Corporate valuation of web 2.0 companies

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The valuation of companies, particularly Internet firms, has sparked extensive debate in both economic theory and practice. Since the early 2000s, literature has increasingly focused on the valuation of Internet companies, especially during the New Economy era, which saw a surge in interest in young, innovative businesses. However, many companies' prospects were misjudged, leading to the collapse of the Internet bubble when it became clear that numerous business models were not economically viable, resulting in a downturn in global stock markets and the failure of many firms. In this context, the emergence of Web 2.0 marked a new phase for the Internet sector. Coined in 2005, the term signified a shift following the New Economy crisis, with successful Internet companies exhibiting distinct characteristics. The relevance of Web 2.0 was further highlighted by significant corporate acquisitions, reminiscent of the earlier bubble. For instance, Google acquired YouTube in 2006 for $1.65 billion, despite its lack of substantial revenue. Similarly, Microsoft invested $240 million for a minority stake in Facebook, valuing it at $15 billion, while Goldman Sachs invested $450 million in 2011, giving Facebook a theoretical market value of $50 billion. Concurrently, Web 2.0 companies achieved remarkably high market valuations during IPOs, exemplified by LinkedIn's $9 billion valuation on its first day on the NYSE in May 2011, despite not