In the Web 2.0 world, the formula is pretty simple for pumping-up a valuation to nose-bleed levels. First, you need an inexplicable name for the company.  Next, users need to generate the content, so you can call it a UGC (user generated content) play. Oh, and make sure you use a cool programming technique, such as AJAX.  Finally, if you want a bonus, add video to the mix.

Profits?  Revenues?  Of course not.

Well, the latest rumor is that a new-fangled Web 2.0 play, Bebo, did a "just say no" to a $550 million buyout offer.  Allegedly, the suitor was BT.  Yes, that BT.  The company that makes money selling crusty stuff like telephone services.

This week, Hitwise published its list of top social networking sites. No doubt, the guerilla is MySpace, with nearly 80% marketshare. The #5 on the list is Bebo, with about 1% of the market. 

Assuming $550 million is an accurate offer, investors are valuing social networking in excess of $500 billion. That's several Google's.

Actually, it was not long after that BT said it has no clue about this latest Web 2.0 rumor.  But, in the Web 2.0 world, such niceties are a minor inconvenience. It's now mostly about cashing-out.