SAN JOSE -- A new study is putting numbers on the explosive growth of privately held Internet social media companies -- none more impressive than Facebook, which it estimates is worth significantly more than eBay or Yahoo, with its value up by 56 percent since the middle of the year.
According to research by New York securities firm Nyppex, Facebook's "enterprise value" is $41.2 billion, by far the largest in a group that includes fast-growing startups such as Twitter, Zynga, LinkedIn and Groupon, all of which have not yet launched an initial public offering, or IPO.
Determining the worth of these startups has been a Silicon Valley parlor game of sorts, but it also has real-world implications. Unwilling so far to go public, many of the companies allow their employees to sell shares in private markets, helping the companies hang on to valued staff members. Those markets also give investors an early chance at a piece of the startups, but it is extremely difficult for them to estimate what they should pay.
Nyppex set out to estimate the worth of Facebook and other private social Internet companies by using data from private stock trades by individual and institutional investors. Because it is difficult to calculate a private company's market value, Nyppex arrived at an estimate of the company's enterprise value, which includes the claims of all the security holders in these companies, including bondholders and preferred shareholders, minus its cash on hand. Market value, in contrast, is simply the price of a company's shares multiplied by the number of shares outstanding.
Nyppex found that the value of 11 privately held Internet social media companies, many of which are located in the Bay Area, grew by a collective $20 billion, or 54 percent, from June 30 to Dec. 1.
While Facebook accounted for the bulk of that growth, online coupon broker Groupon, social games maker Zynga and microblogging site Twitter each has an enterprise value greater than $2 billion, according to the report.
"We try to be students of venture history, and we think this is a milestone event that's taken place in the last six months," said Laurence Allen, managing member at Nyppex, who also noted that Facebook is worth more than such old-line media companies as Viacom, CBS and Time Warner. "On top of that, these private companies are on record saying, 'We intend to stay private for the foreseeable future.'"
The study compared the enterprise values of selected public and private companies. Facebook has a way to go to reach the enterprise value of public Internet giants like Google, at $149 billion, or Amazon, at $73.5 billion, but the enterprise value of the world's largest social network is now significantly higher than the comparable values of first-generation Internet companies like eBay and Yahoo, at $32.8 billion and $18.4 billion, respectively.
With an enterprise value of $4.8 billion, Chicago-based Groupon mushroomed by 303 percent, or $3.6 billion, from June 30 to Dec. 1, Nyppex found. The estimate for San Francisco-based Twitter grew by 131 percent, or $2.1 billion.
However, two other prominent companies, Zynga and LinkedIn, each declined in value by a little more than 8 percent. Allen said Zynga has acquired a reputation for restricting share transfers, which may have discouraged some investors. He added that LinkedIn, while growing, may be suffering from a perception that it's not growing as fast as other companies in the sector.
Venture capital giant Kleiner Perkins Caufield & Byers launched the $250 million sFund in October to invest in social Internet startups based on the conviction that eventually, startups built around people's social connections can grow to rival the value of the Apples and Googles of the world.
"We think this is a sea change," Bing Gordon, the Kleiner partner leading the sFund, said of the explosive growth in the value of social Internet startups.
"The bottom line is, this is a really good trend for people who live in Northern California," Gordon added. "We've got a bit of a race because other parts of the world would like to be in the epicenter of social software, but we're in the lead right now. So go team!"
Nyppex, of Rye Brook, N.Y., offers brokerage, advisory and other services in the so-called secondary market, where shares of privately held companies are sold by employees and other existing shareholders rather than by the companies themselves.
The firm did the research on private social media companies because investor interest has been intense, Allen said.
Mercury News staff writer Brandon Bailey contributed to this report. Contact Mike Swift at 408-271-3648. Follow him at Twitter.com/swiftstories.