billions like it's nothing now, when less than 10 years ago it was rare to see valuations 1/10th of that. Name something else that had it's value grow so greatly over such a short period of time. Houses maybe?

versus 2006? i doubt it's more than double the number.

maybe it's the comfort level of the audience that helps with monetization?

Comfort level is a good point. I think a lot of that is directly attributable to Facebook, oddly enough.

I'm fairly certain Pinterest never would have taken off if most of their users didn't have a couple of years of Facebook under their belts.

Delicious was far smaller than pinterest is today. And unlike pinterest, it did not have an excellent monetization option attached. Not really comparable.

Any sense of how big pinterest currently is?

A few months ago they had one board and auto followed all their users to it. That board had around 21M registered users. Comscore put them at 17.8M uniques in February.

Hm. Delicious had ~ 7m registered when I left. Maybe not so different in size.