In the online world, the money isn’t always where you think it’s going to be.

Consider Ebay. It belongs among the giants of the online space. Yet if you believe what Jeff Segal says at breakingviews.com, (and I do) the real value in Ebay going forward is going to be its Paypal subsidiary. Ebay’s auction business is going nowhere; growth was at just 1% last year and lagged the online commerce industry as a whole. Paypal grew at a 26% clip in 2008. By 2011, Paypal will in all likelihood be worth more than its parent company (if you use the same earnings multiples as a competitor, Visa, though it is arguably worth of a higher multiplier). 

Think about Steve Jobs. He fouled out, struck out, and was caught looking at quite a few called third strikes before he got on a product development hot streak that lifted the company out of the doldrums. I think we can all agree that the Lisa and the Newton came up a little short.

Maybe it will work out the same way for Facebook. Mark Zuckerberg had better hope so, anyway. His company is struggling mightily to find a profitable business model. Yet as we speak, some tiny shops are clearing $700,000 a month based on the Facebook apps they have created. Maybe one of them will be the magic bullet. Or perhaps, before he figures out what the magic bullet is, Zuckerberg will quit and run against Meg Whitman for governor of California. Stranger things have happened. Look who the governor is now.

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