Social networks refute discounted cash valuations

Social networking sites with a large number of active users are achieving high business valuations regardless of whether they are making or forecasting much profit, according to Business Sale Report. This is raising questions about the possibility of another tech bubble. It is thought that high-user social networks are being purchased because of their strategic potential, as well as to prevent competitor domination. The latter can be seen in Microsoft's recent purchase of Skype, which was influenced by concern about Google being able to strengthen its position in the operating systems arena if the corporation had been able to acquire the company. However, as sites go out of vogue, purchasers run the risk of accruing huge losses. AOL, which purchased Bebo for $850 million in 2008, announced intentions to either sell it or shut it down in 2010 after many of its users decamped to Facebook and Twitter. It was ultimately sold to hedge fund operators Criterion Capital Partners for $10 million in June of last year.