I totally agree with you.May be a ''social network bubble''only time will tell whether its
irrationality.

@Bird_man that's why I tried to highlight the point of the nature of the users. Facebook is essentially a communication network. It is therefore borderline offensive to try and advertise to them. Imagine having adverts running sometime during a phone call, or ads on a letter. Madness!
In the case of Twitter, this is a company that makes zero money! I don't mean 'little money' or 'insignificant amounts.' I mean ZERO. How can any sane investor draw a billion dollar valuation from that? More Madness!
Now comes a company called Groupon. After 3years of business, users are only in the hundreds of thousands, but sales are in the hundreds of millions! Google comes along and says "we'll give you 5 billion dala for a piece of the cake." That's real business.

Well, Twitter plans to make money using promoted tweets. I've already been seeing the promoted tweets, so don't say they're making Zero! Making money via Social is very difficult, though.. because the main reason they're there... as KenyanLyrics says, is to communicate!

@KenyanLyrics,some companies can make a loss for 10yrs but recover in 2yrs."Potential" is very important and that is what separates a regular investor and a venture capitalist.

The employees are being paid using funds from Venture Capitalists.And those venture capitalists are not dumb,they most likely see what the future has in store.Google is most likely making losses from products such as GoogleMaps,Google Docs,Chrome etc....but they are still producing them.Same case back here in Kenya,Nation Media could be making losses on Taifa Leo,K24 could be making losses from The People newspaper,Radio Africa could be making losses on The Star.....
But some people are brave enough to venture into an idea with "potential".And if all goes right, they become instant billionaires.It is all a matter of time. I'm sure 15yrs ago people would say "it's very difficult to make money from search business"......the same way we now say it's "hard to make money from social media".
Just my thoughts though, I'm not saying that I'm an authority.

While social networks are growing others are growing on their backs, so in away a company should identify how the network can be of an advantage to itself. an example is skype . I downloaded the new version of skype and it has a tab for facebook on which one access news feeds (with options of sms and calls) . beside this is a phone book and you get access to all your friends phone numbers on facebook and thus if you want to call anyone .. all you need is buy credit from skype and call from your desk.

True, social networks or sites like google are making money from reselling their data from those who use it . Facebook currently is the number 1 website in the world and has attracted many big wigs wishing to have a small stake in it. Still like Mark's wish that he holds a big share and control of Facebook.