The Digital Skeptic: Will Facebook Follow Yahoo Down?

NEW YORK (MainStreet) -- Let's play a game of money manager Mad Libs. You know -- make a story, swap one set of the nouns and adjectives for another and, voila. Comedy! Except, of course, since we're considering Facebook(FB) and Yahoo!(YHOO) today, we're probably talking tragedy.

Because, let's face it, Facebook is looking more like Yahoo's 2.0 every day.

Like Facebook, Yahoo was whipped up by students at a big school with a big idea. It was 1994 and Jerry Yang and David Filo, two grad students at Stanford "began messing around on the World Wide Web," writes Andrew Clark of The Guardian.

The two had a blinding flash: You could organize the Internet into a hierarchy. And, according to the Yahoo website, they created a "home-brewed" list of favorite links called, I kid you not, Jerry and David's Guide to the World Wide Web. Yes, that is pretty much what your kids do on their iPads these days. But back then it was enough to spin up billions in market cap. Go figure.

A hip, new name quickly came: Yahoo! And the start-up was off to the digital races. Money poured in -- in this case, from Sequoia Capital. There was the same frantic Facebook-like rush to fill every conceivable niche on the Web. Search engines were devised. The site became a "Web portal." (Can anybody tell me what that means? A hole in the Web?) It dabbled in content. Top managers were recruited -- Tim Koogle from Motorola(MOT) came on. And by April 1996, Yahoo, with 49 employees, saw shares run up 156% on its first day of trading. Yang and Filo were instant, Zuckerberg-scale billionaires.

Like Yahoo ... but on the second market
I realize today's Nasdaq investors should only be so lucky to have had a Yahoo-like first day of trading. But for insiders -- and those who played Facebook "stock" on alternative markets such as New York City-based SecondMarket -- should find Yahoo!'s wild ride familiar.

A SecondMarket representative declined to comment on the specifics of the value of Facebook before it went public. Instead I was referred to an infographic that breaks out the history of Facebook on private exchanges.

This chart is simply a must-see for anybody anywhere close to this operation.