Scott Reid: Facebook billions smack of emperor's new clothes

And all that at the ripe old age of 26. Given the meteoric growth of Facebook since its launch from a Harvard dormitory room less than seven years ago, it's no surprise to find Zuckerberg named the most influential person of the information age by Vanity Fair.

Now, his influence - and fortune - have been given a considerable boost thanks to the sort of investment most young internet companies can only dream of.

The social networking behemoth is understood to have raised $500 million from one of Wall Street's most venerable names, Goldman Sachs, and a less familiar Russian investment firm, Digital Sky Technologies.

Following the deal, Facebook is likely to be worth an eye-watering $50bn-plus. That's more than online auctioneer eBay and media giant Time Warner.

Reports suggest that the cash injection could double Zuckerberg's near-$7bn fortune, which was calculated when the website was valued at some $23bn.

The involvement of a leading US investment bank is certain to heighten speculation that Facebook might go for a stock market flotation - a move its founder has played down.

That push to go public may turn to shove if US authorities continue to probe the booming trade in privately held shares in popular social networking sites such as Facebook, Twitter and LinkedIn.

The US Securities and Exchange Commission is concerned that, amid this private market explosion, firms may be able to circumvent public disclosure requirements.

Once a privately held company hits 500 shareholders, it must disclose certain financial information to the public, even if it hasn't filed for an initial public offering.

Shares in private companies can still be traded on private stock exchanges such as SecondMarket and SharesPost, although only institutional investors or high net-worth individuals can acquire the stock, which is generally sold by former employees or early-stage investors.

On SharesPost, a completed contract between a buyer and a seller has valued shares in Facebook at $25 apiece - giving that heady valuation of more than $50bn.

Rewind a decade or so and heady valuations were very much flavour of the day.

Seemingly anyone with a great idea for the next big thing on the net could dream up a price, rush to Nasdaq and watch their (virtual) fortune take off.

The bursting of the speculative dotcom bubble in the early Noughties taught folks a tough lesson.

Naysayers, pointing to past technology-inspired booms such as the railways in the 1840s, would have said "I told you so".Flawed business models and too many players.

Optimists, and chastened venture capitalists, assure us it won't happen again.

Perhaps not. Many that did survive the multi-trillion-dollar digital meltdown have gone on to greater things - Amazon and Yahoo being the prime examples.

No-one is suggesting that Facebook is another Boo.com - the online fashion house that epitomised the dot-com collapse with its 18-month boom-to-bust outing.

The world's most popular social networking forum is making cash - generating an estimated $800m in revenues in 2009. It has more than 500 million active users, whose interacting habits are a godsend to potential advertisers.

The site, which has 1,700 staff, has effectively seen off competition from rivals such as Myspace and Bebo. It has demonstrated its worth in times of crises and humanitarian need, proving that the internet can be a power for good.

Yet, that estimated paper worth of $50bn-plus is surely out of kilter with the level of hard cash the business is bringing in at present.

For the time being, there's still a whiff of the emperor's new clothes about Facebook.

Net profits the future for music retailers

Good news for record shops - sales of records are down. Let me explain.

Research reveals that digital music sales will surpass those of CDs in the US this year - though chiefly due to a fall in revenues from physical formats rather than a sudden surge in online music sales. The milestone is expected to be hit in the UK next year.

Downloading, despite in the main offering poorer quality sound, is an unstoppable force. It's that internet thing again (see above).

The Deloitte research identifies opportunities for specialist outlets and "pop-up" stores at key selling periods. Don't write off the good old record shop just yet.