Stop the Facebook Valuation Madness!

(MoneyWatch)  There's a new investment in Facebook setting off the terrible storm of valuation second guessing. "A Russian company paid $200 million for 2 percent, but Microsoft paid $240 million for 1.6 percent, and that means the company's worth this -- at the moment." It's industry gossip passed breathlessly from VC to reporter to pundit, and it means absolutely nothing.

The second guessing is fierce, as reports detail every iota of available data:

The $10 billion valuation for Facebook is less than the $15 billion value implied in 2007, when Microsoft spent $240 million for a 1.6 percent stake in the company - even though Facebook has substantially grown since then. However Facebook's own appraisal after the Microsoft deal gave the company a market value of about $3.7 billion, according to details revealed in a legal settlement.

It can be tiring even to read. But the thing to remember is that to discuss the value of any asset -- idea, patent, contract, product, or even an entire company -- is, as an old Russian saying goes, a pouring from the empty into the void. You can make as grand a show as possible, but in the end it's meaningless.

Something's value is always relative because it depends on what someone can do with it. A chunk of rock to one might be silver ore to another, awaiting processing. Facebook simply doesn't bring in that much revenue. CEO Mark Zuckerberg says that revenues are rising, with the company "on a track towards creating a self sustaining business." Whatever -- and whenever -- that means. If the numbers were big, you can bet they would have received a concrete hint or two.

According to various reports, Microsoft's investment into Facebook equated to a $15 billion valuation, and about a year ago, Facebook's internal valuation estimate was $3.7 billion. And Zuckerberg apparently has said more than once that the company will have positive cash flow by next year.

Does any of this matter? No. Maybe Microsoft made a mistake by paying as much as it did. Or maybe it was able to get some concession from Facebook, possibly in the area of search, blocking out Google. Maybe the Russians were better negotiators. Or maybe Facebook noticed the economic crisis and made a deal it wasn't particularly fond of in order to secure sufficient working capital.

Whatever the situation, absent a startling revelation from inside the deal, none of this has a practical impact on a tech business unless that business happens to be Facebook, or unless it's trying to use Facebook as an "example" of why it deserves money from some investor.

Crazy man in shower image via stock.xchng user adamsphoto, standard site license.