PALO ALTO — As the mastermind of Facebook.com, Mark Zuckerberg is sitting on a potential gold mine that could make him the next Silicon Valley whiz kid to strike it rich.
But the 22-year-old founder of the Internet's No. 2 social-networking site also could become the next poster boy for missed opportunities if he waits too long to cash in on Facebook Inc., which is expected to generate revenue of more than $100 million this year. The bright outlook is one reason Zuckerberg felt justified spurning several takeover bids last year, including a $1-billion offer from Yahoo Inc.
"We clearly have a bias toward building than selling," Zuckerberg said. "We think there is a lot more to unlock here."
The build-or-sell dilemma facing Zuckerberg is becoming more common among the precocious entrepreneurs immersed in the latest Internet craze, a communal concept of content-sharing that has been dubbed Web 2.0.
Besides Facebook, other Web 2.0 firms frequently mentioned as prime takeover targets include online video site Metacafe.com and Photobucket.com, which has emerged as one of the Internet's busiest destinations by hosting personal videos and photos that are routinely linked to top social-networking sites such as Myspace.com and Facebook.
These sites find themselves at a crucial juncture reached several years ago by the Internet's first big social-networking site, Friendster.com, which chose to stay independent instead of selling. That decision is now regarded as one of Silicon Valley's biggest blunders.
Web 2.0 players have emerged as hot commodities because they are drawing more people away from television, newspapers and other media traditionally used for advertising. Online video channels and social networks, a catchall phrase attached to sites that enable people with common interests to connect and deepen their bonds, are particularly hot.
Deep-pocketed companies are now angling for a piece of the Web 2.0 action -- a quest that already has yielded a couple of big jackpots, helping to propel the sales prices of start-ups to their highest levels since the dot-com boom.
News Corp. paid $580 million in 2005 for the company that owned MySpace, the largest social-networking site, and Google Inc. snapped up video-sharing pioneer YouTube Inc. for more than $1.5 billion late last year.
"I'm surprised a lot more companies haven't already been bought," said Reid Hoffman, a veteran Silicon Valley executive who has invested in many start-ups, including Facebook. "My hunch is the deals are only going to get more expensive in 2008 and 2009."
If the deal-making market continues to heat up, Zuckerberg will end up looking smart for rebuffing Yahoo and other suitors, including Microsoft Corp. and Viacom Inc.
Assuming Facebook hits its financial targets, the Palo Alto-based company should be able to command a sales price well above $1 billion or pursue an even more lucrative initial public stock offering in the tradition of Google, Yahoo Inc., EBay Inc. and Amazon.com Inc. -- a group of Internet icons now worth a combined $250 billion.
A Facebook sale or IPO is bound to happen eventually so the company's early investors, consisting mostly of venture capitalists, can realize some profits. Facebook has raised about $38.5 million since Zuckerberg started the site in 2004 as a sophomore at Harvard University.
Zuckerberg has flexibility in deciding when to cash out because Facebook already is profitable.
An IPO or sale will "make sense at some point for the company, but I never think that's the goal," said Zuckerberg, who is believed to control nearly one-third of Facebook's stock. "The goal is to ... continue introducing certain revolutionary products that push us to the next level."
Marc Andreessen, who made a fortune in his 20s as co-founder of Web browser pioneer Netscape Communications, expects Facebook to become even more valuable in the next year or two.
"Facebook is doing the smart thing. If you are in a big market like social networking, you are usually better off waiting" to sell, said Andreessen, who is now chief technology officer for another social-networking start-up, Ning. Had MySpace remained independent, it would probably be worth $5 billion now, Andreessen estimated.
Should Facebook stumble, it might one day suffer the pangs of regret that torment Friendster Inc., which turned down a takeover bid from Google in 2003 when it reigned as the Internet's hottest networking site.
Had that offer been accepted, Friendster founder Jonathan Abrams and a small group of early investors reportedly would have received $30 million in Google stock that would be worth about $1 billion today.
Abrams left Friendster in 2004, after a falling out with the company's venture capitalists. Now working on its fourth chief executive since Abrams' departure, Friendster hasn't been able to recapture the buzz that once made it a prized commodity.
In January, Friendster attracted fewer than 1.3 million U.S. visitors, leaving it far behind MySpace, with 61.5 million visitors, and Facebook, with 19 million, as well as newcomers such as Bebo.com, Myyearbook.com and Hi5.com, according to ComScore Media Metrix.
Other tales of woe are bound to emerge after the latest deal-making cycle winds down, predicted Ken Marlin, a technology investment banker in New York.
"The world is filled with companies that waited too long to sell and missed their window of opportunity. We think this [Internet] land grab probably will only last another year or two."