As many of you know, I’m a huge fan of privacy online and services that not only enable it, but make it an essential part of their business. Path is a service that allows people to create a mobile social network, with restrictions of having 150 friends maximum for each user.

Path’s raised some capital from some all star investors and is founded by Dave Morin, who is a Facebook and Apple alum, but the key work history is from Facebook since he was the 30th- or so employee there.

As far as some history for the company itself, their version 1.0 product was a non-catchy utter disaster even though the concept was awesome. Privatizing social interactions through any social networking service is a must if the company wants to expand the service and create a sustainable product, in my opinion. The largest problem with the first version was that people just didn’t catch on. Often times since the service is private, you don’t get the Twitter effect, where there are just random people that befriend you and the service just takes off like a rocket ship. Some examples would be YouTube, Instagram, Twitter, so on and so forth.

Path took another go at the product, released a new version and people seemed to catch on. This time they focused on expressing the service as a journal instead of a network. At the core, the product may be identical to the first version, however the product uplift gave users a reason to give it another go. This time people seem to be sticking to the product since Dave mentioned there’s at least a 30x more sharing rate than before, on this brutally honest and insightful interview with JCal from ThisWeekIn.

Now that I’ve layed out some of the backstory for you, I want to explain to you why Path needs to make web an equal focus to mobile.

With any social service, a product doesn’t work (private or public) if there is no social. Mobile is great, but people still spend time on computers all day long. Put these together and web is hole that Path should fix, very soon. If the service doesn’t pick up within families or friend circles beyond technologists, then it won’t be dethroning Facebook. If it does, it will dethrone Facebook. The only way I see Path being a stage 5 threat to Facebook is if Path does the web. Path has done mobile very beautifully, and there is no doubt they can execute the web just as great- and people will come if they do.

If you think about your Facebook stream today, don’t you hate seeing updates from people whom you barely know, or worse off, people you just added because you met them for five minutes once and they added you? Yes of course, which is why Facebook added the unsubscribe button. But the biggest problem is Facebook has botched its privacy functionality multiple times, even savvy technology minded geeks cannot figure it out half the time. I’m not taking a jab at Facebook, they’ve just grown very big and it’s too late to turn back and tell people the friend limit of 5000 is being reduced to 500 or even 150. You usually don’t try to make a 20 year old car compete with the latest models, instead just buy a new model and learn what it has to offer. If you think about it social networks are the same way, people will switch if there is a viable alternative that is better looking and offers more functionality. But the but here and it’s a huge but- is that Path needs to create the web because it will have to drive more than 1 or 2 people from everyones’ friend circles in order to create a movement around their service. Not everyone has a mobile device like an iPhone and many just don’t care to be using the device for other than work even if they do. Having a web destination for when people do want to be social addresses this.

The fact is people want privacy and limitations on who can see things they post online, and Path is great for it. Why did people give G+ a try? Ask your friends, if they still use it. I’ve heard many people complain that it was creepy because random people added them to circles, forcing them to delete their profiles. People want an alternative to Facebook and the way I see it, Path can really capitalize on this vulnerability right now.

I will end this post here, even though I could write a ton more on Path and the future with this: I believe Path can be worth billions of they build a web destination.

Alright so, LinkedIn had its debut as a publicly traded company on Thursday. If you followed it- it exploded. My thoughts? It is absurd- now this is just my opinion, but I am going to say the stock will be worth way less than 1/2 what it is worth today, in 5 years worth of time. But that said, I think LinkedIn just played out the future for Facebook’s IPO and Twitter, if it plans to go public in the future also.

If you look at the earnings multiple and compare that to other companies, the other companies would be worth trillions. Hmmm….smells familiar. But back to Facebook and the future of social IPOs. In fact, I wouldn’t say just social IPOs, but everything related to social. Imagine Zynga having its IPO, etc. What LinkedIn did, Facebook will probably do with more noise, and quite possibly Twitter, too. The problem is that LinkedIn creates very little long term value (I feel). And the general population just doesn’t know that yet. However, a new startup BranchOut, will eat LinkedIn’s lunch, and dinner, and its fourthmeal.

Now that we’ve established that Facebook will have an even more jaw dropping debut on the public market, lets discuss how LinkedIn has a big problem.

BranchOut is basically LinkedIn ON Facebook. I should end my post here and just hit publish, but I’ll explain. People don’t want to be on 10 different services, that require remembering 10 different passwords, and connecting (finding) their contacts on those 10 networks over and over. Another problem is that some contacts are not on all 10 networks. BranchOut brings the LinkedIn features to Facebook (where the world *or at least 600 million people* lives). This makes it way too easy for people to career network on Facebook to even think about being on LinkedIn.

A lot of people might argue its good to keep social fun and social business apart from each other, but lets be honest, the world is becoming a more centralized place. We party with co-workers, and we work with friends. Others might think it will be questionable for BranchOut to build a layer on Facebook where it offers LinkedIn type functionality and the question that if BranchOut will be successful. But we can all learn a lesson from Zynga, whose supposedly valued in the billions, that building a layer on top of Facebook is possible, in a juggernaut way.

I could keep writing and express more opinions about this whole situation, but feel we should just keep it at that and watch what happens.

P.S. Congratulations to Reid and the team for such a successful exit!

If you follow the valuations of companies like Facebook, Twitter, or Groupon- you will see their valuations go from about $10B to $100B. Lets take Facebook in this example; their estimated 2010 earnings were about $2 Billion. Now take that $100B valuation and then look at the earnings multiple. 50x? That’s high.

So for a minute lets say that is ok. Now lets take Google. Its market cap is currently about $190B. It made about $30B in 2010. So 30B in rev x 50 earnings multiple=not 190. Call me elementary, but Google should be worth $1.5 trillion if we are looking and speculating for the future, like investors are for Facebook.

Now forget about valuations for a minute. Even if Facebook was worth $100B hoping to bring in even $20-30B a year- it will have a downfall before it gets to that point unless it does something crazy and starts charging everyone to use the service- which it won’t.

Investors who invested in Facebook at the $100B valuation are going to be wiped off the table in the next 5 years maximum. Ok, maybe not the investors who put their money in at $100B, but the ones that put it in at $150B- or whenever the musical chairs stop.

I’d probably say Groupon is the most justified valuation out of the three mentioned above; if the can sustain their growth.

What does this mean for the startup today?

It’s a good opportunity to raise money, and start something worthy. When the bubble bursts, surely there will be another 2000-era where investors will lock their doors and hibernate. By no means should startups be scared. Even if the bubble bursts, there will be the smart investors who will have funded bubble-companies at a non-bubble stage, and most likely have cashed out.

The worst thing that will happen is the “bad”-(unlucky) investors will be cleared out, kind of how bad debt is being written off in today’s economy, but if your service is blossoming with consumers- it will start all over again.

Bubble 3.0 anyone? Are investors to blame?