It’s a never-ending sport.  With some drastic implications.

There’s ample evidence that the social networks are nothing more that the dot.com bubble revisited.  At the same time, big time players are putting heavy bets down that there’s a pot of gold out there somewhere.  So what are social networks really worth?

MIT’s Technology Review, in my opinion, the ‘Economist’ of tech media, i.e, the ones who have the best writers, do the best research and present it most professionally, has a series of articles this month as part of their Web 2.0 bubble cover feature.  The more relevant article investigates the valuations and advertising assumption, reviewing major financial disappointments at MySpace and Facebook, highlighting ad CPMs in the pennies, and raising the question of whether advertising has any chance of producing meaningful revenue for social networks.  (as I’ve written before, the answer is NO.)

TechCrunch, one of the influential blogs in the web 2.0 / mashup / social media space did a decent job of analyzing social network valuations based on a detailed assessment of advertising revenue, and the value of recent investments (LinkedIn, Facebook) and purchases of large social networks (Bebo, by AOL).

Silicon Alley Insider analyzes the Tech Crunch analysis, adding their own enhancements to the model. Separately, they’ve also got running values of the top 25 private companies — including many social networks — in their SAI 25.

What’s the nuance?

Interestingly, the SAI 25 contradicts the TechCrunch analysis that SAI lauds.  If you think that statement is confusing, try sorting out the math behind it.  In short, it implies what we already know, that the valuations of private companies, and social networks in particular, are volatile, and highly suspect.

Secondly, they are based in large part in an anticipated monetization, which is still largely measured in advertising.  Social network advertising, of course, is incredibly suspect.  As my partner, Dave O’Brien, often points out, if all the ads in social network business plans were actually sold, we’d have a 9 trillion dollar economy (and Ben Bernacke could take a vacation).

As Dave and I sort out social network valuations for nuance clients, we believe that the core business revenue strategy must be identified first, and then social network techniques can be integrated to drive traffic and improve stickiness.  The idea of “then ads fall from the sky” just doesn’t cut the mustard in serious business analysis.