Social media companies are getting huge valuations, but are investors getting in on a boom or setting up for a bust?

Facebook and Twitter are preparing to go public, but there are very few figures to back up the actual worth of these sites. Facebook is supposedly worth $50bn and Twitter $10bn. Some social networks do make a profit, but there are simply to few numbers to analyse and the business models are not yet proved.

Many have warned that ‘cash-rich investors could be inflating a multi-million dollar social networking bubble.’ Whilst some worry it’s the dot-com bubble resurfacing but this time centering on social-media companies, there are others that disagree. Many of the top social networking sites gain users at an increasingly rapid rate, some of these companies have received investments into the billions and have also discussed going public.

The first to go public has been Linkedin, the popular business orientated networking site was launched in May 2003. Growing quickly according to news reports and public data, between 2003 and 2007 Linkedin raised approximately $30m in venture capital.

Linkedin was thought up by Reid Hoffman, an Oxford educated entrepreneur and ‘angel’ investor. Originally CEO, he is now chairman of the board.