Facebook's valuation is astronomical. Even if they had $1Bn in revenue, they are currently valued at x100 of revenue. Assuming Facebook can make between 10% and 30% on its revenues, by traditional valuation models, such as multiple of earnings, Facebook is valued at x300 to x1000 of current earnings. For venture investors, it would needs to return a 5x multiple within a five year period. Even if this were a more growth-equity investment, achieving even x300 to x1000 of earnings seems impossible. Surely no company can be expected to transform it's earnings in such a way?
There is only really one scenario in which such a valuation could be deemed justified: if Facebook becomes the Internet. If we start using the Internet, like we flocked to Microsoft Windows, leaving little use for any other websites, Facebook cab become a platform that is able to tax all the commerce that takes place on it. Can this happen? I'm skeptical. The real money in apps is, I think, in business applications. Salesforce.com and Google seem better placed for those opportunities.