Is Facebook.com really worth its asking price?

With the rumors swirling that Yahoo! may buy Facebook.com, I have to pause and wonder if that could be the biggest kick in the rear to Yahoo! Inc. (NASDAQ: YHOO) investors, or will it end up being a stroke of genius? When eBay bought Skype for over $3 billion not too long ago, I wondered how in the world eBay could ever justify that kind of price. Skype is, after all, a VoIP service that is a great offering to customers, but was not at the time generating the cash flow that would justify the price. Skype makes a pretty good killing these days -- but I still wonder if it was really worth the price that eBay paid?

When News Corp. paid $580 million for MySpace.com, that was a relative bargain in almost every respect. MySpace.com has over 100 million registered users and to make that initial investment back seems like a cakewalk -- and Rupert Murdoch knew that. Google has already partnered with MySpace for a newer $900 million investment. Shrewd, and a good move on the part of Murdoch. But can Facebook.com really generate the $100 million in annual ad revenues that the WSJ predicts? I'd love to see a fact-filled breakdown of this figure along with industry projections and live data. At this time, color me unconvinced.

Facebook.com, with less than 15 million registered users, would have a hard time convincing me that it's worth $1 billion. Sure there is probably ample opportunity to make ad revenue, and Yahoo! could stand to continue upping its advertising streams with newer, flashier web properties. But while Google has the lion's share of the Internet search market and Yahoo! is a distant second, there must be some pretty strong faith in the halls of Yahoo's Sunnyvale headquarters these days. As a Yahoo! shareholder, do you think Facebook.com is worth $1 billion?