Ok, where did you get this number from? I mean, sure there are fields where a P/E of 5 to 7 makes sense, but is the Facebook platform really one of them?

FB apps are pretty high-risk at this point. Paying 5x earnings for an app could mean a 10-year break-even number on a platform that’s only existed for a year. Sure it has massive growth potential, but competition is ridiculously high and “historical” data is basically non-existent. Plus if you’re buying an app without a developer, you’re seriously limiting your future revenue streams.

If you buy an app and don’t spend resources on growing the app and the user base, you’re quite likely to “fall off the radar” as something better comes along and eats up your market share.

But hey, I could be wrong, I’d love to hear some explanations or examples for the 5-7x number.